Hershey's: Demand Price Elasticity

This is a snippet of the transcript, sign up to read more.

Could you explain how you view the current cocoa supply and demand situation? How do you contextualize this compared to historical challenges? While the scale of this may be unprecedented, cost inflation itself is not. Could you walk me through your perspective on this and how you see the supply and demand situation evolving?

Government efforts to reduce land use and spread it out are also in play. It takes seven years for a tree to bear fruit. A study from a couple of years ago mentioned pollination issues, with midges, which are blood-sucking bugs, believed to be involved. Population growth might be reducing midge numbers, complicating pollination, along with hot, dry summers.

This is a snippet of the transcript, sign up to read more.

Could you discuss the price elasticity we should use as a rule of thumb? How do you contextualize the current cocoa price spikes and the corresponding high price increases? Will these increases stick, or will they need to be adjusted if cocoa prices return to around $4,000 or $5,000? How should I think about these factors?

Despite potential supply challenges from Covid, which weren't necessarily cocoa-related, we tried to dampen demand by reducing promotions, pulling advertising, and pushing through price increases. Yet, we still saw resilient demand for a few years. The historical elasticities became oddly inelastic, allowing us to push through price increases without a volume decline. In fact, we saw volume increases.

This is a snippet of the transcript, sign up to read more.

Could you discuss the price elasticity we should use as a rule of thumb? How do you contextualize the current cocoa price spikes and the corresponding high price increases? Will these increases stick, or will they need to be adjusted if cocoa prices return to around $4,000 or $5,000? How should I think about these factors?

There were also dynamics with our main competition having trouble servicing the market. Hershey saw huge share gains as Mars rationalized their portfolio and faced supply issues. Overall, Hershey benefited, and the category in general benefited from reduced elasticities.

This is a snippet of the transcript, sign up to read more.