Thank you, Michele, and good morning, everyone. Our first question in the Q&A is on compensation. Can you speak about why the CEO and named executive officer compensation is fair? Does the entire board approve of the CEO's compensation package?
Thanks, Anoori. Yes, we pay for performance by aligning our short and long-term incentive compensation plans with the business strategies so that we can reward executives who achieve or exceed the applicable company and business division goals. On average, 89% of CEO pay and 78% of named executive officer pay is at risk. We pay competitively by targeting total direct compensation for our executive officers in aggregate at competitive pay levels using the median of our peer group. We align our compensation program with stockholder interests by providing a significant amount of each named executive officer's compensation opportunity in the form of equity and requiring executive stock ownership. On average, 71% of CEO pay and 56% of named executive officer pay is granted in equity. Yes, the entire board approves the CEO's compensation package.
Thank you, Michele. The next question is on LesserEvil. Can you explain the strategy behind acquiring LesserEvil? How do LesserEvil and SkinnyPop fit together in our Salty portfolio?
Yes, I'd be happy to. We are very excited about the pending acquisition of LesserEvil. It is a fantastic brand that expands our presence in better-for-you snacking, which is a priority for us, and it extends our offerings within ready-to-eat popcorn. The brand really nicely complements our Salty portfolio by adding in incremental ingredient-focused snackers and also increases our reach with a younger and more diverse demographic. We think it can drive incrementality. We see opportunity for LesserEvil to be more of a platform brand with credentials that can extend beyond popcorn to new categories and forms like Pups. We are really excited to share more about that and our plans later this year after the transaction closes.
Thanks, Michele. Next, we've had a few questions around the topic of DEI. Can you speak about our position on DEI initiatives and how it's evolved given the current headlines surrounding the topic?
Yes, we routinely review the external landscape, including any changes we see in governmental policy, to ensure that our practices, first and foremost, reflect our company values, are aligned to our business objectives, and also are legally compliant. As part of our latest review, our approach to people-related programming has not changed.
Thank you. The next question was on the topic of regulation. What is the impact of Hershey from recent headlines around the banning of food dyes and/or any other regulations around ingredients?
Paramount for us, our highest priority always remains the safety and quality of our products. We will continue to ensure that all Hershey products comply with all applicable laws and regulations and that they are manufactured under strict quality and safety requirements, as we always have. We do actively monitor and participate in industry, regulatory, and scientific communities, and we continually assess our products and our portfolio against the latest developments. This robust program is designed to protect consumers. It's also designed to maintain trust in our iconic brands and ensure that everyone can safely enjoy more moments of goodness. We've had a practice of proactively prioritizing product changes as needed to stay ahead of regulatory changes over the years. For example, with Red Dye No. 3 and Propylparaben, we were ahead of those changes and those regulatory requirements, and our natural coloring work is well underway.
Thanks, Michele. The next question is on GLP-1 drugs. With these drugs and increased focus on broadly health and wellness, how are you changing your business strategy?
We have robust planning and forecasting processes that factor in all the changes that we see in consumer behavior, including GLP-1 adoption rates. Health and wellness trends have begun many years ago, and they continue today. We see them show up in different ways, shapes, and forms, particularly products with specific nutritional claims such as low sugar, higher protein, high fiber, and clean labels. As always, we are continually adapting our portfolio and products so that we can move with the consumer and where the consumer's headed. We have a suite of great-tasting low-sugar products in our Hershey's and Lily's brands, and we've built and expanded a protein portfolio that is resonating with consumers. We also recently announced a partnership we're really excited about with VitaKey to create a suite of health and wellness products leveraging their technology.
LesserEvil will bring a fantastic clean-label brand into our Salty portfolio as well.
Thanks, Michele. The next question is on our growth plans. What new strategies are you using to grow sales after a challenging 2020?
We expect to have net sales growth of at least 2% in 2025, and that's in line with our long-term algorithm. Our strategy is four-fold, and that includes, first of all, a renewed focus on innovation with a robust pipeline of new items across both confection and salty snacks. Secondly, we're broadening our investments in chocolate to extend to our variety brand portfolio. We also have work underway to reshape the shelf for shoppability. Third, we have a maniacal focus on driving seasonal execution and share, an area that's been a strength for us. Lastly, delivering incrementality through some of our recent M&A, which includes Sour Strips. We'll extend our presence in sweets and also our pending acquisition of LesserEvil.
In addition, we have assembled a very strong leadership team that has a terrific mix of both internal and also external perspectives that will ensure we are positioned for long-term growth as we strive to achieve our leading snacking powerhouse vision.
Thanks, Michele. The next question, we've had several inquiries about tariffs. What impact will the Trump administration tariffs have on the business, particularly in sourcing cocoa needed to produce chocolate?
Tariffs are certainly top of mind for us. Our teams are closely monitoring the evolving tariff policies, and we're assessing the actions, including optimization of our supply chain, identification of cost-savings measures, and alternative sourcing strategies. We are simultaneously working with our elected officials and trade organizations that we belong to to request an exemption for cocoa tariffs in particular, given that cocoa cannot be grown in the United States. Hershey continues to invest in domestic manufacturing, and while some of our key raw materials and inputs are sourced overseas, the vast majority of what we sell in the U.S. is made in the U.S. Just last month, we had the great opportunity to cut the ribbon on a state-of-the-art chocolate processing facility right here in Hershey, PA, strengthening our supply chain and creating local jobs.
We're developing robust mitigation plans for our raw material and finished goods exposures with several no-regrets actions already underway. Through these efforts and by working with our customer partners, we aim to ensure that our products remain accessible and affordable for consumers.
Thanks, Michele. Next up is a question around cocoa. Can you speak about the elevated cocoa costs and how the company is addressing this challenge?
Yes. We have and are taking aggressive action to manage this difficult cost environment. For example, last year, we announced a transformation program that will leverage our recent investments to operate more efficiently and effectively. Given our strong start to the program, we have increased the three-year program's cost savings target to $350 million, up from $300 million. We're also leveraging technology across the organization to maximize the returns that we have on the investments that we're making, including media and promotion, as well as manufacturing processes. We're also leveraging our supply chain scale and flexibility to diversify how we source cocoa. Last year, we announced a double-digit price increase on half of our U.S. confection portfolio and a variety of price increases elsewhere around the world.
We continue to evaluate and pull as many different levers as possible, and we continue to invest in and shape our portfolio to drive profitable growth into the future. We believe that we will emerge from these challenges even stronger than ever through the transformation, technology, and these capability advancements that we are making, as well as further actions that we're planning to take to address cost inflation.
Thank you, Michele. The next question is, when was the last time that a proposal offered by a shareholder rather than the board was approved by the shareholders?
Sure. We have a relatively limited history of shareholder proposals. In the past 20 years, we've only had eight shareholder proposals, and four of those were between 2022 and 2024. None of those proposals were approved by shareholders. This isn't really unusual. Since 2014, only 12% of all shareholder proposals across the market have received a majority of votes cast. Separate from shareholder proposals, the Hershey Board of Directors is continually evaluating and adapting its policies to maintain and preserve stockholder protections and enhance the board's accountability to the shareholders. Occasionally, the Hershey Board of Directors receives recommendations from our largest shareholder, the Hershey Trust Company. These are also considered for implementation by the Hershey Company Board. For example, the recent introduction of director term limits and this year's amendments to the company's certificate of incorporation were recommendations from the Hershey Trust.
Great. Thank you. The next question is on innovation. What are some of the new products we can expect to see?
That is always a fun one to talk about because we always have so many. This past year, we introduced Reese's Caramel and Reese's Lava, a partnership with Shaquille O'Neal, launching Shaq-A-Licious Extra-Large Gummies, Jolly Rancher Ropes, and Jolly Rancher Freeze-Dried, Reese's-filled Peanut Butter Pretzels, which is really leveraging the best of some of our confection with some of our new salty capabilities, and Dot's Barbecue, which have all really resonated with consumers. We will continue to bring more exciting new flavors and texture combinations this spring with Cinnamon Toast Crunch Kisses, Reese's Peanut Butter and Jelly in both grape and strawberry, depending on your favorite flavor, and Hershey's with Caramel S'mores in store now.
In addition, we have further excitement planned for the back half of this year, including a new Shaq-A-Licious Extra-Large Gummies shape with a very unique activation, a new flavor of Dot's, and our biggest Reese's innovation ever, which you will hear more about this summer.
Great. Very exciting. The next question is also on an exciting topic. When is the Milton Hershey movie going to be released, and is the film going to be a documentary?
Yes, we're really excited about the movie. We could not be prouder that our business not only creates products that delight consumers, but also for all the good the company does today in supporting education and transforming lives through the Milton Hershey School. The Hershey movie is a story of resilience, generosity, and using business as a force for good. It is a dramatized feature film. It's not a documentary. It is filming now, and it's set to be released in 2026. We can't wait for this story to be told, and more details will be shared closer to the launch.
Perfect. And then the last question for the Q&A portion today. Michele, as you reflect on your leadership at Hershey, what is one lesson that has most influenced how you've guided the company?
That's a great, very insightful question. I would say, first and foremost, the power of being courageous in taking smart, bold, forward action to maximize value creation. What does that mean? Well, whether it was to take the bold move to expand our portfolio into salty snacks via M&A, whether it was to lean in during COVID to pivot our focus to consumers' behaviors and focus on our take-home portfolio, and actually place a bet that trick-or-treat would actually happen and that we could work with retailers and consumers to make it safely happen. Large profitability enhancement work, things like optimizing a particular geographic market to significantly improve profitability or holistic cost savings programs. Lastly, even organizational change, bold moves in organizational change and capability building, like those that we have made in technology that are giving us benefit today and will give us long-term value creation as well.
All of these and that willingness to think big, be bold, have been key to maximizing short and long-term value creation. I'll then add a second reflection as well in terms of a lesson, and that is just appreciate our employees. They are the people who make it all happen. It's a principle that I was brought up with, but seeing in motion our people thrive is so incredibly fulfilling for me and I think for all of them.
Thank you, Michele. This concludes the Q&A portion of today's meeting. As noted earlier, responses to pertinent questions received, including those that we were unable to address today given time constraints, will be posted on our website within a few days of the meeting. Thanks to all of you who submitted questions today. We'll now proceed to James Turoff to report the preliminary results of voting.
Thank you, Anoori. The inspector of elections from American Election Services has provided me with the following results. Holders of the common stock voting separately as a class cast at least 106,932,150 votes in favor of Ms. Mullin and Mr. Ozan as nominees for director. Holders of the common stock and Class B common stock voting together cast at least 619,968,294 votes in favor of each of the other nine nominees for director, thereby electing the 11 nominees whose names were listed in the proxy statement as directors for the coming year. Holders of the common stock and Class B common stock voting together ratified the appointment of Ernst & Young LLP as independent auditors for 2025. Stockholders cast at least 671,942,872 votes for the appointment, 1,028,311 votes against the appointment, and abstained from casting at least 200,803 votes on the appointment.
Holders of the common stock and Class B common stock voting together approved named executive officer compensation on a non-binding advisory basis. Stockholders cast at least 625,011,839 votes for the proposal, 29,266,222 votes against the proposal, and abstained from casting at least 499,215 votes on the proposal. Holders of the common stock and Class B common stock voting together approved the amended and restated certificate of incorporation to provide stockholders the right to fill certain vacancies on the board of directors. Stockholders cast at least 653,958,087 votes for the proposal, 472,295 votes against the proposal, and abstained from casting at least 346,894 votes on the proposal. As a reminder, final results will be available within one week on the company's website under the Investor Relations tab. I will now turn the meeting back over to Michele for closing thoughts.
Thanks, James. This concludes the 2025 annual meeting of stockholders. I want to thank you all very much for joining us today. Even as importantly, I want to thank you for your continued support of The Hershey Company. Thank you and have a great day.
This now concludes the meeting. Thank you for joining and have a pleasant day.
The host has ended this call. Goodbye.