Greetings, welcome to The Hershey Company First Quarter 2023 Question- and-A nswer Session. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Ms. Melissa Poole, Vice President of Investor Relations for The Hershey Company. Thank you. You may begin.
Good morning, everyone. Thank you for joining us today for The Hershey Company's First Quarter 2023 Earnings Q&A Session. I hope everyone has had the chance to read our press release and listen to our prerecorded management remarks, both of which are available on our website. We have posted a transcript of the prerecorded remarks. At the conclusion of today's live Q&A session, we will also post a transcript and audio replay of this call. Please note that during today's Q&A session, we may make forward-looking statements that are subject to various risks and uncertainties. These statements include expectations and assumptions regarding the company's future operations and financial performance. Actual results could differ materially from those projected. The company undertakes no obligation to update these statements based on subsequent events.
A detailed listing of such risks and uncertainties can be found in today's press release and the company's SEC filings. Finally, please note that we may refer to certain non-GAAP financial measures that we believe will provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations to the GAAP results are included in this morning's press release. Joining me today are Hershey's Chairman and CEO, Michele Buck, and Hershey's Senior Vice President and CFO, Steve Voskuil. With that, I will turn it over to the operator for the first question.
If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.
Great. Thanks so much. Good morning, everybody.
Good morning.
Good morning.
First off, I wanted to ask a little bit about the guidance update on the top line. The company beat by a few points on the top line in the quarter, but when we take out the earlier summer shipments, which is really just timing, I guess results on organic were only slightly ahead of the street view. Hershey raised its sales growth guidance to the high end of the previous range for the full year. I guess my question is: What are you seeing at this stage that gave you the confidence to shift the top-line guidance the way you did?
Yeah. Thank you, Andrew. Yeah, you're exactly right. For the 1st quarter, the timing impact was about half of the beat on the sales line and also strong performance in international. Those were the 2 big drivers. If we look to the balance of the year, obviously the timing's gonna wash out in the 2nd quarter, but we do expect to see a little bit better elasticities in the year ago period. We still see it moderating versus some of the strong performance we've seen in the last 6-9 months, but a little bit more improved. We base that a little bit more on media investment that we also have incrementally in the year ago plan.
Between, I'll say, the strength we saw in the international business, what we're seeing, on the back of improved elasticities a little bit in the year ago period, that's what gives us the confidence in the raise.
Great. Thanks for that. With the pull forward of some shipments from 2Q into 1Q, along with the tougher year-ago organic sales and EPS growth comparisons in 2Q, what are some of the key puts and takes to keep in mind when we're modeling for 2Q? Thanks so much.
Yeah. Two Q will be, probably be our most challenging quarter as I look to the balance of the year. You know, we're gonna have the timing piece shift back out, also recall last year was a big inventory, till quarter as well. When you look at the lap, it's a pretty tough lap. That combined with that point and a half coming out will put, you know, more to the mid-single digit range, probably from a sales standpoint. That will put more pressure on the EPS side than the rest of the quarters.
Great. Thanks so much.
Our next question comes from the line of Ken Goldman with J.P. Morgan. Please proceed with your question.
Good morning. Two questions on capacity if I could. First, I think your prior guidance, if I had it down right, was for five new lines to come on this year. I think you're calling for four now. Am I reading that wrong, or was one delayed? I'm also curious to learn a little bit more about the Weaver acquisitions, just in terms of how they may help you down the road in terms of added capacity or efficiency. Obviously, bringing plants in-house is generally a good thing for efficiency, just in light of the fact that they already did make product for you, just trying to get a little bit of a better sense of, you know, some of the benefits down the road for you. Thank you.
Sure. There is no change to the number of lines. There are five lines, I think there's one that we just didn't specifically call out in our remarks. So no difference there. Relative to Weaver, we feel very good about the acquisition. Weaver Manufacturing is currently a co-man of SkinnyPop. We acquired two plants, really what it gives us are three things. It gives us sufficient capacity to be able to support growth for several years to come, as you know, we're seeing very strong growth on SkinnyPop . It provides us with resiliency and also flexibility, just so that we can continue to support the strong growth that we are seeing.
You know, as you know, as you look across our business for strategic categories and businesses that we are in, we do like to have at least some degree of owned manufacturing across our network. We also feel pretty good about the investment return, at the investment that we made. We believe, given the quality of the assets, the fact the facilities are on the newer side, that it is faster and cheaper than if we needed to build this on our own.
Thank you.
Sure.
Our next question comes from the line of Cody Ross with UBS. Please proceed with your question.
Good morning. Thank you for taking our question. You're implementing a high single-digit price increase on 50% of your confection portfolio effective at the end of May. I believe that's correct, that's what you announced at the Analyst Day. How much do you believe will benefit fiscal 2023 versus fiscal 2024? Can you explain the mechanics of the benefit by the year?
Yeah, at a high level, it's gonna have, as we talked about in the investor conference, you know, more impact in 2024 than it is in 2023. That's based on partly the implementation date and then also the fact that we have protection in place for, you know, for big promotions and programming, for a good part of the year. We're still working with retailers on the implementation, all of that will continue. I think by the time we get to the mid-year mark, we'll probably have more visibility both on balance of 2023 and 2024 impact, we'll be able to talk more about it at that time.
Great. Thank you. Just a quick question on gross margin. Your gross margin came in higher than both yours and the street's expectation this quarter. You raised your outlook to expansion of 70 to 80 basis points for the year. What gave you confidence to raise your outlook this early in the year, especially in context of your retail partners who are struggling to expand gross margin this year based on their guidance? Thank you.
Thank you. It is early in the year. I think in general, we probably wouldn't look at raising our guidance top line or bottom line this early in the year. On the gross margin side, though, a couple of things. One, clearly we have some commodities that are getting more expensive, cocoa and sugar, in particular, are moving in the wrong direction. We have a few smaller non-hedged ingredients that are a little bit more favorable right now than they were. Time will tell whether that's gonna be able to stick around. Probably the biggest piece has been just freight and logistics improvements. If you recall, last year at this time when we did the call, that was one of the big, I'll say, surprises on the downside was increases in freight and logistics costs.
For the first quarter at least, we saw some improvement in that, both on our supply chain but also, contracted support for getting trucks to show up for appointments and freight costs and so forth. Those are really the drivers in the first quarter that we've captured in the, in the outlook. Time will tell as the year goes on how the rest plays out, but that's what gives us the confidence. It's really just the first quarter performance.
Thank you very much. I'll pass that along.
Our next question comes from the line of Nik Modi with RBC. Please proceed with your question.
Yeah, thank you. Good morning, everyone. Just a quick clarification.
Good morning.
Hey, good morning. On international, you know, I saw the comments you put in the prepared remarks, but maybe any more context on exactly some of the specific initiatives outside of a recovery in travel. I'm just curious on, you know, there's a very strong number relative to expectations. If you could just touch on the market share commentary you made in the U.S., you know, and kind of what's driving some of that. You talked about some mix, but I was kind of unclear exactly what that was referencing.
Yeah. I mean, if we look at the initiatives in international, you know, we've seen category strength across the markets. We saw a stronger Easter season in Brazil than we had anticipated. We continue to see distribution gains in Mexico and also in India. Across the board, some strength there. We do expect some moderation going forward because we have some pretty strong laps, but our demand has really remained pretty resilient. We're also seeing some impact from timing as if you may recall in Q4, consumer demand outpaced our shipments, and we've recovered some of that in the first quarter. Can you repeat your share question one more time?
Michelle, I was just hoping you could provide some context on the U.S. share commentary you had in the prepared remarks in the press release. You know, you had referenced, I think, in the prepared remarks, mix was a driver, and I was just unclear. If you could just provide any context on some of the market share trends that you're seeing.
Absolutely. We definitely if we look at Easter, we had some impact from supply constraints. We anticipate by Halloween and holiday, those will be behind us, but that impacted us. Also, we've continued to see very strong growth in sweets, and then also that rebound of refreshment from some of the weaker trends in that post COVID type of era. Really mix as an impact.
Great. Thank you. I'll pass it on.
Our next question comes from the line of Pamela Kaufman with Morgan Stanley. Please proceed with your question.
Hi. Good morning.
Good morning.
Good morning.
I was hoping that you could talk kind of generally about what you're seeing in the consumer demand environment. You've seen strong volumes despite strong pricing growth. How are you thinking about the consumer and elasticities over the course of the year?
I'll start by talking a little bit about the trends, and I'll let Steve talk about elasticities. Certainly consumer behavior continues to evolve, and we know that many consumers have made changes to their spending to respond to inflation in the marketplace. We certainly continue to see that food has performed well compared to other categories, specifically food at home, as it's a much more affordable option for consumers versus dining out. We also know snacks and candy continue to perform even better than broader food, and elasticities in those categories have continued to remain pretty strong, and we do expect that we'll continue to see strength in those elasticities. We know that consumers are being increasingly mindful about where they shop.
They are looking for more affordable options, whether it is the channels in which they're shopping, whether it's private label, whether it is deals and increased promotion. We are constantly carefully monitoring those trends just to make sure that our media and our in-store activations are really optimized so that we can align to the trends that we're seeing. Steve, do you want to talk a little bit about elasticity?
Yeah, on the elasticity side, w e touched on this a little bit in the first question. We still expect elasticity to moderate as the year goes on, but in our outlook now, it's a little bit less severely than we did in our original plan. You know, we'll see how the year plays out, but that's our current assumption.
Okay, thank you. My second question is just on the ERP implementation within snacks. Can you touch on what benefits you expect to realize from it and what impact is factored into your guidance for this year from the ERP implementation?
Sure. We have the impact of the transition on ERP baked into the guidance. We've profiled that out across the quarters, including some inventory build in advance of the changeover, and then the changeover itself in the back half of the year. In terms of benefits, it's a critical ingredient to driving efficient scale across that businesses. We touched on that a bit in our investor conference as well. You know, one of our goals is to drive scaled efficiency on all parts of that business on the front end, the supply chain side and so forth. This system is important to get them on the same system the rest of the company will operate on so we can operate the back office efficiently, we can operate the front end efficiently, have more inventory visibility, better planning capability.
So it is integral. We're excited about it. Everything to date is on track, and we'll look forward to getting that behind us later this year.
Pam, I think we did on the last call, we might have called out the impact. It's about a half a point headwind for us for the full year related to that transition, all focused in the fourth quarter for Salty.
Great. Thank you.
Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.
Thanks. Good morning.
Good morning.
In your prepared remarks, you mentioned. Good morning. You mentioned that you'll be in a strong position to fully support consumer demand for the rest of 2023. I wonder if you could give some color about that. It's obviously ahead of that 5% increase in production that you're expecting to add. Is that the COVID era issues with labor constraints in your supply chain? Is it the upstream suppliers coming through? I have a quick follow-up.
I mean, I would say, the recovery that we anticipate is really driven by the increasing investments that we've continued to make over the past several years in capacity. Obviously, some of them take some time to be able to get equipment, get it up and running, et cetera. You know, that's the point at which we believe we start to get ahead. I think we've pretty consistently talked about, you know, end of 2023 and 2024 that we anticipate being beyond many of these supply issues. Yes, I would say predominantly they've been focused on capacity. Certainly in the early years, there were some other industry dynamics as well.
David, I'm not sure maybe, your question? The 5%, just to clarify, that is actually just a pounds number, not a sales number. Maybe we weren't clear enough in the remarks. That 5% growth in production pounds will be well ahead of what the guidance calls for volume, and that's kinda how we catch up.
Got it. In that capacity that you're ramping up with the three new REESE'S plants and the one new Hershey plant, will that be more than the 5% into 2024 because it's ramping through the year? I'm wondering, you know, what's the impact of capacity increase for 2024, do you think?
There will be a carryover into 2024 from those, as well as some additional capacity expansions that we have coming online. There will be a low single-digit increase in pounds production available next year as well from some carryover and some new initiatives.
Thank you very much.
Our next question comes from the line of Max Gumport with BNP Paribas. Please proceed with your question.
Hey, thanks for the question. I was hoping you could give us an update on what you're seeing with regard to the retailer pricing environment. It feels like we're seeing more headlines in the media talking about retailers pushing back specifically against packaged food manufacturers, but we're continuing to see companies like yourself getting strong pricing through in quarterly results. Just hoping you can give us some color on this debate that seems to be emerging. Thanks.
We always partner very closely with our retail customers to try and do what we believe is best to meet consumer demand and also to drive category growth, which is good for both of us. We continue to have very collaborative discussions with our retailers, relative to our pricing implementation, which also includes a lot of discussion about the right plans to have business reinvestment that will enable the support of very strong unit conversion.
Thanks. One follow-up on gross margins. I realize it's early in the year and that taking up guidance is a bit unusual, and it speaks to the confidence you have in your outlook. But one question I'm getting is that if we look at your gross margin result in the first quarter and think about what your guidance implies for the remainder of the year, it seems like it would imply some sequential step down in gross margin through the year, even after taking into account some seasonality. I'm just curious what type of factors might be going into those assumptions there. Thanks.
Yeah. I think the biggest factor is it is still early in the year, we still have a lot to play out. We're certainly taking stock of the upsides that we saw in the first quarter. We're still being cautious also on what is to come. You know, the world's changed a lot over these quarters, there's still a lot of volatility potentially ahead. We're factoring that. Also as we go forward, particularly in Q4, the laps get tougher. That's the other factor weighing in the guidance.
Thanks very much.
Thank you.
Our next question comes from the line of Bryan Spillane with Bank of America. Please proceed with your question.
Hey, thanks, operator. Good morning, everybody. I just wanted to ask a question about seasonal. You know, you talked about what part of what impacted market share on seasonals in the first quarter was capacity constraints. I think, right, we've talked about more capacity available for seasonals as we move through the year. Can you just kinda talk about that and how that sets up for, you know, especially the fall, or, you know, the third and fourth quarter, and whether you feel like you'll be adequately supplied seasonal product there.
Yeah, sure. absolutely, we believe that, with the additional supply that we have ramping up as we go through the year, that we will be in good shape to have a very solid plan to meet Halloween and holiday demand. some of the issues that we encountered during Easter, we should be past in the back half.
Okay. Thank you.
Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.
Thank you. Good morning.
Good morning.
In, in the, in the press release, you had mentioned, just the ability to sustain momentum into 2024 and beyond. Obviously, it's early, but just, you know, kinda caught my eye that you would call that out. What are you seeing that would, you know, drive a reference that's kind of that far ahead, and how much color can you give on how you're thinking about 2024 right now?
I mean, we're not really gonna talk about 2024. I mean, at the very high level, I'll talk a little bit about the consumer piece and Steve can talk about the P&L component. You know, we feel good about the momentum that we're seeing on the business, certainly in terms of consumers' engagement with the category. A lot of the underlying consumer behaviors that we're seeing sustain, which continue to support performance. We're continuing to see good response to the investments that we're making in media behind the business across all parts, really. I mean, CMG as well as our salty brands, where we're just getting started on some of the investments in salty. Certainly, as we saw in the first quarter, strong momentum in international. Right now we don't see any big signals that suggest to us any big hurdles on the top line.
I would agree. I'd just point to, as Michelle said, you know, capacity, having capacity available as we exit the year, to be a little bit more on the gas from that standpoint versus some of the limits we've had here, in the last couple of years. The Salty aspirations that we have, talked a lot about that at the conference, coming off the back of the ERP and rolling into next year. We're excited about that. The commercial capabilities, that we talked more about at the conference as well, being able to help drive sustainable growth in the U.S., U.S. business in particular. Those are just some of the reasons I think we feel pretty good about the momentum.
No, that's helpful color. Thank you. Just to follow up on Dot's, we got to see the ads at Investor Day, obviously. Just curious if you have a sense of how big a lift you think that can drive and maybe specifically at least what's factored into your thinking and guidance around that. Just, you know, sorta, we've already seen obviously a very strong momentum there. How much further can it go? You know, what's some of how you think about your expectations?
You know, I would say it's too early. We've just started the support on air. We feel very good about all the work that we've done in terms of understanding the Dot's consumer and the consumer's relationship with Dot's. We feel good about the messaging direction, the creative execution, and certainly it's scored incredibly well. The responsiveness that we tend to see across our snacking categories with advertising investment. More to come, and we'll share more as we have actual in-market results on that. We think that will clearly only help us given that we haven't been investing in that brand in the past.
Okay, great. Thanks so much.
Our next question comes from the line of Rob Dickerson with Jefferies. Please proceed with your question.
All right, great. Thanks so much. Just two kind of easy questions. The first is just in international, obviously impressive on the volume side, but really don't see any incremental pricing year-over-year. I'm just curious, you know, I mean, clearly it's intentional, just kind of curious as to why that's intentional, like why we're not seeing much pricing in international, just kind of given the cost complex and kind of what you've been able to push through in the U.S. I have a quick follow-up.
Sure. We are pursuing a price strategy in international. It's just more modest of what we're seeing so far, and it's offset by some of the other laps that we had in the quarter, having some impact on how much of that price is coming through. We should see more price come through in the next three quarters.
Okay. Fair enough. Then just quickly back to you, Steve, too. You know, buying the incremental popcorn facilities, which I get, but clearly not that much cash outlay for those facilities. If we kind of think about where the top line probably is headed in 2024, and CapEx gets a little bit better next year, margins seem decent, you know, there should be a step up in free cash flow while the balance sheet's strong. I know you kind of always reiterate kind of your standard issue, capital deployment, you know, priorities, but, you know, would you say kind of at this point, given, you know, all the CapEx that's being spent, you know, on the new facilities, right?
New lines, the recent, you know, the acquisition of the new popcorn facilities, that kind of broadly speaking, you feel like you're probably in a pretty good spot in terms of kind of what you need to grow. Therefore, you know, is there a possibility for, you know, let's say, you know, other cash deployment, whether, you know, be it around the dividend or buyback or what have you? Thanks.
Sure. Yeah, great question. The short answer is, yeah, we do feel good with that additional capacity in place or coming in place for the Weaver acquisition, will be very helpful to support the growth of that business for a time to come. I also like the fact that, you know, we're buying well-maintained, state-of-the-art manufacturing facilities. Where we're doing that, it's still much more capital efficient than building from whole cloth. It is capital efficient to pick up assets this way as well. As we look to the future, I feel good about the capacity that we're gonna have installed on both the confection business and the Salty business, and that will have an impact on free cash flow as we look to the future.
All right. Fair enough. Thank you.
Thank you.
Our next question comes from the line of Jonathan Feeney with Consumer Edge. Please proceed with your question.
Thanks very much. Could you comment on the role of, say, not just recent distribution growth, but distribution growth over the last 12 to 18 months in the salty snack business, driving that really outsized volume growth? Because, you know, I guess I'm trying to understand how when you take these products, whether it's Dot's most recently or others, into new markets, is there a necessary decay curve? Like, you know, you have all this great innovation, new Hershey capabilities, and then that kind of seasons and it slows down. You know, what data or, you know, insight can you offer to help us understand that and maybe to think about what a sustainable organic volume growth looks like for salty snacks going forward? Thanks.
Yes, absolutely. Clearly, distribution is job one when we buy a business like this. I mean, that's one of our key strengths, and we want to fully utilize it. On Dot's in particular, there were really opportunities to kind of fill in on distribution. Previously, they really didn't have a very large Walmart business, and they were underdeveloped in the Northeast. That's been a big area of focus, and that certainly has driven, has been a key driver of the business. We've also seen increases in velocity at the same time, given the very strong repeat potential that we see from consumers behind this product. As you think about the growth trajectory over time, I would kind of describe it as it basically will evolve in terms of what the drivers are.
As we fill out the distribution, you know, we start to really employ our category management capability relative to optimizing the shelf. As you saw in March, we then start to apply our media capability with advertising behind the brand to really increase awareness and household penetration. Beyond that, the other kind of key focus is relative to price pack architecture and other drivers. I think where we'll see the revenue coming from, it will continue, but we will apply the other capabilities we have to really generate that. As we mentioned at Investor Day, we do anticipate seeing growth in that 15% kind of range for the next few years. You know, a deceleration from the, you know, 20%+ that we've seen more recently.
Thank you very much.
Thank you.
Our next question comes from the line of John Baumgartner with Mizuho Securities USA. Please proceed with your question.
Good morning. Thanks for the question.
Good morning.
You know, maybe just building on John's question, Michele, sticking with the salty snacks distribution. I know the focus here is building availability in mass and grocery, the ACV opportunity seems pretty significant in C stores as well. Are there any considerations, whether it's dislodging competitors or, you know, the routes to market that you need a DSD model, given the velocities, that maybe makes the path to building ACV in C stores a bit slower for these categories? Just, you know, how are you thinking about, you know, closing that distribution gap in C stores over time? Thank you.
Well, C stores is really a core capability for the company for our base core CMG business. Certainly we realize its importance in reaching certain specific consumers and really certain specific occasions when consumers are out and about. It is a priority for us. We have been focused on that. I think in SkinnyPop we are certainly making progress, but there's more opportunity to go. It'll remain a focus for us going forward. I don't know if I'd say that there is any key barrier. Certainly, there are folks who have DSD capability more broadly, but we've done a good job with our CMG business where we don't have it building distribution in convenience stores. We feel very good about that.
Across our salty snack network, we do have both warehouse and DSD capability, and we're really working right now to optimize how we best utilize each to maximize the potential of the business.
Okay. Then in terms of the popcorn assets that you're acquiring, in addition to just the pure growth and volume capacity, is there anything to augment your capabilities, whether it's pack size or anything else in terms of opportunities there?
Yeah. Beyond just the capacity, you know, one of the things that gives us the opportunity to optimize the supply chain network more broadly. If you think to the future, other assets potentially coming in, you can think about some of the strategies we talked about around price pack architecture and being able to make sure we got the right packs and mixes to support the business going forward. By having all of that in our hands and our control just gives us more flexibility and agility to deliver that growth plan.
Yeah. As I mentioned earlier, that gives us capacity ahead of demand, so it gives us that trajectory for the next few years.
Thanks, Michelle. Thanks, Steve.
Thank you.
Our next question comes from the line of Jason English with Goldman Sachs. Please proceed with your question.
Hey. Morning, folks. Thanks for letting me in.
Good morning.
Morning.
A couple of quick questions. Colgate just recently did something similar in pet food in terms of going out and buying some capacity. When that came into the fold, there was a lot of other products that it was making. It created some margin distortion, near term. Is there anything to be aware of, like, ACV similar on that front with the Weaver acquisition?
No. I mean, the bulk of the capacity is ready-to-eat popcorn, so it didn't really come with a big negative overhang.
That's right.
Other than that there will be excess, you know, unused capacity for a while, so that, you know, there's some fixed overhead there.
Some fixed overhead and some transition costs that would be normal, but not a portfolio overhang like you're referencing, Jason.
Good to know. Thanks for that. Bigger picture question? As you mentioned, elasticity has been very low. That's not a Hershey comment or even a confection comment. It's an industry comment because we haven't had a lot of cross price elasticity, we're moving in the same direction. It sounds like in 2024 you're gonna kind of break from the pack and push through quite a bit of pricing at a time where we're not expecting a lot from the industry at large. How are you managing those cross-price elasticities? Which categories should we be watching, where you tend to see switching between confection? I'll leave it there.
Yeah, I would say, first of all, it's a little early yet to be starting to think about the cross elasticities for 2024. You're right, we're trying to, you know, think ahead in terms of the pricing strategy. We're also watching the commodity space, like we talked about earlier, and some of the upward movements on cocoa and sugar. I think that's getting us in a good starting position. What happens to the other categories and peers is all yet to be seen, and we'll be able to communicate more on that, obviously, as we probably turn the corner and get to the back half.
Yeah.
Melissa, anything you want to add?
Yeah, the one piece I might add is just, you know, ours has kind of come through a little bit slower and more elongated because of the timing it takes for us to implement, particularly with seasons. Kind of as we think about 2024 pricing, we won't have an outsized price gap versus kind of pre-pandemic levels versus a lot of our competition. As you've seen, many of them are posting high teens or 20% pricing versus us at 10%. So some of it is just ours is a little bit more spread out, but we will certainly be watching it very closely and particularly within, you know, snacking to look at where the share of stomach is going and how those cross elasticities progress.
Yeah, that's a good point, Melissa. Thanks a lot. I'll pass it on.
Our next question comes from the line of Chris Carey with Wells Fargo Securities. Please proceed with your question.
Hi. Good morning. Thanks for the question. I just have a question on confection margins, very strong in the quarter, you know, even despite, you know, a tough year ago compare, pricing is clearly building. You know, how should we be thinking about, you know, confection margins not just this year, but certainly over time as it seems like width coming through very strongly with pricing and costs perhaps are easing? Again, just a trajectory of confection margins would be helpful. And I think you had, you know, mentioned some inflation in cocoa and sugar.
Just remind us of your, you know, your duration on those hedges and, you know, when we might be seeing that, you know, inflation coming through, and just so we can kind of assess when the pricing might be needed to offset it. Thanks so much.
Sure. I'll take the last piece first. Just on cocoa and sugar, we don't get specific on the duration of our hedging programs. Obviously, for those two commodities we do some hedging, but we don't share the duration. We do expect to see, you know, potentially more impact in 24 than 23, but we'll see how the markets play out. On pricing, just more generally, as we talked about in the investor conference, you know, our goal is to always have a mix of volume and price. That's part of the balance in our growth formula. As part of that, we also wanna see margin accretion over time from both sources.
Confection margins have been strong, but even in the future, across all levers of pricing, including price pack architecture and mix and other things, we wanna continue to put upward pressure on our margins because that's part of our growth formula.
We continue to see some of our inputs rise, you know, cocoa and sugar recently, which is one of the reasons that we decided to lean into that more recent pricing action.
That's right.
Okay. That's it for me. Thanks so much.
Thank you.
We have reached the end of the question- and- answer session. I'll now turn the call back over to Melissa Poole for closing remarks.
Yep. Thanks so much for joining us this morning and all the great questions and the continued interest and investment in our company. I'll be available today and in the coming weeks to answer any additional follow-ups you may have. Thanks so much. Have a great day.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.