Q2 2023 Hershey Co Earnings Call
Okay.
Greetings and welcome to the Hershey Company's second 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 would 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 and thank you for joining us today for the Hershey Company's second quarter 2023 earnings Q&A session and 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 posted a transcript of the pre recorded remarks at the conclusion of today's live Q&A session. We will also post the 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.
The release and the company's SEC filings. Finally, please note 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.
She senior Vice President and CFO , Steve Voskuil with that I will turn it over to the operator for the first question.
Thank you we will now be conducting a question and answer session. If he 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.
Press Star two if we would like to remove your question from a Q1 moment. Please while we poll for your questions.
Our first questions come from the line of Andrew <unk> with Barclays. Please proceed with your question.
Great. Thanks, so much and good morning, everybody.
Good morning, Good morning, I wanted to ask a bit about the pricing versus volume commentary regarding the full year sales growth outlook and the comments. It sounds like you expect price to be a bit better in the second half and maybe volume is a bit worse than originally planned. So just two questions. On this first how do we think about the balance between the two in the second half.
And could could volume would be down year over year in two age.
And then more specifically on volume is the weaker than anticipated volume fully due to just the new pricing actions or are you, reflecting a tougher consumer or a competitive environment.
And that outlook, where both thanks so much.
Yes, I'm happy to take that one Andrew.
Your math is right. That's the way we're looking at it in the price piece. It really is driven by the volume impact really is driven by the extra price impact as.
As we look at the back half and as we look at volume in the back half, yes year over year, we expect it to be down, but it's really is price driven there is probably a very small portion attributable to the salty Miss stuff in Q2.
But the vast majority is just a reaction to price.
Right great. Thanks, so much I'll pass it on.
Yeah.
Thank you our next questions come from the line of Bryan Spillane with Bank of America. Please proceed with your question.
Yeah.
Brian could you check up yourself muted please.
Yes.
Alright, let's come back to Brian [laughter], Okay.
Our next questions come from the line of Ken Goldman with J P. Morgan. Please proceed with your questions hi, Thanks, so much.
You've done a great job, obviously implementing pricing to offset inflation, but cocoa and sugar are up a lot more I know you can't talk about pricing that hasnt been announced to the trade yet but is it reasonable to think that you are maybe considering another list price increase and you know it.
At what point do you start to ask how high is too high how do you think about elasticity in the consumer in that environment I just wanted to get a sense for kind of the puts and takes as you think about how to deal with and manage maybe what continues to be an inflationary environment for you.
Sure I mean, youre right cocoa and sugar are historically high it I saw a news article this morning talking about cocoa that'd be hit a 12 year high on the New York Exchange.
Good news is we've got experience managing through commodity Russias up and down and so as we talked about in the past as we look at dealing with that price is a lever, but it's not the only lever and so we look at driving more productivity driving efficiency through other parts of the P&L.
And in general driving revenue management is just part of our ongoing strategy and so all the usual levers will be applied and as I said, it's not the first time, we've had to deal with something like that so we're pretty good at being able to navigate and you're right, we're not going to get.
More specific than that at this stage.
Thank you and then just on the comment about increased competitive I guess innovation in confectionery and North America.
How incremental is the innovation that youre seeing.
Any real surprises in there versus your prior expectations you know it's been such a I don't want to say a benign competitive environment, because obviously you have some tough.
Tough players in the market, but I I is it getting more intense than what you would've expected I guess is what I'm going for there.
Yeah. So I would say you know the innovation is up off of a relatively low base. So it is having an impact based on that I think many folks have been focused certainly we've been focused a lot on execution and meeting demand for the past few years and focused on the core with innovation not claim as big of a role and I think.
Now, we're just seeing competitors in the marketplace start to dial up the innovation more back to historic levels and as we go forward. That's certainly an area that we're going to be focused on as we are continuing to increase capacity.
At the same time.
Thank you.
Thank you. Our next question is coming from the line of Max <unk> with BNP Paribas. Please proceed with your questions.
Hey, Thanks for the question with regard to be increased chocolate capacity this year and additional co manufacturing capacity he secured and suites for next year.
Is there any way you can help us dimensionalize, how sizeable are those capacity increases are.
Just as we try to get a sense for how impactful these additions could be for for volumes in the second half and also in 2024. Thank you.
Okay.
Yeah, I think we've said in the past, but if you took a look at the capacity that we have coming online. This year, that's already gone into place and then what's coming in the back half.
And then look kind of year over year Youre in somewhere in the 5% range of the incremental capacity across our chocolate and sweets.
Yeah.
Great. Thanks very much.
You bet.
Thank you our next questions come from the line of Michael elaborate with Piper Sandler. Please proceed with your questions.
Thank you good morning.
Good morning.
You've got the integration in salty snacks and the transition to S. P that you've been talking about in.
I never seem to be sort of a smoother easier mentioned theirs.
Some hiccups that you've seen but can you just maybe give a little sense of.
What does looked like in a little more detail and specifically with an eye on just having a uh huh.
Of what's to come when you know what have you learned and how confident are you that the rest of the year can can avoid some of those hiccups or just be even so where theres still.
Yeah, I mean, I would say overall, it's certainly one of our key focuses as we planned for this year was was that at the enterprise level really focusing on the stellar execution. We plan the business in a way to assume that we would be trying to frontload performance.
Knowing that you know there are always hiccups in the execution and so in Q4, we do expect to see volumes be down.
And we put that in our plan. The teams are all over it. It is a focused effort not just within <unk>, but across every functional area of the salt business.
And so far we've been doing pretty well and sell T with household penetration growing repeat frequency strong sales. Yeah. We didn't have the promotional shift into Q3, and we feel good about being able to execute that but we feel like we're well geared up to be able to execute that that said, we certainly do believe that there will be.
I would tell it in the back half of the year with the ups and downs of best sport.
Okay, that's helpful and just back to pricing.
You've got.
Delays in some of the timing between the announcement and implementation and then seasons of course or perhaps a staggered effect in with just some of the maybe layers to it can you give a sense of just what you've announced already or put in place already has as an impact on 2024.
It looks like at least the low single digit maybe my math guesses or estimates closer to like three points you might already have.
And is that about right or what are some of the moving parts and we have a.
I'm a little bit further to look ahead of what's already been.
Put in place.
We have high single digits in the second half of this year and as we look to 'twenty for low single digit pricing.
Uh huh.
And just to clarify that's without any other that but that would be before theres anything else that might still be to come right.
That's what we've announced.
Perfect. Thanks, so much.
Thank you our next questions come from the line of Pamela Kaufman with Morgan Stanley . Please proceed with your questions.
Good morning.
Good morning, good morning.
Advertising spend was up 15% this quarter, which is an acceleration from Q1.
Given the better than expected performance in gross margins for the year and what Youre seeing in the competitive and demand environment are there any changes to your plans for marketing spend for this year.
Relative to before.
No no fundamental changes we had expected this year to be a year or two invest in brands and again as we have capacity coming online.
Leading into seasons, especially if we get to the back half a significant increase in brand investment was planned and we're executing to that plan and also as mentioned we were working to really front load more of we're still T planning because the best score.
So where plains accounted for that as well.
And then just in the prepared remarks, there are comments about private label launches and yours healthy snacks categories.
You're generally in categories that very little private label competition.
Considering the launches that you alluded to just curious to hear how you're thinking about managing private label competition in your categories.
And how you are addressing it.
Yeah. So certainly there is a bit more private label insult even in CMG.
But what we have considered we continue to see that well private label has ticked up a bit.
Our brands have continued to remain quite strong and do incredibly well and as we look at private label, even within the confection category them.
While there has been increased activity there it remains a very small part of the category less than 3% and the entries we've seen in the marketplace. This year are still relatively small.
So we don't take our leadership for granted we certainly continue to invest in our brands to make sure that our propositions are strong, but we feel very well about how we're competing right now in the marketplace on that.
Okay.
Thank you.
Thank you our next questions come from the line of Nik Modi with RBC capital markets. Please proceed with your question yes.
Yes. Thank you good morning, everyone.
Good morning, I was hoping you could just kind of address.
You know the halt the Halloween sees.
Season as it relates to.
One of your competitors are still struggling with supply chain and have cut back their orders.
I'm just curious do you know how can you take advantage of this do you have visibility at this point in terms of maybe securing some of that a missed opportunity by it by some of your competitors just wanted to get some clarity on how you think about that as it relates to the third quarter.
Yes. So we are expecting a very strong Halloween, we know that customers are planning a big displays and we are certainly participating in that and as well all have strong marketing support to consumers planned as well. So we have certainly taken an approach of leaning into Halloween.
We feel good that there will be plenty of candy out there.
So feeling good about that as we look at overall in the back half as it relates to our market share, we think that there'll be a stable approach overall, but you.
Some pressure on everyday despite some of our strengths around the seasons.
Great and then if I could just clarify you know in terms of the execution issues in salty snacks.
What exactly happened so you talked about systems changeover, but can you just provide us the details on exactly what the problem was.
Yeah, I mean, I'd say two key things one is we had some promotions that we had planned to occur in Q2 that shifted to Q3 and then we have had some just basic issues as we've been bringing together all of those businesses that you would expect during a transition like that around sales.
Sales and commercial and supply chain execution.
So things just weren't as connected as they need it to be we feel very good that the team is on it and focused on it and execution is something that we tend to do very well. So we have a lot of confidence in our ability to.
To focus and get that back around you know that said of course the back half of the year. As we've mentioned is going to be have a lot of volatility that's really tied to S. Four as we build inventory and then work through the implementation and anticipate that we will have later sales in the fourth quarter as a result of that but we have confidence in our ability to succeed.
Execution.
Great. Thanks, so much I'll pass it on.
Thank you our next questions come from the line of Alexia Howard with Bernstein. Please proceed with your questions.
Good morning, everyone.
Yeah.
Hello can I ask first of all about market share trends in U S. Chocolate it sounds as though capacity constraints and other issues have has.
Some of those declines do you have a view as to when those market share trends should start to improve and turn positive again.
Yeah.
So we expect to continue to see pressure in the back half of the year.
We believe that will start to see some improvement, but there are a couple of things that are really impacting share. So one certainly is around category mix with refreshment and suites being stronger than we had anticipated.
Chocolate should improve and we are focused on increasing our level of innovation to be even more competitive and will be in a better position to do that as we continue to have more capacity come online.
Great incremental yeah go ahead.
I'm sorry, no I was going to say moving onto salty snacks, you talked about a double digit decline I think in the in the fourth quarter because of the transformation.
Is that choppiness expected to persist into 2024.
No no not at this stage you know really it's just the Q3 will be getting ready and building inventory for the switchover Q4 will be the switchover in the recovery and so by the time, we get to the first quarter, we'd expect to be back on a back or very close to a regular like that yeah great.
Great. Thank you very much I'll pass it on.
You bet.
Thank you our next questions come from the line of Matt Smith with Stifel. Please proceed with your question.
Hi, good morning.
Steve I wanted to dig in a little bit on gross margin you had a really solid first half with margin expansion up near 100 basis points and you again increase the margin expectations for the year. So could you could you talk about the drivers of margin expansion relative to your initial expectations and what's weighing on the expansion in the second half relative to the performance.
In the first half was a tougher comparisons in relation to the balance of pricing and inflation or are there other factors at play like increased promotion.
Sure. Yeah, we were pleased with the gross margin performance through the first half and we've had a few things I think that have broken our way you know seen less inflation in things like packaging and logistics and even some material cost.
<unk> progress has been strong I feel really good about where we're at the mid year Mark on productivity and then of course, we've had pricing drop through so all of those have worked in our favor and we will continue to some degree as we go to the back half of it though as you look at the back half.
Taking the volume impact, we're going to have some more fixed cost absorption.
Impact that will be a little bit of a wait and again, we've got hedging against commodities, but still from a.
Year over year, and beginning of the year end of year perspective, we still have a bit more cost for some of the inflationary commodities cocoa and sugar smaller ways and again smoothed out by hedging, but still some impact.
Those are probably the two biggest drags as we look to the back half, but again overall feel feel competent taking our guidance up and so the team's doing a nice job managing the cost side.
And thank you for that and just as a follow up if I understood. What you were saying about the second half there should be a nice gross margin benefit in the third quarter as you build inventory with retailers ahead of the cutover in salty snacks is that is that right.
Yeah, Yeah, we will get some benefit against southeast not the biggest business, but we will get some absorption benefit as we build inventory in itself.
Okay. Thanks for that I'll pass it on.
Thank you.
Thank you. Our next question will come from the line of Cody Ross with UBS. Please proceed with your questions.
Good morning, Thank you for taking our questions a couple of housekeeping ones and then a longer term one in nature.
First one I think you spoke about inventory headwinds in the quarter I think they were lapping the inventory replenishment last year and the pull forward of sales into <unk> from <unk> is that correct and if so can you quantify each one for us.
It is correct in terms of breaking out the pieces, there's about 300 basis points you attribute to the lap and about a 150 basis points shift relative to Q1, you know order of magnitude.
Great. Thank you other housekeeping question.
Just as far as the Fork to you I think you guys said that sales should be down double digits in the salty business due to the ERP implementation can you just quantify that for us or give us an expectation for magnitude and then just one last one.
In terms of.
Dollars or yes, the dollar.
But you are expecting from from the ERP implementation.
Yeah, I don't know that we'd get them out without that it's a double digit decline.
To go any more specific than that.
Understood and then last question just on the competitive environment.
There's been a lot of news in the headlines lately about private label and other branded competitors, becoming more competitive what are you seeing and are competitive in the competitive environment. I know you said you've seen branded players pick up more innovation.
Besides that are you seeing any step up in promotions and what's kind of your expectation going forward. Thank you.
Yeah, I mean, I'd say you know the categories that we're in have always been very competitive but the good thing is we have rational competitors and what we're seeing overall I'd say, it's pretty consistent with what we've seen historically we.
So we have seen some higher levels of innovation as supply chains have gotten stronger and people have been able to support innovation.
So we have seen some increases in private label and I think with the economic environment.
In both confection in and filthy, but frankly the results of those entries have been somewhat mixed and certainly our brands have held up really well.
We continue to focus on driving sustainable profitable growth you know as it relates to get infection and promotional activity.
Display has always been important for the impulse driven category and so we didn't see as much of the change in promotion as perhaps some other categories have seen so that's been much more stable for us and we anticipate we'll continue to going forward. So we will continue to invest.
It robustly to drive our brand them with innovation marketing support what we think is the right level of promotion.
Great. Thank you very much I'll pass it on.
Thank you our next questions come from the line of Jason English with Goldman Sachs. Please proceed with your questions.
Hey, folks good morning, Thanks for slipping me in.
Questions.
First on salty snacks promotion shifts it seems odd usually promotions are locked in him all the best for retailers. So was this an issue of you actually not having a promotion you were planning for like a misalignment with yourselves and finance functions or at a retailer actually castle activity out here.
Yes.
Yes retailers did not cancel activity on us, but it was really our choice to to move a promotion. So so that piece is that and then relative to our broader execution issues. We had some temporary out of stocks.
We go to market differently with dogs than we do with skinny pop and the team quickly adjusted and we've seen our service levels improve so we don't expect to see that kind of impact in the second half.
Okay. So you canceled promotional activity on your retailer is that because of supply constraints or what drove that decision.
No, we really shifted to in destiny, a promotion in the third quarter that we thought made a lot of sense in advance of that store. It was a big opportunity for us.
Okay.
Switching gears kind of coming back to you Mr. Goldman quite a question earlier I had a couple of lines of question on competitive activity.
The release has been a tremendous amount of focus on market share.
And rather than driving category growth.
We've seen the category actually weaken quite a bit in recent guidance.
Two part question.
First what do you attribute the accelerated volume declines in chocolate confections to be driven by.
And second are you into any organization on share and assuming you are based on the heavy emphasis and the release of prepared comments.
Or how do you manage the risk of us getting back to where we were 567 years ago, where it was sort of always duking it out promoting away value in the category.
Rather than what.
It's been a much more I would say constructive competitive environment seen over last couple of years.
Yeah, well you know as we look at the category certainly we've had significant pricing in the category.
20% price and.
Time, we should see some moderation.
And the volume declines should should moderate as well. So certainly prices has played a factor I would say we are always focused on driving the category as well as market share because being the category leader. We know if we drive the category we stand to have some of the greatest benefits. So we certainly don't approach this as Duke.
Get out, but rather how do we continue to connect with consumers and partner with our retail customers to maximize what's gonna be best to drive the overall business and category and we've got a lot more tools.
This occasion today to look at the Rois for how we're deploying things like promotion and there is no intent to get into an arms race of.
Bad returning investments like that we like we want to win with innovation, which we talked about in the remarks.
Not just spending and I think Jason if it helps a little to you know we had the past call. It two months or so multiple price increases about three different price increases hitting retail at the same time, which is kind of what drove that 20%. Michelle mentioned, that's kind of something that we were at the tail end of lapping some and some new ones. We're going in so we would expect that pricing number to come down in it.
With that the volume declines to moderate as well so in the next couple of months, we would expect that to normalize a bit.
Okay, and I'm going to cheat with one quick follow up related to that question, but.
The point on arguments any organization yourself sorts in particular its market share component to the bonus or is it just deliver the revenue.
Yeah.
Yes to date market share is not a component of most bonuses that's about delivering the revenue, but we have other metrics around quality of delivery and how it's delivered and where sales activity based margins that.
Enable a balance between sales and profitable sales that's right.
Got it that's helpful. Thank you very much I'll pass it on.
Yeah.
Thank you. Our next question is come from the line of counter erotica with consumer Edge Research. Please proceed with your questions.
Good morning, Thanks for the question.
So I guess I should think about that.
Right.
The pricing environment, and increasing elasticity going forward.
Some capacity is just meeting existing underlying demand or is there maybe an opportunity to allocate some of that newfound capacity to take advantage of some strategic revenue management opportunities such as package resizing or far weights to drive net price realization going forward.
Yeah, we've been very focused on strategic revenue management and pack price architecture on both confection and a silty categories. You know I think a few years ago, we talked about evolving our pricing approach from just list pricing, how we look more holistically at strategic pricing and in these categories in particular, its a big opportunity.
Yeah, we continue to focus there and confection and unsold T. It's certainly something that as we acquired these businesses was a real underdeveloped area of opportunity.
Great. Thank you I'll pass it on.
Thank you our next questions come from the line of Rob Dickerson with Jefferies. Please proceed with your question.
Oh, great. Thanks, so much just two questions I just wanted to circle back to the some of the comments you made.
On cocoa and sugar inflation I kind of asked.
It sounds like you know there clearly are.
Other offsets.
Besides pricing that you can kind of help alleviate or let's say soften some of the pressure over the next two years given your hedging schedule.
But you know clearly their culture was also inflated fairly materially over the past few months I'm just curious like what I try to combine the comments from the offsets within the comments.
Or would you put it in the prepared remarks about potential more promotional activity next year.
The pricing you've taken is like do you feel like you're kind of reaching this point such that you know maybe your market share is a little softer maybe that's driven by capacity capacity is coming alive, but you need to promote but also maybe you kind of have kind of hit certain price points that you have to be very careful with it at this point on the everyday side of the business.
But you don't really want to take more pricing.
If you hadn't you would so I'm just trying to get a sense of.
Sort of like why you wouldn't want to basically take a little bit more given where the input cost complex that section.
Yeah, I mean, we will take those are all the kind of consideration that we look at when we think about you know 2024 and beyond and again, we look at the whole P&L and look at market share. We look at what competition is doing and clearly we look at commodities and where we think they're headed and so I don't want to get more specific on the construct of the 24 plan, but you know those are the kinds of things we'll consider again.
We've navigated this before we've got a lot of levers at our disposal pricing rather than just one of those levers.
And it'll be interesting to see what happens in the cocoa sugar market I do think in those cases are still a lot of speculation and then again, our hedging strategy gives us an element of smoothing and protection to a degree that but we'll be watching to see how these markets hold up because they are at pretty high levels eight typically and it's not driven by fundamentals to a large degree.
Okay Fair enough and then just quickly.
You know the comment on Halloween should be very strong Michelle you said plenty of candy looks sounds like Halloween seasonal sales expected to be up double digit.
So I'm just curious you know like but why do you think Halloween will be so strong. This year number one and then number two I think last year you did have some benefit from early shipments.
So I just wanted to make sure there aren't like earlier shipments coming.
That's it thanks so much.
Sure. So you know we get a lot of visibility to the seasons, because we plan with customers in advance relative to <unk>.
Needing to build inventory for the season. So we have a lot of good visibility in terms of what is being bought and we have very strong programs to drive sell through so that gives us a lot of confidence we know that during.
Difficult economic times consumers are particularly interested in enjoying kind of the simple things in life like these seasons like Halloween and so that's another kind of tailwind of focus relative to our conviction and why I think we and our customer partners are really wanted to lean into Halloween.
Okay.
Okay Fair enough and then on the shipment side it doesn't sound like there's any delta there relative to the year ago.
No no.
All right Super Thank you.
You bet.
Thank you. Our next question is coming from the line of Chris Carey with Wells Fargo Securities. Please proceed with your questions.
Hi, good morning, everyone. Good.
Good morning.
So just a.
A question kind of clarification around faulting.
We've seen some.
Deceleration.
Shane you.
Namely volume in recent scanner data.
And I'm, just trying to understand and apologies. If this has kind of been addressed.
And in some form but just to clarify.
Was any of that because.
The lack of supply because of a shift in promotional programs said another way our supply ramps in Q3, it sounds like Theres. Some shift in promotional programs would you expect the consumption trends I realize what you're saying about your.
You reported results in Q3, and Q4, but what would you expect the consumption trends to pick up or or is what we're seeing you know, perhaps more indicative of underlying too bad. So I just want to maybe understand how you think about the balance of those things.
So promotional declines did drive that deceleration and yes, we do expect that to pick up in Q3 going forward.
Okay, that's simple.
Thanks, so much.
Thank you.
Thank you our next questions come from the line of Bryan Spillane with Bank of America. Please proceed with your questions. Thanks, Operator, Hey, good morning, guys.
Good morning morning, So two quick ones for me one just a follow up on elasticity and another one on capital allocation. So first on elasticity.
Michelle is there any any.
Any pronounced differences across channels, so I guess small format immediate consumption versus large box.
Anything there to call out in terms of where the if there was any differences in terms of elasticity across across those those channels or or consumption occasions.
I don't think that we've seen anything significant across the channels now.
And then Steve just on capital location noticed the dividend increase of 15%.
Obviously, it makes the dividend more competitive I guess with with interest rates going up but just can you remind us again as we kind of think about think over the next couple of years.
As capital spending normalizes and again, assuming that there's not some major.
Strategic event that would affect the balance sheet, just how youre thinking about capital allocation and returning cash to shareholders going forward.
You know again, it would it be more dividends with share repurchases become more pronounced piece, just just kind of how youre thinking about that.
As we think about it over the next couple of years would be helpful. Thanks.
Sure, Yes, I'd be happy to no fundamental changes in our capital allocation philosophy that we talked about back at the Investor Conference.
Great dividend increase when you look at that and you look at our or targets for payout ratio and so on we're still even with this increase a little bit behind where we'd like to be in where we've been historically so.
And that just reflects the great earnings progress over the last few years.
But pleased with the 15% increase and you're right as we look forward as capital spending moderates off some of the really high spending we've had here recently.
We're going to look for other ways to be thoughtful with capital and returning cash to shareholders through repurchases. For example is our stop gap when we don't have better returning alternatives and so so that's not going to change.
Thank you.
Thank you our next questions come from the line of Robert Moskow with TD Cowen. Please proceed with your question.
Hey, Thank you for the question.
Similar to Brian about elasticity, but but slightly different I wanted to know if you're if you've seen any differences in the elasticity within the portfolio.
Like multi serve bags versus single serve.
Especially heading into Halloween you know some of those bags can cost 20 $25 at retail.
Have you seen any.
Observations and consumer behavior about just the absolute price points.
Affecting demand.
So nothing material relative to the pack size piece I mean, what we've tended to see over time is seasons tend to perform better and to be less elastic and I think that's just the nature of people are going to participate but that's the biggest difference that we see.
Okay.
And so no real change in like single serve.
Demand affected by traffic or just the absolute price point of the bars getting up there.
Now.
Okay.
Thank you.
Yeah.
Thank you our next questions come from the line of David Palmer with Evercore ISI. Please proceed with your questions.
Alright. Thanks.
At your Analyst day, you provided guidance of North American confection organic sales in the low single digits.
Including flattish volume.
Could you remind us again of the drivers just to sustain that sales growth with low single digit pricing in flat volume.
Perhaps our competition.
Competition.
Returns in a more fulsome manner. Thanks, so much.
Yes, I would say nothing fundamental changing in that algorithm and the way we think about the sources of growth for U S confection or for the rest of the business. We always expect it to be a competitive category over time.
And so we're looking at it the same way there's nothing that's happening this quarter or even for the balance of this year that we think fundamentally changes any of that.
Yep. Thank you I'm showing no further questions in the queue at this time I'd like to hand, the call back over to MS. Melissa Poole for any closing comments.
Yeah. Thanks, so much for joining us. This morning, I know it was a particularly busy morning of earnings. So thanks for all of their great questions and look forward to catching up with you. All later today for any outstanding ones you may have.
Great day, everyone.
Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.
Yeah.
Yeah.
Okay.