The Hershey Company, which owns several confectionary brands, is seeing the rise of the “chocolate effect” as cash-strapped consumers seek to treat themselves at a lower price point.
Why it matters
As inflation hits consumers’ spending habits, low-priced treats become more popular.
In a Q3 earnings call, president and CEO Michele Buck said Hershey is seeing some of these changes in spending: “Specifically, value channels and value packs are selling well.”
“Within our categories the trends have really remained very strong as the consumer continues to prioritize snacking, and particularly sweet treats … Snacking and confection products continued to outpace the overall store and they are growing double digits,” the CEO said.
This is in contrast, Buck added, to the “significant decline” the company experienced during Covid when consumers where less mobile. But now that people are moving around again, “we've seen that business really come back”.
Taking on private labels
Private labels are becoming more of a threat in its categories, especially among lower-income consumers who are more sensitive on price.
“We are seeing some improvements in private-label performance and, really, we're seeing this across the board – slightly more noticeable with lower-income consumers, but really across all different income levels,” Buck said.
“We have minimal private-label presence, so we continue to see that our products remain an affordable treat for families and for consumers. And we know that part of that is they want to reward themselves when times are tough. They also use these products to relieve stress. We think that those trends will continue.”
Develop a tiered price system allowing consumers to purchase branded items at a price point which is most accessible to them.
Continue brand building to differentiate against private-label competitors who may be more flexible on price.
Manage portfolios carefully to ensure fast-growth SKUs are getting the support they need to thrive.