The Hershey Company

Greetings and welcome to the Hershey Company first quarter 2024 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.

Good morning, everyone. Thank you for joining us today for the Hershey Company's first quarter 2024 earnings Q&A session. I hope everyone has had the chance to read our press release and listen to our pre-recorded management remarks, both of which are available on our website. In addition, we have posted a transcript of the pre-recorded 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 filing. 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 Senior Vice President and CFO, Steve Voskal. With that, I will turn it over to the operator for the first question.

Thank you. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. And you may press star 2 if you'd 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 keys. 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, Andrew.

Michelle, I guess excluding the inventory build, underlying organic sales in North America confectionary rose 2%. I think we in the street had modeled it broadly more flattish. And recently, market share trends in chocolate have inflected, you know, following a year of weakness. I guess my question is, am I overplaying this? Or maybe are you two starting to see sort of building underlying momentum in the core confectionery segment, you know, outside of all the ERP inventory noise? And would you expect to see a sequential improvement in volume trends in 2Q?

Yep. So Andrew, we are definitely, we're very pleased with our Q1 top line performance. I would say that overall it was in line with our expectations. However, our market share did exceed expectations. And our strength was really driven by very strong performance in seasons, both overall in takeaway as well as market share, and also the strength that we had in innovation with Reese's Caramel. which not only did well with consumers, was the best innovation in the category, and also was able to drive strong merchandising for us, particularly as we launched around Super Bowl. So we're feeling good about what we're seeing, and as we look to the rest of the year, we do expect some improvement in trends as we enter throughout the year and proceed towards the end of the year.

And then you mentioned in the preparator marks improved display activity. in the first half of this year versus the second half of last year. I know there's a lot that goes into that, but can we also take this to mean maybe that some of the headwind you faced last year from a major customer going through, you know, what seems like yet another sort of clean store effort maybe has started to realize a bit that display and sort of multiple points of interruption for snacks improve sales, or is that too strong a way to characterize it? Thanks so much.

Yeah, I would say we are partnering very strongly with that retailer, as we always do, and certainly I think we both recognize some of those opportunities that we can go after. As we look at the performance year to date, a lot of the strengths that we had seen versus second half of last year in merch, was really across other customers versus that customer with seasons, innovation, and then really tying some of our media to events like the Super Bowl or March Madness driving merch. So we do anticipate that we will see some of the strength from merch with that retailer in the second half of the year.

Thank you.

Thank you. And our next question comes from the line of Alexia Howard with Bernstein. Please proceed with your question.

Good morning, everyone.

Good morning.

Okay, so two questions. First of all, I know you're not going to comment on what you're doing with your COCO forward contracting and hedging strategy, but could you give us a little bit more detail on the levers and options you have regarding sourcing for 2025, whether it's sourcing from other regions, obviously timing of contracts, the amount of flexibility you can build into the system, just some ideas of the types of levers that you can pull, given the amount of volatility that's out there in the cocoa markets today.

Sure. Yeah, I'm happy to take that one. So multiple ways to deal with the volatility, obviously, you know, the hedging program and the financial side is one way to deal. And then the supply chain side, making sure we've got diverse sourcing, And we've done a good job of that over the years of really trying to diversify that supply chain footprint. And no doubt, you know, looking back at the last few years, we'll continue to move that diversification forward. But that does give us some flexibility on sourcing. And of course, we have recipes and taste profiles and things like that that guide those choices. But within that, we've got quite a bit of flexibility on the sourcing side.

Great. And then are you able to comment on What you're seeing in terms of the state of the American consumer, we've been hearing a lot about this recently with lower income consumers becoming more vulnerable. Any comments you can make on how much the SNAP spending cutbacks last year hit you? I don't know whether you're able to quantify that, but just comments on where you're seeing the American consumer headed at the moment. Thank you, and I'll pass it on.

Yeah, absolutely. So we do know that we saw impact from the snap reductions in the business in the back part of last year. You know, we are beginning to see some stabilization as we start to lap some of those reductions consistent with our expectations. As we built our plan, we anticipated that that would occur. However, we do continue to see value seeking behavior from consumers. So so that still hasn't changed. I'd say it's improving a bit, but it's still there.

Thank you very much. I'll pass it on.

Our next question comes from the line of Ken Goldman with JP Morgan. Please proceed with your question.

Hi, thank you. I just wanted to follow up to your answer to Andrew's question about North America Confectionary. I think you said that you were, that in general it came in underlying, right, excluding the ship ahead. you know, kind of in line with your expectations, but that your market share exceeded your expectations. So I guess just mathematically, the category maybe didn't do quite as well as you had hoped. So, A, I'm just trying to make sure I'm hearing that correctly. And B, if so, you know, what do you attribute that to? Again, we all know there's been some elasticity, and you mentioned the lower end struggling a little bit. Is it really just tied to that, or are there other factors maybe we should consider?

Yeah, I mean, I'd say some of that is always tied to, each key competitor and what their programming is like versus prior year. So our largest competitor Mars was a little bit soft for the quarter with share down. And I think a lot of that was driven by their innovation, the lap versus prior year with some of that innovation not sustaining. And those things do impact the category. So that looked to be one of the biggest drivers.

Thank you for that. And then just pivoting a little bit to Salty, obviously your sales trends were much improved. I think it's fair to say that there's still maybe some opportunities and margin ahead. I just wanted to get a level of, or get a sense of the level of, you know, how content you are with the A&P investment in that business. Do you expect to have to invest any more in price? Just, I guess, how confident are you in the kind of the building blocks to really get that

business a little more stable to a position where you can grow it and expand margins at the same time yep so overall salty was on track with our expectations as well we had very strong dots performance and then as expected um while skinny pop improved we knew that the majority of that improvement would would not occur until we get to lapping the q2 period and going forward um You know, Skinny Pop does remain pressured along with some of the rest of the ready to eat popcorn category. And we think that that will shift once we get past that lap. As we move through the year, we do have strong media and trade investments behind both of the brands. We also have flavor and pack innovation that will help us both grow and also drive share gains in the second half of the year. From a profitability perspective, Q1 salty profit was the weakest for the year, of where the business will be for the year. So you can expect that to get better going forward. And also, you know, the bigger increase in our advertising really starts to happen in Q2 and beyond, working forward.

Very helpful. Thank you.

Our next question comes from the line of Max Gumport with BNP. Please proceed with your question.

Hey, thanks for the question. I realize you're not getting into 2025 pricing conversation from this call or commenting on COCO inflation. I'm just curious if you could talk about some of the other factors that go into that framework, though. So we've talked a little bit about market share trends, but also what you're seeing with category volumes, health of the consumer overall, the competitive environment, cross-category elasticity concerns, just as we try to think through what you're seeing. Thanks so much.

Yeah, so on 2025, and I think that's where you're pointing the question, I would just say we're in the midst of building the 2025 plan, and so obviously, yeah, we're not going to talk about COCO. As we look to the plan, there are a lot of levers we'll be looking at, and so pricing is a level we'll look at, other supply chain savings. As we talked about in our last call, we've got some transformation savings that we'll be building in the years to come, including 2025. As we get further into the year, we'll be able to talk more about what we expect for 2025, including category health and what we think about the consumer and so forth.

Okay. And then turning to the comments on gross margin for 2Q24, any help you can give us in terms of the cost absorption that might reverse out in 2Q after a strong 1Q, given the inventory dynamics associated with the ERP cutover? I'll leave it there. Thank you.

Sure. Yeah, we expect to see that fixed cost leverage that we benefited from in the first quarter effectively fully reverse out in the second quarter. So order of magnitude, you know, we had 20 to 25 million of benefit on fixed cost absorption and then also a little bit of mix just based on the type of inventory that was built in the first quarter. And so both of those components should reverse out in full in the second quarter.

Great. Thank you. You bet.

And our next question comes from the line of Nick Modi with RBC Capital Markets. Please proceed with your question.

Yeah, thank you. Good morning, everyone. Just two questions. Good morning. Michelle, I was wondering if you could just comment on kind of what you're seeing from a channel perspective, primarily C-stores, because some of the feedback we're getting, you know, the traffic is really starting to come under some pressure. So love your thoughts there. And then just kind of more broadly, you know, one of the things that obviously we've talked about in the past has been this kind of cross elasticity between, you know, what's going on in your business versus other potential alternatives for the consumer, whether it be snack bars or, or what have you. And I'm just curious as you kind of think about the year, you know, are you, you know, framing your promotional plans and your pricing and your price gaps, uh, more from that lens, or you're still just, you know, more holistically or focused more specifically on just the categories in which you're competing. Thanks.

Yeah, so as it relates to C-Store, our business in C-Store has been holding up pretty well for us. So we really haven't seen a big change in trend, I would say, that we are focused on there. And as we look to price gaps, we always look at price gaps both and price points, absolute price points, both within the category as well as across the snacking category. So that is really a standard way that we view our price elasticity and we continue to evaluate it that way.

Great. Thanks. I'll pass it on.

Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

Thank you. Good morning. I just wanted to come back to the comments on 2Q. You called out the high single-digit declines you expect from the inventory reversing, but last quarter you said how you expect double-digit EPS declines in the first half. I don't, unless I missed it, believe you reiterated that, but would that still apply as well?

It does, yep.

Okay, great, thanks. And then Just as you think about any of the moving parts with some cocoa volatility or costs, maybe uncertainty at least, you've also reiterated how you just think for the long term and want to approach the business that way. Would it be right to assume that that does some amount of protection for A and C? How do you think about managing that as one of the variables, and is it something that is in play or is protected? What's kind of the approach there as far as the marketing spend?

Yeah, I mean, I think strategically we want to always continue to invest in our brands. We believe that's a key part of the model and we know that If you break that investment, it can take some time to rebuild to get to kind of your threshold levels again. That said, every year when we build a plan, we reevaluate the return on all of those pieces of spending. And we have to have the right news. We have to have the right increases in effectiveness and efficiency to set the right levels. So it's not to say that we are set at a specific budget or percent of net sales, every year we do adjust that based on what we're seeing in the returns, where the opportunities are, what kind of news we might have that we want to support, et cetera.

Okay, great. Thanks so much.

Our next question comes from the line of Brian Spillane with Bank of America. Please proceed with your question.

Hey, thanks, operator. Good morning, everyone. I guess, Michelle, can you give us a perspective, if you can, I guess, if you look at seasons in the first quarter and maybe just, you know, how consumers purchased around Easter and what the display and merchandising was like, does it give you any insight into Halloween maybe being any different this year or maybe needing a different approach for Halloween and And I guess I say that in the context, if we think about last year with the everyday business being so under pressure, right, it put a lot more pressure on seasons and Halloween and kind of the balance of the year to sort of drive the business. And it seems like that every day is at least as a category or the small format stores are under a lot of pressure. So I'm just trying to get an understanding if we have a lot of dependency on Halloween as we go through the end of the year and whether or not there's any sort of difference in the way consumers are shopping around holidays.

Yeah, absolutely. So if I start with the beginning of the year, Valentine's, the category was strong, and we performed very well there from a share perspective. The Easter category declined, but it was a shorter season, which always makes it more difficult. But Seltzer was very good. And again, we gained share in that season as well. As we look at the second half of the year, you know, we do feel like those trends are positive for the second half, but obviously we had some very strong seasonal performance in 23. So we think second half will grow, but we think the growth will moderate and perhaps be more in line with our overall growth as a company versus kind of supersized in the back half.

Okay, great. Thanks, Michelle.

And our next question comes from the line of Robert Mosca with TD Cowen. Please proceed with your question.

Hi. Thank you. Michelle, I thought I remembered last quarter you saying that once you got past the ERP conversion completely and, you know, after second quarter, that's when you would start to evaluate pricing actions to cover higher costs. Did I get that right? And is that still your strategy? And then lastly, I was wondering, like, how do you know that, how did you go about estimating, you know, how much extra inventory the customers pulled forward? You know, you're expecting one thing, like maybe they would take a month of inventory. And did they just say, no, we want two months instead of one month extra? And then how do you know that maybe they weren't pulling forward shipments ahead of a perceived price increase? Thanks.

So, hey, first of all, our teams have done an amazing job with the U.S. and Canadian S4 implementation, and we don't take that lightly. So we're thrilled about that, and I think we are consistent with what we've said all along, which is, hey, you know, we are in a pretty good position. We're shipping products, you know, invoicing customers, et cetera. But we do consider ourselves at the end of that ramp-up phase. and making sure that we have a stable system, can close the books at the end of the quarter and all of that. So yes, end of Q2 is when we believe we're maybe officially stable on S4 and have options available to us. Of course, we never speak about any of our intentions or strategies around pricing or when we might or might not, but rather just that the capability exists to be able to. Relative to the excess inventory, You know, frankly, we worked closely with customers because we wanted to understand how much inventory they wanted. I think a few things happened. We had some customers who maybe had not put in as much and communicated fully the requirements, so we had some of that that added to inventory. Frankly, I think we saw some others who, in the face of other companies in the marketplace who were struggling with ERP implementation, it spooked, you know, some retailers into wanting a little bit more inventory. So I would say relative to what we saw and was communicated to us, that's really, um, and we were actually able to execute more than we anticipated. We actually thought we, you know, we had to plan for some kind of disruption in the startup and assume that there'd be a cap on how much we could give retailers. So we were actually able to better fully meet what they really wanted. Versus originally, I think we kind of tried to cap them a little more just because we weren't sure we'd be able to deliver.

Steve, is there anything you'd say? And where we landed in the end, we feel was a healthy level. And so in the second quarter, we'll see the vast majority of that bleed out. It wasn't too much. And we don't see there's a sign about trying to get ahead of price increases. The way price increases these days work their way to the market, you know, pre-buying inventory isn't really the common practice. So not much risk there.

Great. Thank you for the call, Art. You bet.

Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.

Thank you. Good morning. Question on price elasticity. What do you think your price elasticity is on the chocolate products today? And do you have a sense of how that might change if you were to, you know, if cocoa prices remain elevated and you were to need a large price increase heading into 2025? Any thoughts about how that price elasticity might change?

What we've seen is no material change in our elasticities over the past several months. We remain in line with historical levels, which is about minus one, and that's what we would assume going forward.

Got it. You're always so good on insights. There's been this post-COVID slowdown in at-home snacking, and perhaps there's that overlay of the SNAP reductions causing or influencing that. But now there's talk of a weakening low-end consumer and perhaps convenience channels being relatively weaker now. I'm just wondering how you're thinking about the net of all these things going forward, and if you're seeing... cross currents between your different channels as you go through 24. Thank you.

Yeah, so certainly I would agree that, you know, with value-seeking behavior that a lot of that is coming from lower income consumers and we've seen that relative to SNAP reduction and the trends that that drove frankly in our business as well as I think across other edibles based on what other companies have shared as well. I would say that our C-store business is okay, and I would say mass, club, and dollar are very strong. So you may be seeing a little bit of that value-seeking based on where that shakes out, but I wouldn't say it's something that we have seen as significant or dramatic.

Got it. Thank you.

Our next question comes from the line of Chris Carey with Wells Fargo Securities. Please proceed with your question.

Hi, good morning. One quick question on gross margin. Did the complexion of your gross margin at all through the year. I know there's some timing dynamics between Q1 and Q2 and the full year outlook is unchanged, but is productivity coming in better? Are parts of inflation coming in worse? Are parts of inflation coming in better? Just any insight on how your delivery against this target has evolved over the past few months and is evolving over the balance of the year relative to your going expectations.

Yeah, no change. We're still, you know, as we talked about on our call last time, you know, about 200 basis points down year-over-year for the full year. Productivity savings off to a good start, right in line with plans. So, at this point, nothing material that would point to a reshaping.

Oh, okay. Yeah. Just the follow-up is on the category comments. The way that I interpreted it was that some of the slower category at the beginning of the year is almost entirely innovation relative to your goal and expectations of your peer, or is there anything else that you're seeing which you would highlight as over and above just that one comment regarding the lapping of innovation for one of your important competitors?

Nope, nothing else that I would highlight on that.

It's very clean. Thanks. Thank you very much.

Our next question comes from the line of Tom Palmer with Citi. Please proceed with your question.

Good morning. I wanted to just ask a little bit differently. I know you're not talking about cocoa inflation for next year, but there are some moving costs beyond just the headline cocoa inflation. You've got conversion costs, and I think you're buying more butter and liquor than powder. So when we just look at headline cocoa inflation, do these items like conversion and then the kind of the sub items within cocoa that you're buying, do those soften the magnitude of inflation? Are they adding to it right now? Just trying to understand that piece of the dynamic.

Sure. Yeah, you're right. Cocoa is sort of the headline, the big headline. But when you look at cocoa derivatives, they are also increasing. And we won't comment about percent increase relative to cocoa price increases, but they are inflationary just as cocoa itself is.

Okay. Understood. And on the salty snack side, you noted non-measured channels as a driver maybe of outperformance versus what we see in scanner. Where's that really coming from? And is this like other retailers? Is this more on the e-commerce side? And should we think about it as Velocity or expanded distribution?

Yes, so it is from Club, especially some very nice increases on DOTS that we shared last year. We got incremental distribution. So at this point, it's from both distribution and velocity there. So DOTS was up about 30% to start the year, and we gained over 300 market share points club was one of the drivers of that.

Great. Thank you.

And our next question comes from the line of Rob Dickerson with Jefferies. Please proceed with your question.

Great. Thanks so much. Michelle, maybe Steve too, let me fully understand, right, not speaking to hedging practices. you know, kind of where you're positioned or how you're positioned or how you're thinking about, you know, the internal hedging dynamic. But I am curious, maybe just more broadly, you know, we heard from another large confection company earlier this week that was kind of able to speak, you know, kind of in general as to kind of just how you're thinking about just like global cocoa supply, right? I'm sure you have plenty of internal and external advisors kind of trying to provide that perspective and I'm sure it's a lot better than ours. So, I'm just curious if you have any general comments around that first question.

Yep, we're happy to share. So I would say, you know, overall, our views about what has driven the market are somewhat consistent with what that, you know, large competitor shared earlier. You know, as we think about it, we think both structural and transient forces have been at play, impacting prices over the past several months. You know, it certainly started with poor weather, a poor weather that impacted crop and then concerns about supply. But as we've mentioned previously, it's also about much more than just supply and demand economics, but rather the impacts of regulation like the EU deforestation regulation, market speculation, and also the lack of liquidity. So we continue to closely monitor supply and demand in the short term, which are the things that we can most get data and information on. The market will start and has started to get some signals on the supply outlook for the main crop. That will happen over the summer. Your early reads on mid crop look good, but it's really early. So we continue to monitor that. We also have full coverage for 24. We have some coverage into 25. And then we remain very focused on executing what's within our control. You know, our business strategies to drive growth, improve share, innovate, enhance our capabilities, drive cost efficiency as we continue to monitor that environment.

Okay, great. Thanks for that. It was very helpful. And then maybe... Steve, this one's a little bit more for you. You know, I know you have the two programs focused on productivity and savings. The kind of, you know, gross is over the next three years, 700 million. You know, there's obviously some cost inflation already in the system could be more forthcoming. I don't really think you've, you know, spoken much to kind of like the net productivity and savings. And I also don't expect you to give me an actual number. But I am just curious, kind of like, you know, how should we feel about kind of like the, you know, net impactability, you know, on the P&L, again, broadly speaking, given just, you know, what clearly is kind of a material amount of savings and productivity over the next three years. That's it. Thanks.

Sure. And maybe if I just take Coco to the side and look at the rest of the business, you model is to offset inflationary costs over time through a variety of levers in the P&L. And that fundamental model is still in place. Of course, COPA was certainly stressing it in the near term, but longer term, that is still the model to cover inflation. And so as we think about these savings programs, both the earlier one we discussed in the investor conference focused on productivity, and then the most recent one, which is a mix of SG&A savings and productivity, both of those we like to focus on being a net benefit to the P&L over the horizons that we're talking about, which would imply we have to get other ongoing normal efficiencies to offset normal ongoing inflation. And so that's the way we're looking at those cost programs.

All right, great. Thanks so much. You bet.

Our next question comes from the line of Jim Solera with Stevens. Please proceed with your question.

Hey, guys. Good morning. Thanks for taking our question. Michelle, I wanted to circle back to seasons and just dig down on, you know, you guys mentioned you gained share in Valentine's and Easter. Can you just talk through what's driving that? And then maybe if there's any learnings that you can take to apply to, I don't know if you'd characterize it as like a mini or a bonus season with the Olympics this year.

Sure. So as I look at, you know, winning in season, certainly it starts with the right product portfolio. We feel good about the portfolio. We always have innovation at the seasons and we feel good that we had the right innovation. Another key driver is merch. We did a very nice job with merch and our retail sales teams, you know, working stores to get the visibility that we really desired for the category and overall for our business. And then also, you know, we had the ability to provide even more supply. As we've mentioned over the past several years, you know, we had a couple of years where we were constrained by what we were able to deliver. And, you know, end of last year, we really got to a much fuller place in supply across our portfolio. And yes, all of those lessons we apply to those not traditional seasons, but those other occasional seasons, things like Super Bowl, March Madness, and Olympics. And so we certainly plan to leverage those same levers to make Olympics a strong event for us in the summer.

Great. And on the Olympics specifically, if I'm not mistaken, I think it's two weeks. And so Should we expect like in-store activations on that to run for like three weeks or four weeks or any way to kind of size that up as we think about that at the end of the summer?

Well, we usually start some of those activations ahead of the event. Retailers like to, you know, kind of highlight the event and get people engaged on ahead of time. So you will see some of those displays start as early as June, really leading into the Olympics. And then, Depending on the retailer, you'll see them throughout the summer. Okay, perfect.

Thanks, guys. I'll hop back in the queue.

Thank you. Our next question comes from the line of John Baumgardner with Mizuho. Please proceed with your question.

Good morning. Thanks for the question. Good morning. In terms of the international business, there's been some high-level comments about Europe over the past year or so. I think recognizing your presence there a bit more than in the past. And I'm curious how you're thinking about that market longer term. Would you say you're still in the trial period? Is there anything that still needs better understanding at this point? Just how do you think about Hershey's desire to maybe take the next steps? And I guess it's a pretty big market with some differentiated products.

Yeah, so yes, it is a large market. And I think the approach that we've always taken over time is it is a very well-developed, established market. And therefore, we believed our best chances of succeeding are with a differentiated product. And after a lot of work, we have been successful in bringing Reese's to Europe. And really starting in the UK, we've had some phenomenal success with, frankly, not a ton of investment in support in terms of on-the-ground people or other investments. So we now have a business that we feel good about that's profitable there, and that's really our primary focus. So we think about Europe a bit more from where we have that, you know, elements of a differentiated portfolio that we think can win. And not looking at it as a big investment, but rather doing it efficiently to maintain strong margins.

Okay. And in the U.S., I'm curious, as the consumer encounters just sort of an extended period of high inflation, are you seeing any changes in terms of demand drivers for your categories where maybe the pull in advertising isn't what it used to be? Does it require more price promo? Does it require more in-store display, more front-of-store presence? How do you think about, or are you seeing any changes in sort of the efficiency of the man drivers that are out there?

Yeah, I mean, I guess one way that I think about it is making sure that we look at each occasion, which really comes down to kind of the pack types across the portfolio, and ensuring that we have good entry-level prices based on how the consumer, well, and I guess prices based on how the consumer perceives value. A lot of times for the lower-income consumer, it's about an entry-level price point that enables them to participate. In some categories, it's about volume that has a better price per ounce. So I think, to me, that might be the bigger piece. I do think areas like seasons and innovation also drive value above and beyond the base products, and so I think we've seen that as well.

Thank you.

And our next question comes from the line of Alejandro Zamacona with HSBC. Please proceed with your question.

Thank you. Good morning, everyone. Just a follow-up on the cocoa prices discussion. So I'm curious in hearing any comments regarding the recent normalization. So recently, prices have declined 30% in the last couple of weeks. So any comments around that would be helpful. Thank you.

Yeah, well, I think, first of all, that decline is just further evidence of the tremendous volatility that we're seeing in the marketplace. You know, it's hard to peg what some of those declines. There are no new signals relative to supply and demand that are meaningful yet. I mean, perhaps some early signs about the mid-crop, which leads us to believe that more of the decline is driven by some of the non-supply-demand economic factors, but some of those other factors that we've discussed relative to speculators, thoughts on regulation, et cetera.

Thank you.

Thank you. We have reached the end of our question and answer session. And with that, I would like to turn the floor back over to Melissa Poole for any closing comments.

Thanks so much for joining us this morning. I know there's another call, so we'll let you all go to make sure you can attend that and look forward to catching up later today. Have a great weekend.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.