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spk17: Greetings and welcome to the Hershey Company first quarter 2023 question and answer 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.
spk08: 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. In addition, 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, Michelle Buck, and Hershey's Senior Vice President and CFO, Steve Boskell. With that, I will turn it over to the operator for the first question.
spk17: And if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone would indicate your line is in the question queue. You may press star 2 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.
spk19: Good morning, everybody.
spk11: Good morning.
spk19: 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, but Hershey raised its sales growth guidance to the high end of the previous range for the full year. So 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?
spk09: Yeah, thank you, Andrew. Yeah, you're exactly right. For the first quarter, the timing impact was about half of the beat on the sales line and also strong performance in international. So those were the two big drivers. We look to the balance of year. Obviously, the timing is going to wash out in the second quarter. But we do expect to see a little bit better elasticities in the year-to-go period. We still see it moderating versus some of the strong performance we've seen in the last six to nine months, but a little bit more improvement. And we're based at a little bit more on media investment that we also have incrementally in the year-to-go plan. So 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-to-go period, that's what gives us the confidence in the race.
spk19: Great. Thanks for that. And then with the pull forward of some shipments from 2Q into 1Q, along with the tougher, I guess, year ago, organic sales and EPS growth comparisons in 2Q, I guess, what are some of the key puts and takes to keep in mind when we're modeling for 2Q? Thanks so much.
spk09: Yeah, Q2 will probably be our most challenging quarter as I look to the balance of the year. You know, we're going to have the timing piece shift back out, but then also recall last year was a big inventory problem. till quarter as well. And so when you look at the lap, it's a pretty tough lap. That, combined with that point and a half coming out, will put more to the mid-single-digit range, probably from a sales standpoint. And that will put more pressure on the EPS side than the rest of the quarters.
spk14: Great. Thanks so much. Our next question comes from the line of Ken Goldman with JP Morgan.
spk17: Please proceed with your question.
spk07: Hey, 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 so am i reading that wrong or was one delayed um and then 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 uh in houses is generally a good thing for efficiency, but 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.
spk10: Sure. So there is no change to the number of lines. There are five lines. And 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 command of Skinny Pop. We acquired two plants and really what it gives us are three things. It gives us sufficient capacity to be able to support growth for several years to come. And as you know, we're seeing very strong growth on Skinny Pop. 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. And 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.
spk14: Thank you. Sure. Our next question comes from the line of Cody Ross with UBS.
spk16: 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, what you announced at the analyst day. How much do you believe will benefit fiscal 23 versus fiscal 24? And can you explain the mechanics of the benefit by the year?
spk09: Yeah, at a high level, it's going to have, as we talked about in the investor conference, more impact in 24 than it is in 23. That's based on partly the implementation date and then also the fact that we have protection in place for big promotions and programming for a good part of the year. And 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 23 and 24 impacts, and we'll be able to talk more about it at that time.
spk16: Great, thank you. And then 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.
spk09: Yeah, thank you. Yeah, 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, and so COCO is 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 going to be able to stick around, but probably the biggest piece has been just freight and logistics improvements. And 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. And 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. So those are really the drivers in the first quarter that we've captured in the outlook. Time will tell as the year goes on how the rest plays out, but that's what gives us the confidence is really just the first quarter performance.
spk14: Thank you very much. I'll pass it along. Our next question comes from the line of Nick Marty with RBC.
spk17: Please proceed with your question.
spk12: Yeah, thank you. Good morning, everyone. So just a quick clarification. 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 and travel? I'm just curious on, you know, there's a very strong number of relative expectations. And then if you could just touch on the market share commentary you made in the U.S., Um, you know, and kind of, kind of what's driving some of that. He talked about some mix, but I was kind of unclear exactly what, what that was referencing.
spk10: Yeah. I mean, if we look at the initiatives in international, you know, we've seen category strength across the market. Uh, we saw a stronger Easter season in Brazil than we had anticipated. Um, we continue to see distribution gains in Mexico and also in India. Um, so 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. And then we're also seeing some impact from timing as, if you may recall in Q4, consumer demand outpaced our shipments, and we recovered some of that in the first quarter. And can you repeat your share question one more time?
spk12: Yeah, 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. But if you could just provide any context on some of the market share trends that you're seeing.
spk10: Yeah, absolutely. So 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. And then 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. So really mixed as an impact.
spk11: Great. Thank you. I'll pass it on.
spk17: Our next question comes from the line of Pamela Kaufman with Morgan Stanley. Please proceed with your question.
spk13: Hi. 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. So how are you thinking about the consumer and elasticities over the course of the year?
spk10: So 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. And 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. And 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?
spk09: Yeah, on the elasticity side, we 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. And, you know, we'll see how the year plays out, but that's our current assumption.
spk13: Okay, thank you. And my second question is just on the ERP implementation within SNACs. 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?
spk09: Sure. So 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. 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. And 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. And 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.
spk08: And, 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. Great.
spk13: Thank you.
spk14: Our next question comes from the line of David Palmer with Evercore ISI.
spk17: Please proceed with your question.
spk15: Thanks. Good morning. In your prepared remarks, you mentioned that you'll be in a strong position to fully support consumer demand for the rest of 23. I wonder if you could give some color about that. It's obviously ahead of some 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 that the upstream suppliers coming through? And I have a quick follow-up.
spk10: Yeah, 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. And so, you know, that's the point at which we believe we start to get ahead. So I think we've pretty consistently talked about, you know, end of 23 and 24 that we anticipate being beyond many of these supply issues. But yes, I would say predominantly they've been focused on capacity. Certainly in the early years, there were some other industry dynamics as well.
spk08: David, I'm not sure, maybe your question, the 5%, just to clarify, that is actually a pound number, not a sales number. Maybe we weren't clear enough in the remarks. So that 5% growth in production pounds will be well ahead of what the guidance calls for volume, and that's kind of how we catch up.
spk15: Got it. And 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 24 because it's ramping through the year. I'm wondering, you know, what's the impact of capacity increase for 2024, do you think?
spk08: There will be a carryover into 24 from those as well as some additional capacity expansions that we have coming online. So there will be a low single-digit increase in pounds production available next year as well from some carryover and some new initiatives.
spk15: Thank you very much.
spk17: Our next question comes from the line of Max Dunford with BNP Paribas. Please proceed with your question.
spk06: 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 and quarterly results. So just hoping you can give us some color on, on this, uh, debate that seems to be emerging. Thanks.
spk10: So 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. So 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.
spk06: Thanks. And one follow-up on gross margin. 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 margins through the year, even after taking into account some seasonality. And so I'm just curious what type of factors might be going into those assumptions there. Thanks.
spk09: Yeah, I think the biggest factor is it is still early in the year. We still have a lot to play out. And so we're certainly taking stock of the upsides that we saw in the first quarter. But 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. And so we're factoring that. And then also as we go forward, particularly Q4, the laps get tougher. And so that's the other factor weighing in the guidance.
spk14: Thanks very much. Thank you.
spk17: Our next question comes from the line of Brian Svillain with Bank of America. Please proceed with your question.
spk01: Hey, thanks, Operator. Good morning, everybody. I just wanted to ask a question about seasonal. You talked about part of what impacted market share on seasonals in the first quarter was capacity constraints. And I think we've talked about more capacity available for seasonals as we move through the year. So can you just kind of 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.
spk10: Yeah, sure. So 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 uh halloween and holiday demand so some of the issues that we encountered during easter we should be passed 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
spk18: In the press release, you had mentioned just the ability to sustain momentum into 2024 and beyond. Obviously, it's early, but just kind of caught my eye that you would call that out. What are you seeing that would 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?
spk10: I mean, we're not going to give a lot of, we're not really going to talk about 2024. I mean, at the very high level, we'll talk a little bit about the consumer piece, and Steve can talk about the P&L component. But, 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. And certainly, as we saw in the first quarter, strong momentum in international. So right now, we don't see any big signals that suggest to us any big hurdles on the top line.
spk09: Yeah, I would agree. I 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. And then the commercial capabilities that we talked more about at the conference as well, being able to help drive sustainable growth in the U.S. business in particular. So, Those are just some of the reasons I think we feel pretty good about the momentum.
spk18: No, that's helpful, Culler. Thank you. And just to follow up on DOTS, we got to see the ads yesterday, obviously, and 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 and just sort of – we've already seen obviously – very strong momentum there. How much further can it go and what's some of how you think about your expectations?
spk10: 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 DOTS consumer and the consumer's relationship with DOTS. And so we feel good about the messaging direction, the creative execution, and certainly it's scored incredibly well. And the responsiveness that we tend to see across our snacking categories with advertising investment. So more to come and we'll share more as we have actual in-market results on that. But we think that will clearly only help us given that we haven't been investing in that brand in the past.
spk14: Okay, great. Thanks so much. Our next question comes from the line of Rob Dickerson with Jefferies.
spk17: Beautiful seat with your question.
spk03: All right, great. Thanks so much. Just two kind of easy questions. The first is just an international, obviously impressive on the volume side, but really don't see any incremental pricing year over year. So I'm just curious, you know, I mean, clearly it's intentional. Just kind of curious as to why that's intentional, why we're not seeing much pricing international, just kind of given the cost complex and kind of what you've been able to push through in the U.S. And then I have a quick follow-up.
spk09: Sure. We are pursuing a price strategy in international. It's just more modest, 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. But we should see more price come through in the next three quarters.
spk03: Okay. Fair enough. And 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. And if we kind of think about where the top line probably is headed, you know, 24 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. So 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 all the cab exits being spent, you know, on the new facilities, right, the new lines, and then 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, and therefore, you know, is there a possibility for let's say, other cash deployment, whether it be around the dividend or buyback or what have you? Thanks.
spk09: Sure. Yeah, great question. So 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. And I also like the fact that we're buying – well-maintained, state-of-the-art manufacturing facilities. When we're doing that, it's still much more capital efficient than building from whole cloth. And so it is capital efficient to pick up assets this way as well. So as we look to the future, I feel good about the capacity that we're going to 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.
spk14: All right. Fair enough. Thank you. Thank you.
spk17: Our next question comes from the line of Jonathan Feeney with Consumer Edge. Please proceed with your question.
spk02: 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 of growth? Because, you know, I guess... I'm trying to understand how when you take these products, whether it's DOTS 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. 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.
spk10: Yes, absolutely. So 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. So in DOTS 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. So that's been a big area of focus and that certainly has driven has been a key driver of the business, but 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. Then 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. So 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. And then beyond that, the other kind of key focuses relative to price pack architecture, um, and other drivers. So I think we will see the revenue coming from it will continue, but we will apply the other capabilities we have to really generate that. And as we mentioned at investor day. We do anticipate seeing growth in that 15% kind of range for the next few years, but a deceleration from the 20-plus percent that we've seen more recently.
spk14: Thank you very much. Thank you.
spk17: Our next question comes from the line of John Baumgartner with Mizugo Securities USA. Please proceed with your question.
spk05: Good morning. Thanks for the question. Maybe just building on John's question, Michelle, sticking with the salty snacks distribution. I know the focus here is building availability in mass and grocery, but the ACV opportunity seems pretty significant in C-stores as well. Are there any considerations, whether it's dislodging competitors or 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 how are we thinking about closing that distribution gap in C-Stores over time? Thank you.
spk10: Well, C-Store is really a core capability for the company, for our base core CMG business. So certainly we realize its importance in reaching certain specific consumers and really certain specific occasions when consumers are out and about. So it is a priority for us. We have been focused on that. I think in Skinny Pop we are certainly making progress, but there's more opportunity to go and so 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. So we feel very good about that. And then across our Salty Snacks network, we do have both warehouse and DSV capability, and we're really working right now to optimize how we best utilize each to maximize the potential of the business.
spk05: Okay. And then in terms of the popcorn assets that you're acquiring, in addition to just the pure growth and volume and capacity, Is there anything, augmented capabilities, whether it's pack size or anything else in terms of opportunities there?
spk09: Yeah, beyond just the capacity, one of the things that gives us the opportunity to optimize the supply chain network more broadly. So if you think to the future, other assets are 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've got the right packs and mixes to support the business going forward. So by having all of that in our hands and our control just gives us more flexibility and agility to deliver that growth plan.
spk10: Yeah, and as I mentioned earlier, we do have – that gives us capacity ahead of demand, so it gives us that trajectory for the next few years.
spk14: Thanks, Michelle. Thanks, Steve.
spk11: Thank you.
spk14: Our next question comes from the line of Jason English with Goldman Sachs.
spk17: Please proceed with your question.
spk04: Hey, good morning, folks. Thanks for stopping in. Good morning. A couple of quick questions. So Colgate just recently did something similar in fat 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 AC similar on that front with Weaver Acquisition?
spk10: 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.
spk09: Yeah, some fixed overhead and some transition costs that would be normal, but not a portfolio overhang like you're referencing, Jason.
spk04: Good to know. Thanks for that. And then 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-priceless. We're moving in the same direction. It sounds like in 24, you're going to 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-priceless acidities? Which categories should we be watching where you tend to see switching between confection and And I'll leave it there.
spk09: Yeah, I would say, first of all, it's a little early yet to be starting to think about the cross elasticities for 24. 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. And so I think that's getting us in a good starting position. But then 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.
spk08: 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. So kind of as we think about 24 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.
spk14: 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 questions.
spk20: 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. How should we be thinking about, you know, confection margins, not just this year, but certainly over time as it seems like it's coming through very strongly with pricing and costs perhaps are easing. And so again, just a trajectory of confection margins would be helpful. And I think you had mentioned some inflation in cocoa and sugar. Just remind us of your duration on those hedges and when we might be seeing that inflation coming through and just so we can kind of assess when the pricing might be needed to offset it. So thanks so much.
spk09: 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 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 at the investor conference, our goal is to always have a mix of volume and price. That's part of the balance in our growth formula. And as part of that, we also want to see margin accretion over time for both sources. And so confection margins have been strong, but even in the future, across all levers of pricing, including price-packed architecture and mix and other things, we want to continue to put upward pressure on our margins because that's part of our growth formula.
spk10: And 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.
spk14: Okay, that's it for me. Thanks so much. Thank you. And we have reached the end of the question and answer session.
spk17: I'll now turn the call back over to Melissa Poole for closing remarks.
spk08: Thanks so much for joining us this morning and all the great questions and the continued interest and investment in our company. So 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.
spk17: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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