Q1 2025 Hershey Co Earnings Call

Greetings and welcome to the Hershey Company first quarter 2025 question and answer session.

Operator: Greetings and welcome to the Hershey Company first quarter 2025 question and answer If you'd like to join the question queue, please press star one on your telephone. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded.

If you'd like to join the question queue. Please press star one on your telephone keypad.

At this time all participants are in a listen only mode.

As a reminder, this conference is being recorded.

Anoori Naughton: I'd now like to turn the call over to your host, Anoori Naughton, Senior Director of Investor Relations for the Hershey Co. Thank you. You may begin. Thank you and good morning everyone. Thank you for joining us today for the Hershey Company's first quarter 2025 earnings Q&A. 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.

Speaker Change: I'd now like to turn the call over to your host annoying on senior director of Investor Relations for the Hershey Company thinking you may begin.

Thank you and good morning, everyone. Thank you for joining us today for the Hershey Company's first quarter 2025 earnings Q&A session. I Hope everyone has had a chance to read our press release.

Speaker Change: We reported management remarks, both of.

Speaker Change: Which are available on our website. In addition, we have posted a transcript pretty required mark to conclude.

Anoori Naughton: In addition, we have posted a transcript of the prerecorded 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 including expectations and assumptions regarding the company's future operations and plans.

Speaker Change: As you know today live Q&A session, we will also pause to transact.

Speaker Change: A replay of this call.

Speaker Change: 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, including expectations and assumptions regarding the company's future operations.

Anoori Naughton: Actual results could differ materially from the The company undertakes no obligation to update these statements based on A detailed listing of such risks and uncertainties can be found in today's press release and the company's FTC Finally, please note that we may refer to certain non-GAAP financial factors that we believe provide useful information for 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.

Speaker Change: Actual results could differ materially.

Speaker Change: The company undertakes no obligation to update these statements based upon yes I do.

Your child listing of such risks and uncertainties can be found in today's press release on the Companys E E.

Speaker Change: Finally, please note that we may refer to certain non-GAAP financial measures that we believe provides useful information for investors.

Speaker Change: The presentation of this information is not meant to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Anoori Naughton: Reconciliations for the GAAP results are included in this morning's Joining me today are Hershey's Chairman and CEO Michele Buck and Hershey's Senior Vice President and CFO Steve Voskuil.

Speaker Change: Reconciliations to the GAAP results are included in.

Speaker Change: This morning.

Speaker Change: Joining me today are Hershey, Chairman and CEO, Michelle got Hershey, Senior Vice President and CFO with that I will turn it over to the operator for the first question.

Operator: With that, I will turn it over to the operators. Thank you. Once again, as a reminder, it's star one to join the question queue. We ask that you please ask one question and one follow-up.

Speaker Change: Thank you once again as a reminder, its star one to join the question queue. We ask that you. Please ask one question and one follow up our first question comes from the line of Ken Goldman with J P. Morgan. Please proceed with your question.

Ken Goldman: Our first question comes from the line of Ken Goldman with J.P. Morgan. Hi, thank you. And I appreciate the help on your 2Q tariff expense. You know, appreciating the fluidity of the situation and that you're taking some, you know, mitigating actions, including trying to get an exemption. Is there a rough way for investors to think about the risk ahead if an exemption doesn't immediately come through? And I guess I'm trying to quantify what might not be currently quantifiable, but I guess any help in thinking about the level of risk in 3Q and 4Q, you know, might help to diminish some of the uncertainty.

Speaker Change: Hi, Thank you.

Ken Goldman: And I appreciate the help on your two Q tariff expense just appreciating the fluidity of the situation and that you were taking some mitigating actions, including trying to get an exemption.

Ken Goldman: They're a rough way for investors to think about the risk ahead, if an exemption doesn't immediately come through and I guess I'm trying to quantify what might not be currently quantifiable, but I guess any help in thinking about the level of risk in <unk> and <unk> you know it might help to diminish some of the uncertainty on the stock.

Unknown Executive: Okay.

Steve Voskuil: Do you want to take that one? You bet. Thanks for the question, Ken. Yeah, so for Q2, I think we have enough clarity to share that 15 to 20. And as you'd expect, we've got a lot of inventories. So that mitigates some of the impact for Q2. As we look to the back half, as you said, I'll start by saying it changes constantly. And that's part of the reason for not sharing it in the release. But if we look at the unmitigated impact for Q3 and Q4, and of course, we are going to mitigate. We'll talk more about that in a minute.

Ken Goldman: Yeah, Let me take that one you bet. Thanks for the question Yeah. Yeah. So for Q2, I think we have enough clarity to assure that 15 to 20 years.

Ken Goldman: We've got a lot of inventories so that mitigates some of the impact for Q2, as we look to the back half.

Ken Goldman: You said I'll start by saying it changes constantly as part of the reason for sharing.

Ken Goldman: Sure and in the release, but if we looked at the unmitigated.

Ken Goldman: For Q3, Q4 and of course, we already mitigate will talk more about that in a minute, but beyond unmitigated.

Steve Voskuil: But the unmitigated impact could be up to $100 million per quarter for Q3 and Q4. If you break that down, two-thirds of it are either COCO or the Canadian retaliatory tariffs. And those are the two areas where, as you can imagine, we've got the most effort focused on influencing government action, using every lever at our disposal to get those tariffs changed, particularly with respect to COCO. But that's the impact on the committee. And as we've talked about in the past, that we're going to use, aside from the lobbying and the influencing and so forth, we're going to use every lever in the toolbox for whatever amount of tariffs remain as we go forward in the back half of the year.

Ken Goldman: That can be up to $100 million per quarter for quarter, three and quarter. Four you can break that down two thirds of it are either cocoa for the Canadian retaliatory tariffs and those are the two areas where as you can imagine we've got the most effort focused on.

Ken Goldman: Influencing government action using every lever at our disposal to get those tariffs changes, particularly with respect to total.

Ken Goldman: But that's the impact on Medicaid.

Ken Goldman: And as we've talked about in the past everything to us aside from from the lobbying of the influencing and so far the reserve Delever the toolbox for whatever amount of tariff remain as we go forward in the back half of the year and we'll be in a position to share more specifics about those actions kind of get to the mid year Mark.

Unknown Executive: And we'll be in a position to share more specifics about those actions as we kind of get to the mid-year mark, but as we've said before, it's like all of the levers are on the table as we look at mitigating both COCO and that incremental tariff component. Yeah, and can I just add, and all that work is well underway, exploring it. Productivity, pricing, sourcing, manufacturing changes, all of Got it.

Ken Goldman: But as we've said before is that all of the levers around the table as we look at mitigating both cocoa and the incremental tariffs component I'm kind of just adding all that work is well underway.

Ken Goldman: Exploring at this level.

Ken Goldman: Productivity equation sourcing manufacturing changes all of that.

Ken Goldman: Got it okay. That's very clear. Thank you and then a quick follow up.

Ken Goldman: Okay, that's that's very clear. Thank you.

Unknown Executive: And then a quick follow up. You said to expect 2Q EPS to decline by less than 1Q, you know, just on the Easter season timing and some ERP reverse. One Q was down, you know, obviously, pretty heavily over 30%. But the streets modeling to Q down less than 2%. Again, I know there's some uncertainty here. But how would you like us to think about the magnitude of that decline, just in light of some of the tailwinds and headwinds you mentioned? Yeah, so I'll give you a couple things the in total for the first half, we expect EPS to be down about 30%.

Ken Goldman: You said to expect <unk> EPS to decline.

Ken Goldman: By less than one Q just doesn't the Easter season timing and some ERP reversals <unk> was down obviously.

Ken Goldman: Obviously pretty heavily over 30%, but the street's modeling <unk> down less than 2% again, there I know theres some uncertainty here, but how would you like us to think about the magnitude of that decline just in light of some of the tailwind and headwinds you mentioned.

Ken Goldman: Yeah. So I'll give you a couple of things the <unk> in total for the first half we expect EPS to be down about 30%. So if you kind of take the full year guide of down mid thirties also implies back half probably down about 40%.

Unknown Executive: And so if you kind of take the full year guide and down mid 30s, you know, also implies the back half probably down about 40%. If we go a little bit deeper on the second quarter, as you mentioned, you know, the net sales side will be very strong with the Long Easter, the last of the deload last year with the ERP change. For the second quarter, we expect gross margin to be down about 700 basis points. And that includes that small tariff component that I mentioned earlier. And we also expect SG&A dollars will be up meaningfully.

Ken Goldman: If we go a little bit deeper on the second quarter. As you mentioned net sales side will be very strong with a long Easter in the lap of the de load last year with the ERP change.

Ken Goldman: The second quarter, we expect gross margin is down about 700 basis points and that includes the that small tariff component that I mentioned earlier.

We also expect SG&A dollars will be up meaningfully and part of that is last year, we didn't spend much on marketing and so on as he came out of the ERP transformation. So you can expect that this year will have high teens year over year SG&A growth in the second quarter, just reflecting that the bigger lap. So gross margin was probably the biggest.

Unknown Executive: And part of that is last year, we didn't spend much on marketing and so on as we came out of the ERP transformation. So you can expect that this year we'll have quite high team year-over-year SG&A growth in the second quarter, just reflecting that bigger lap. So gross margin was probably the biggest change relative to the Q2 outlook. And as you mentioned, there's some noise there with the new ERP system and basically how we manage commodity costs to the P&L across the quarters. But on a full year basis, it has no impact.

Ken Goldman: Change relative to the Q2 outlook and as you mentioned, there's some noise there with the new ERP system and it basically how how we manage commodity costs through the P&L across the quarters, but on a full year basis. It has no impact.

Ken Goldman: Thanks, so much I appreciate it.

Unknown Executive: Thanks so much, I appreciate it.

Ken Goldman: You bet.

Speaker Change: Thank you. Our next question comes from the line of Andrew Lazar with Barclays. Please proceed with your question.

Andrew Lazar: Our next question comes from the line of Andrew Lazar with Barker. Great. Thanks. Thanks so much. This quarter, in the prepared remarks, you mentioned an outlook for balance to top and bottom. Paul last quarter. earnings growth next year, even at current COCOA level. Today's prepared remarks, you mentioned some actions that you'll take. But don't go as far as to discuss earnings next year. I'm just curious. Yeah, our thinking hasn't changed. We still see a path to earnings growth next year, even with tariffs, as we currently understand them. Now, I will say, you know, the next breath, that path is narrower, it's more challenging, and it's going to point to the importance of the mitigation of the actions that we're going to take as we get further into this year.

Andrew Lazar: Great. Thanks, Thanks, so much.

Andrew Lazar: Last quarter in the prepared remarks, you mentioned an outlook for a balanced top and bottom line growth in 2006 and on the call last quarter. I think you mentioned an expectation for earnings growth next year.

Andrew Lazar: Current cocoa levels in today's prepared remarks, you mentioned some actions that youll take next year, but don't go as far as to discuss earnings next year and I'm. Just curious if your thinking on that front has changed.

Andrew Lazar: Yes.

Andrew Lazar: Thinking hasnt changed we still see a path to earnings growth next year, even with tariffs as we currently understand and now I will say in the next breath that path is narrow work, it's more challenging and it's going to point to the importance of the mitigation of the actions that we're going to take as we get further into this year, but we still see a path.

Unknown Executive: But we still see a path to earnings growth next year and that balanced growth formula.

Andrew Lazar: To earnings growth next year and that balanced growth formula.

Andrew Lazar: Got it got it okay. Thank you for that and then I know I know your pricing actions. This year have been a bit more nuanced right in an effort to sort of.

Unknown Executive: that.

Andrew Lazar: And then, you know, I know I know your pricing actions this year have been a bit more nuanced, right in an effort to sort of gain some incremental shelf . Curious if you're seeing any benefits there as of yet, and if so, you know, or how should we think about the progress you expect on market share? Sure. So Andrew, thanks for the question. I guess a couple components of that. First of all, if we think about instant consumable, you know, we have seen already some improvements in trips in CSTOR. So January and February were the worst months.

Andrew Lazar: Gains from incremental shelf placements, maybe especially in the instant consumable space and I'm curious if you're seeing any benefits there.

Andrew Lazar: And if so how.

Andrew Lazar: I guess, how should we think about the progress you expect on market share as a result of that specifically in CMG in the coming quarters. Thank you.

Sure. So Andrew Thanks for the question I guess, a couple of components of that first of all if we think about instant consumable we have seen already.

Andrew Lazar: Some improvements in trips in C stores. So January February was the worst months, then we started to see a little bit of moderation.

Unknown Executive: Then we started to see a little bit of moderation. In April, we started to see some green shoots on our instant consumable business as we started to see some signs of incremental merge placement that are having an impact. And as we've said, more of that to come as we approach the back half of the year. We have visibility to some incremental programming as we look forward into the summer and fall. And we also, of course, know that we have very strong, robust innovation that will really help to drive the business. So while we haven't built into our numbers any other further potential upsides, we do think as the consumer continues to be more pressured, and air travel pulls back, we will likely see some increase in car travel, which could benefit CSTOR, though we haven't built that in.

Andrew Lazar: In April we started to see some green shoots on our mobile business and we've started to see some signs of increments emerge placement.

Andrew Lazar: That are having an impact and as we've said we're about to come as we approach the back half of the year.

Andrew Lazar: We have this ability to some incremental programming as we look forward into the summer and fall and we also of course now that we have very strong robust innovation.

Andrew Lazar: That will really help to drive the business.

Well, we haven't built into our numbers any other further potential upsides, we just think as the consumer continues to be more pressured in air travel pools that we will likely see some increase in car travel, which could benefit you started that we haven't built that in.

Unknown Executive: As we look at market share, yeah, we're very pleased with where we are on a year to date basis. We had anticipated all along that Q1 would be a little bit softer, Q2 stronger given the shift of EASTER. We're really pleased that our year to date share is now positive, as we've captured that positivity of the later EASTER. And we continue to expect share to be neutral to up in the second half. driven by our continued outperformance in sweeps, where we're really pleased with the momentum we've got there. Our business was up 10% up 100 basis points in share.

Andrew Lazar: As we look at market share Yeah, we're very pleased with where we are on a year to date basis.

Andrew Lazar: We had anticipated all along that Q1 would be a little bit softer Q2 stronger given the shift of Easter.

Andrew Lazar: Really pleased that our year to date share is been positive as we've captured that positivity positivity of the later Easter.

Andrew Lazar: And we continue to expect share to be neutral to up in the second half.

Andrew Lazar: Driven by our continued off of fluids and suites, where we're really pleased with the momentum. We've got there in business was up 10% up 100 basis points in share and then we've seen continued strength in season, and we anticipate continued improvement in the trends in chocolate and refreshment given the programming to come.

Unknown Executive: And then we've seen continued strength in seasons. And we anticipate continued improvement in the trends in chocolate and refreshment given the programming. Thank you.

Speaker Change: Thanks, so much.

Speaker Change: Thank you. Our next question comes from the line of Max <unk> with BNP Paribas. Please proceed with your question.

Max Gumport: Our next question comes from the line of Max Gumport with BNP Paribas. Hey, thanks for the question. There might be some some rounding involved with this question. But at the midpoint, your guidance seems to imply that Pre, considering tariffs, your expectation for EBIT has gone up modestly. So that's correct.

Speaker Change: Thanks for the question.

Speaker Change: There might be some some rounding involved with this question, but at the midpoint your guidance seems to apply that.

Speaker Change: Free considering tariffs your expectation for ebay has gone up modestly so that's correct.

Unknown Executive: Just any factors you're seeing that have made you a bit more optimistic on the base business or really is there just some rounding going on in terms of what we might be seeing in the guidance? Thanks very much.

Speaker Change: Any factors Youre seeing that has made you a bit more optimistic on the base business or really is there just some some rounding going on in terms of the.

Speaker Change: What we might be seeing in the guidance thanks very much.

Unknown Executive: Yeah, thanks for the question, Mac. It is really grounding. You know, fundamentally, we're still aligned with the outlook. Right.

Speaker Change: Yes. Thanks for the question, Matt It is really rounding.

Speaker Change: Fundamentally we are still in line with the outlook.

Speaker Change: Ashish.

Speaker Change: Great and then on the U S consumer and snacking pressure in particular so.

Unknown Executive: And then on the on the US consumer and snacking pressure in particular, so about the softening consumer sentiment and value-seeking behaviors you're seeing. I'm wondering if you're also seeing any impact from changing consumer preferences and healthier eating. I think those are the types of dynamics that have helped inform some of the decisions that have been made.

Speaker Change: Prepared remarks had comments about the softening consumer sentiment and value seeking behavior, you are seeing and it sounds like that's really what you would attribute.

Speaker Change: The weakness in stacking that we're currently seeing.

Speaker Change: I'm wondering if you're also seeing any impact from J&J consumer preferences and healthier eating.

Speaker Change: I think those are the types of dynamics that have helped inform some of your recent.

Unknown Executive: M&A Action. So I'd be curious to get more color on what you're seeing on that. Thanks very Yeah, so let me start by saying yes, overall, certainly, we're seeing a weak consumer, consumer confidence down. Fortunately, we aren't really seeing that impact show up in our categories. DMG has held up incredibly well. Part of that is, of course, chocolate in particular plays a very important emotional role in people's lives, the connectivity they have to the brands, especially in troubled times, and especially in our sequences. As we look at Salty, certainly the business has held up really well relative to it being premium and permissible.

Speaker Change: M&A actions I'd be curious to get more color on what you're seeing on that front. Thanks very much.

Speaker Change: Yeah. So let me start by saying, yes, overall, certainly we're seeing a.

Speaker Change: A weak consumer consumer confidence down Fortunately, we aren't really seeing that impact show up in our categories CMG has held up incredibly well.

Speaker Change: Part of that is of course.

Speaker Change: And in particular plays a very important emotional role in People's lives.

Speaker Change: Activity they have to the brands, especially in troubled times, and especially in our ceilings business.

Speaker Change: As we look at <unk> certainly the business has held up really well relative to premium and permissible.

Unknown Executive: And we've also been really very pleased to see that Elasticities have held up really well in the category. On a year-to-date basis, everyday chocolate pricing is up 8%, volume is down 4.5%. So we think that's a really another good indicator of the category holding up incredibly well.

Speaker Change: <unk> also been really very pleased to see that elasticities have held up really well in the category on a year to date basis everyday chocolate.

Speaker Change: Pricing is up 8% volume is down four 5% so.

Speaker Change: So we think that's a really another good indicator of the category holding up incredibly well.

Unknown Executive: Great. Thanks very much.

Speaker Change: Great. Thanks, very much I'll pass it on.

Unknown Executive: I'll pass it over to you. Thank you.

Speaker Change: Thank you. Our next question comes from the line of David Palmer with Evercore ISI. Please proceed with your question.

David Palmer: Our next question comes from the line of David Palmer with Epicor ISI. Thanks. Good morning. It looks like seasonal chocolates going to be strong in the first half as you had expected. wonder, you know, it looks like you you have bigger plans for everyday chocolate heading into the second half. Do you think you can get to growth in your non-seasonal chocolate business in the second half? Yes, we are feeling good based on the plans that we have that that is going to come through. We've mentioned before, very strong innovation that we haven't yet announced in the back half of the year that we think is going to be certainly a key driver.

David Palmer: Oh, Thanks, good morning, it looks like seasonal chocolate is going to be strong in the first half is as you had expected.

Speaker Change: I Wonder you know it looks like you you have bigger plans for everyday chocolate heading into the second half of it.

Speaker Change: You mentioned that you expect improvement there do you think you can get to growth in your non seasonal chocolate business in the second half.

Speaker Change: Yes, we are feeling good based on the plans that we have that that that is going to come through we've mentioned before very strong innovation that we haven't yet announced in the back half of the year that we think is going to be certainly a key driver.

Unknown Executive: We have and are expecting low single-digit growth in everyday CMG.

Speaker Change: Hum.

Speaker Change: We have and are expecting low single digit growth in everyday TMT.

Speaker Change: Oh, that's great and then on on non chocolate or sweets.

Unknown Executive: Unknown Speaker, Matthew Lavery, Unknown Attendee, Unknown Speaker, Matthew Lavery, Unknown Speaker, Matthew Lavery, Unknown Speaker, Matthew Lavery, Unknown Speaker, Yep, so I absolutely believe that this is not just a moment in time on sweets. It has long term growth potential. Some of what we're seeing is a strong interest in consumers and in their palates for these types of products.

Speaker Change: We're doing really well there and I'm sure you know maybe now you wish you were bigger in that category at this very moment, but I wonder how youre thinking about that strategically is that category.

Speaker Change: That category, having a moment with perhaps some new forms out there really driving growth for you and and you're gaining a lot of share.

Speaker Change: Or you know maybe do you think this is.

Speaker Change: This is a platform that has legs like long term that this isn't just a moment, where you're getting some some hits with forms but rather this is a category that should outperform chocolate over the long term and I'll pass it on.

Speaker Change: Yep. So I absolutely believe that this is not just a moment titled suites. It has long term growth potential.

What we're seeing is Ah.

Speaker Change: A strong interest in consumers and in their pallets for these types of products.

Speaker Change: Some components that are generational and demographic as we see younger consumers and also young diverse families being big consumers of this segment and I think we've also seen in this segment the power of great innovation and really creating growth whether it's the new brands that we've put in the marketplace.

Speaker Change: Sharply forms like Jane on ropes for freeze dried.

Speaker Change: And we have further plans to continue to grow and innovate there.

Speaker Change: Thank you.

Robert Moskow: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Robert Moskow with TD Cowen. Please proceed with your questions.

Robert Moskow: Our next question comes from the line of Robert Moskow. and T.D. Cowan.

Unknown Executive: Please Hi, thanks. You know, I saw the news about the ribbon cutting at the Rhesus Chocolate Processing Facility. And I know that you're now at the tail end of your billion dollar expansion plan for chocolate, expanding capacity. But Michele, you know, with cocoa futures really stubbornly high and a weaker consumer environment, I would imagine the volume outlook for chocolate, it must be lower than than what was originally expected a few years ago when the capacity expansion started. So forgive me if you've talked about this before, but but if you and Steve could could help square those two things, like if if the plan was, say, to expand capacity on chocolate by 10%, but volume is, you know, it's got to be lower than what you thought.

Robert Moskow: Hi, Thanks, you know I saw the news about the ribbon cutting at our recent chocolate processing facility and I know that you are now at the tail end of your billion dollar expansion plan for chocolate are expanding capacity, but Michelle you know with with cocoa futures really stubbornly high and a weaker consumer.

Speaker Change: Matt I would imagine the volume outlook for chocolate.

Speaker Change: Be lower than what was originally expected a few years ago when when the capacity expansion started so so forgive me if you've talked about this before but if you and Steve could could help square those two things like if if the plan was say to expand capacity on chocolate by 10%, but volume as you know there's got to be lower.

Speaker Change: And what you thought.

Michele Buck: How do you still make that capacity expansion work for you financially? Yep. So this new plant really allows us to be much more agile and gives us flexibility across the network. And what we are producing at this plant is chocolate paste, which gives us gives us stronger control over our supply chain, and more vertical integration. So, you know, we came into COVID capacity constrained. And as you know, we have several periods of time where we weren't able to meet demand, especially in seasons. And the billion dollar investment really helped to get us caught up. And we're already seeing that benefit show up in seasons where growth has been significantly higher, because we've really been able to capture some of that.

Speaker Change: How do you still think that capacity expansion work for you financially.

Speaker Change: Yes. So this new plan really allows us to be much more agile and gives us flexibility across the network.

Speaker Change: And what we are producing at this plant is chocolate piece, which gives us gives us stronger control over our supply chain and more vertical integration.

Speaker Change: So yeah, we came into COVID-19 capacity constrained and as you know we had several periods of time, where we weren't able to meet demands, especially in seasons.

Speaker Change: And the billion dollar investment really.

Speaker Change: Hope to get us caught up.

Speaker Change: And we're already seeing that benefit show up in seasons, where our growth has been significantly higher because we've really been able to capture some of that and that's what's enabled us to gain share. We received from the last peak and also long reach that's were most.

Michele Buck: And that's what's enabled us to gain share every season for the last eight. And also on race, that's where we were most underdeveloped or under leveraged on capacity, we're now able to invest for even bigger innovation.

Speaker Change: Underdeveloped around leverage some capacity, we're now able to invest for even bigger innovation.

Unknown Executive: Okay, thank you. Thank you.

Speaker Change: Okay. Thank you.

Speaker Change: Thanks.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question comes from the line of Jim Suva with Stephens Inc. Please proceed with your question.

Jim Salera: Our next question comes from the line of Jim Salera with Stevens Inc. Thanks for taking our question.

Jim Suva: Thanks for taking my questions.

Jim Salera: Um, I wanted to maybe drill down on on something that we've been hearing recently, from HHS and talking about potentially putting some restrictions on what people can buy with with snap dollars. It's a two part question. One, are you able to quantify what percentage of your sales are purchased with snap dollars? And then do you have a sense for How wide ranging some of those restrictions might be because it seems like the administration's focus is really around Artificial ingredients are highly processed food. And if I just think about the ingredients in Hershey's Kiss or milk chocolate bar, there really aren't that many.

Jim Suva: I wanted to maybe drill down on something that we've been hearing recently from HHS and talking about potentially putting some restrictions on what people can buy with with snap dollars is two part question. One are you able to.

Jim Suva: Quantify what percentage of your sales are purchased with snap dollars.

Jim Suva: Do you have a sense for you.

Jim Suva: How wide ranging some of those restrictions might be because it seems like the administration's focus is really around.

Jim Suva: Artificial ingredients are highly processed food and if I, just think about the ingredients and hershey's kiss or a milk chocolate bar that there really aren't that many and so while it might fall under.

Michele Buck: And so while it might fall under, you know, candy, it's it might still be included given that it's basically natural. Just any thoughts on there. And if you could quantify, you know, Yeah, absolutely.

Jim Suva: Kandi is completed.

Jim Suva: It might still be included given that it's basically all.

Jim Suva: Collateral just any.

Jim Suva: Also on there and if you could quantify what the potential impacts that might be thank you.

Jim Suva: Yeah, absolutely. So first of all we're watching how the implementation plays out to get new full clarity on exactly how it will work, but based on our current understanding we don't anticipate a material impact to our business first of all we don't over index to snap relative to the category of food in general in fact.

Michele Buck: So first of all, we're watching how the implementation plays out to get full clarity on exactly how it will work. But based on our current understanding, we don't anticipate a material impact to our business. First of all, we don't over index to SNAP relative to the category of food in general. In fact, only about 2% of SNAP purchases are candy, which is well below many other categories like soda, salty snacks, desserts. And so we see pretty similar buying patterns between SNAP and non SNAP households. And certainly in salty, our portfolio is premium and permissible. So we don't anticipate that while the overall category may have an impact, we don't think that that will impact us.

Jim Suva: Only about 2% of snap purchases, our candy, which is well below many other categories like soda salty snacks desserts.

Jim Suva: And so we see pretty similar buying patterns between snap on snap households.

Jim Suva: Certainly insult to your portfolio is premium and permissible. So we don't anticipate that well see overall category may have an impact we don't think that that will impact us.

Michele Buck: And as it relates to kind of the broader, your question around natural ingredients, and kind of the maha components of all of this, you know, our highest priority is always around safety and quality of our products. And we proactively try to stay ahead of where regulation might be headed. And we've been ahead of some of the changes that have been needed, like propylparaben ban in California, we were ahead of red dye number three. So we've had work under layer natural coloring for quite some time. Chocolate should be less impacted. You're correct. If you look at the ingredient labels, there, you know, a lot of our products really are pretty simple, natural ingredients.

Jim Suva: And as it relates to kind of a brother.

Jim Suva: Your question around natural ingredients.

Jim Suva: And kind of the Maha components of all of this our highest priority is always around safety and quality of our products and we proactively try to stay ahead of where regulation might be headed and we've been ahead of some of the changes they've been eating like cocoa paraben that ban in California. We were ahead of him right di number three.

Jim Suva: So we've had work underway on natural coloring for quite some time.

Speaker Change: Shot that it should be less impacted youre correct. If you look at the ingredient labels. There you know a lot of our products really are.

Jim Suva: The simple natural ingredients.

Unknown Executive: Some of the areas that might be impacted by this are mostly in the sweets. Okay, great.

Speaker Change: Some of the areas that might be impacted by this are mostly in the suites portfolio.

Speaker Change: Okay, Great and then maybe just as a follow up to that in your conversations with your retail partners do you get a sense that when they're putting together the plan O grams, but they kind of have an eye towards maybe favoring.

Michele Buck: And then maybe just as a follow up to that, in your conversations with your Do you get a sense that when they're putting together the planograms, that they kind of have an eye towards, you know, maybe favoring products that would broadly fall under kind of snack food, but have less exposure to artificial ingredients or things like that? And could that potentially be a benefit as we think about, you know, shelf resets as we move into the back half of the I think, you know, it could be I think they're always going to look at what is going to have the highest velocity and make their shelves as productive as possible.

Speaker Change: Products that would broadly fall under kind of stacks food, but have less exposure to alright.

Speaker Change: Alright, thank you ingredients or things like that and could that potentially be a benefit as you think about shelf resets as we move into the back half of the year.

Speaker Change: I mean, I think it could be I think there are always going to look at what is going to have the highest velocity and make themselves as productive as possible.

Speaker Change: You know, perhaps some of it could be 10 every manufacturer move as quickly as needed to.

Michele Buck: You know, perhaps some of it could be, can every manufacturer move as quickly as needed to , to be on top of the changes. But, you know, they will always focus on what consumers want. And, you know, we know that the importance of, you know, focusing on health and wellness and functionality, as well as the value of indulgence will continue. Thank you.

Speaker Change: And be on top of the changes.

Speaker Change: But they were always focused on what consumers want and we know that.

Speaker Change: The importance of focusing on health and wellness and functionality.

Speaker Change: As well as the value of indulgence will continue.

Speaker Change: Great I'll hop back in.

Speaker Change: Thank you. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Peter Galbo with Bank of America. Please proceed with your question.

Peter Galbo: Our next question comes from the line of Peter Galbo with Bank of America. Hey, good morning, Michele and Steve. Thanks. Thanks for the question.

Peter Galbo: Hey, good morning, Michelle and Steve Thanks for the question.

Michele Buck: I just wanted to circle back actually on on Ken Goldman's, you know, initial question around kind of the tariff thing. And Michele, maybe just even from reading in the prepared remarks. reads to me like maybe there was a big internal debate as to whether to Would you like to conclude the impact of tariff for full year in the guidance versus just for 2Q so just maybe help us understand the thinking a bit more around what the internal discussion was on you know just 2Q versus the full year and kind of how you came to this conclusion relative maybe to some of your peers who have put it in front of you I wouldn't say that we had, we certainly had discussion, but I wouldn't say we had massive internal debate.

Peter Galbo: I just wanted to circle back actually on on Ken Goldman You know where the initial question.

Peter Galbo: Around kind of the tariff thinking.

Speaker Change: And Michelle maybe just even from reading in the prepared remarks that it reads to me like maybe there was a big internal debate as to whether to.

Speaker Change: Include the impact of tariff for full year in the guidance versus just for <unk>. So just maybe help us understand the thinking a bit more around.

Speaker Change: What the internal discussion was on you know just to Q versus the full year and kind of how you came to this conclusion relative maybe to some of your peers, who have put in for the full year.

Speaker Change: Yeah, I wouldn't say that we had we certainly had discussion, but I wouldn't say, we had massive internal debate.

Steve Voskuil: Steve, maybe you want to talk about it a little bit more? Yeah, no, no big debate. And as I said, peers have done a lot of different things. So there isn't one formula for how this has been handled. I think the challenge in discussing is we always want to be transparent. And so, you know, that goes to the answer to Ken's question. Visibility, everything we know at the moment, knowing that it's subject to a lot of change, particularly on this front. And the second piece was the mitigation activity. And it's one thing to talk about an unmitigated tariff impact.

Speaker Change: Maybe you want to talk about.

Speaker Change: A little bit more yes, no no big debate and they said peers have done a lot of different things. So there isn't one formula for how this has been handled I think the challenge and in discussing A&D always lumpy transparent and so that goes to the answer to Ken's question.

Speaker Change: Visibility to everything we know at the moment, knowing that it's subject to sell a lot of change, particularly on this front and the second piece was the mitigation activity. It's one thing to talk about an unmitigated tariff impact that's what I'm going to talk about a.

Steve Voskuil: It's another to talk about a, you know, fully mitigated, work with our mitigation actions in gear and contributing. And so without those two pieces matched up, it's sort of apart from that. And so we want to give you the pieces as best as we know them. And as we get to the mid-year mark, we'll talk more about that mitigation and probably have a better view of the net impact as we go forward. And then in the meantime, hopefully some legislative action will will make that unmitigated impact fall lower. Got it. Okay, no, thanks for that.

Speaker Change: Fully.

Speaker Change: Matthew mitigated worked with our mitigation actions in year end and contributing and so without those two pieces, Matt stuff, that's sort of a powerful story and so we want to give you the pieces as best as we know then as we get to the mid year, Mark will talk more about that mitigation and probably have a better view of the net impact as we go forward and then in the meantime, hopefully some legislative action will will make.

Speaker Change: That unmitigated impact Paul Lawrie.

Speaker Change: Got it okay. Thanks for that that's helpful.

Unknown Executive: That's helpful.

Unknown Executive: And Steve, I think in your prepared remarks, there's some moving pieces, just as we try and think about revenue phasing, you know, maybe more so in the back half of the year. But I think if I read it correctly, you know, snacks kind of on a on an unimpacted basis exited at a pretty healthy rate. I know there's some wonkiness in the comps on on confectionary and 2Q. But maybe you can just help us on the revenue phasing in the back half of the year. Thanks very Thanks so much. See you all later. here. I don't think there's anything anything surprising to that capillary relative to the profile.

Speaker Change: And Steve I think in your prepared remarks, there was some moving pieces just as we try and think about revenue phasing you know maybe more so in the back half of the year, but I think if I read it correctly snacks kind of on a on an on impacted basis exited at a at a pretty healthy rate I know theres. Some walking this and the comps on confectionery.

Speaker Change: <unk>, but maybe you can just help us on the revenue phasing in in the back half of the year. Thanks very much.

Speaker Change: How much.

Speaker Change: <unk>.

Speaker Change: Yeah, I don't think there's anything anything surprising in the back half and here relative to our profile, Yeah top line, which should be in line with the long term off attitude of Barbara soft across the quarters third and fourth quarter.

Unknown Executive: Yeah, top line should be in line with the long term about two to 4% across the quarters in the third and fourth quarter. And, you know, in line relatively across Okay, thanks very much. Thank you.

Speaker Change: And in line relatively.

Speaker Change: Wow.

Speaker Change: Okay. Thanks very much.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Alexia Howard with Bernstein. Please proceed with your question.

Alexia Howard: Our next question comes from the line of Alexia Howard with Bernstein. Good morning, everyone. Morning. Good morning. Hi.

Alexia Howard: Good morning, everyone.

Speaker Change: Good morning, good morning.

Speaker Change: Hi, So can I ask first of all about the.

Alexia Howard: So can I ask, first of all, about the more precise timing of this big innovation in Reese's in the fall? When is that due to happen? And you mentioned that you expect it to be the biggest innovation ever on the brand. I mean, that's a pretty big statement. You probably can't tell us what the innovation is, but what is it that gives you confidence that it might be the biggest innovation ever for that brand? Well, we are consistently innovating and investing in our iconic brands, specifically to give consumers what they're asking for. And sometimes they know what they want.

Speaker Change: More precise timing of this big innovation in races in the fall when is that due to happen and you mentioned that you expect it to be the biggest innovation ever on the brand I mean that that's a pretty big statement.

You probably can't tell us what the innovation is but what is it that gives you confidence that it might be the biggest innovation at all for that brand.

Speaker Change: Well, we are consistently innovating and investing in our iconic brands.

Speaker Change: I didn't give consumers what they are asking for and sometimes they know what they want other times, where you are trying to provide some things that we think they will want but this innovation is something that they've been asking for for quite.

Michele Buck: Other times we're, you know, trying to provide them things that we think they will want. But this innovation is something that they've been asking for, for quite a long time. So, and based on all of our early planning around that, all of the research that we've done, it gives us a pretty good feel for the type of innovation. That's what gives us the confidence relative to the size, relative to timing, stay tuned. It will be hitting in the fall and we're really anxious for all about it and try it. Right, thank you.

Speaker Change: A long time.

Speaker Change: So and and based on all of our early planning around that with the research that we've done that gives us a pretty good feel for size of innovation.

Speaker Change: That's what gives us the confidence relative to the size relative to timing.

Speaker Change: Stay tuned it will be hitting in the fall.

Speaker Change: And we're really anxious for.

Speaker Change: Got it and try it.

Speaker Change: Yes.

Speaker Change: Great. Thank you and then just a follow up on the the attitudes question I know for example, you have red number 40 in twin boys still can you quantify what proportion of your overall sales.

Unknown Executive: And then just a follow up on the the additives question.

Unknown Executive: I know, for example, you have read number 40 in Twizzlers still, can you quantify what proportion of your overall sales still have additives in them that would be on the list that's going to be, I guess, banned in 2027? Yeah, it's largely going to be our sweets portfolio, some refreshments, and then anything else that's coated chocolate. So if you think about Cadbury eggs, for example, fall into that bucket. So that should give you a feel for the size. And then relative to, you know, the ingredients, obviously, it's a relatively small. Total percent of our ingredients.

Speaker Change: They'll have attitudes and then that would be on the list that's gonna be I guess found in 2027.

Speaker Change: Yeah, it's largely going to be our suites portfolio.

Speaker Change: Some refreshments and then anything else that's coded.

Speaker Change: Chocolate. So if you think about Cadbury eggs for example, who fall into that bucket.

Speaker Change: So that.

Speaker Change: That should give you a feel for the size and.

Speaker Change: And then relative to the ingredients obviously.

Speaker Change: It's a relatively small group.

Speaker Change: Total percent of our ingredient costs, but we feel good about our ability to be compliant they've done all of the work that we have underway already.

Unknown Executive: But we feel good about our ability to be compliant based on all of the work that we have already done.

Unknown Executive: Great, thank you very much. I'll pass it on.

Speaker Change: Great. Thank you very much I'll pass it on.

Speaker Change: Thank you. Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

Michael Lavery: Thank you. Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question. Thank you. Good morning. Thank you, ladies and gentlemen. Thank you, thanks for having me.

Speaker Change: Okay.

Michael Lavery: Good morning.

Speaker Change: Good morning.

Unknown Executive: This has been premier webcast since April 21st 2020 for Supreme Court Justice zombie Our guru prosecutor, the witness testimony is here to testify for us today. As you talk about readying some of the options, just, you know, at least contingency or hypothetical planning for 2026, you called out pricing, price pipe architecture, demand shaping and sourcing strategies. The price pipe architecture and pricing are fairly straightforward. Can you just maybe give a sense of what some of the demand shaping and sourcing strategy changes might look like? Yeah, certainly. So we really think about some of the mixed opportunities.

Speaker Change: As you talk about reading some of the options.

Speaker Change: Just.

Speaker Change: At least contingency or hypothetical planning for 'twenty six.

Speaker Change: You called out pricing price pack architecture.

Speaker Change: Demand shaping and sourcing strategies.

Speaker Change: This type of architecture and pricing are fairly straightforward can you just maybe give a sense of what some of the.

Speaker Change: Shaping in the sourcing strategy changes might look like.

Speaker Change: Yeah, certainly so.

Speaker Change: And we really think about some of the the mix opportunities. So as we're looking at demand shaping.

Unknown Executive: So as we're looking at demand shaping, inflation of cocoa, certainly we have options across our portfolio, in sweets, in salty, in parts of the portfolio that are less cocoa intensive. And so those are, you know, some places that that we focus. From a sourcing perspective, we are already doing work in that area. For competitive reasons, we don't want to get into too much detail in that area. But we have options in terms of how we how we source that also help us to take advantage in price, basically generate savings. Okay, that's helpful. And just on salty snacks, you announced the lesser evil deal that that would add a little bit to your scale.

Speaker Change: Hum.

Speaker Change: Inflation of cocoa, certainly we have options across our portfolio in suites in salty in parts of the portfolio that arent less carbon intensive and so those are you know there are some places that we focus on from a sourcing perspective, we are already.

Speaker Change: Doing work in that area for competitive reasons, we don't want again too much detail in that area.

Speaker Change: But we have options in terms of how we how we source that also help us to.

Speaker Change: Take advantage and in price basically generate team.

Speaker Change: Okay. That's helpful.

Speaker Change: Just on salty snacks, you announced the lesser evil.

Speaker Change: Deal.

Speaker Change: That would add a little bit to your scale.

Unknown Executive: In the commentary after the Mars-Kellonova deal was announced, the Mars CEO pointed to one of the benefits being diluting their exposure to cocoa by adding a large salty snacks portfolio. That's from a company that also already has a pet food business. It would seem like some of that logic could apply to your case as well. Do you have sort of any scale ambitions, maybe almost for Insulti? I know you laid out some of your M&A criteria at Cagney that touched at least a little bit on that, but how do you think about just how that business might have Sure.

Speaker Change: In the.

Speaker Change: Commentary after.

Speaker Change: After the the Mars, killing him, but the all of the balance Tomorrow CEO appointed.

Speaker Change: One of the benefits being diluting their exposure to cocoa by adding a large salted snacks portfolio.

Speaker Change: From a company, but also already has a pet food business.

Speaker Change: Seem like some of that logic could apply to your case as well.

Speaker Change: Have sort of any scale ambitions, maybe almost for their own sake and salty or.

Speaker Change: I know you've laid out for me or your M&A criteria at Cagny.

Speaker Change: <unk> touched at least a little bit on that but.

Speaker Change: How do you think about just how that business might evolve.

Speaker Change: Sure. So you know this really goes back to back in 2017, when we laid out our vision to be a snacking powerhouse and really what that was all about is how do we really leverage our core capabilities to maximize incremental get got to incremental consumers and incremental snacking.

Michele Buck: So, you know, this really goes back to back in 2017, when we laid out our vision to be a snacking powerhouse. And really, what that was all about is, how do we really leverage our core capabilities to maximize incremental, get to incremental consumers and incremental snacking occasions. And we do that really by leveraging white spaces that we think are on trend with consumers. So we have a large, you know, chocolate business, we love our chocolate business, and we want to continue to grow that. But we also know that if we get into white spaces, like sweets, better for you, and salty, it adds incremental consumers and occasions.

Speaker Change: Occasions, and we do that really by leveraging white spaces that we think are on trend with consumers. So we have a large chocolate business, we love our chocolate business and we want to continue to grow that but we also know that if we get into white spaces like suites, better for you and salty it as incremental.

Speaker Change: Consumers and occasions, so that's really.

Michele Buck: So that's really the role and what it plays. Certainly within that, as we've said, we're always looking for really great brands that we think can be sustainable and grow over time, that are high margin and high growth. We feel really good that we have a good track record of finding those, given the scale that we've achieved with Skinny Pop, with Donuts. And we like that Lesser Evil specifically is very focused on new benefits, ingredient focused snackers, and it extends our reach with younger, more diverse demographics, especially young families, which opens up a whole new range of opportunity for us.

Speaker Change: The role and what it plays certainly within that as we've said we're always looking for really great brands that we think can be sustainable and grow over time, and our high margin and high growth. We feel really good that we have a good track record of finding those given the scale that we've achieved with skinny pop with Tom.

Speaker Change: And we like that.

Speaker Change: Lesser evil specific.

Speaker Change: Is very focused on do benefits ingredients focused snappers and it extends our reach with younger more diverse demographics, especially young families, which opens up a whole new range of opportunity for us. So we see it being a better for you platform.

Unknown Executive: So we see it being a better for you platform that can really be extended and scaled across categories and forms. Okay, great. Thanks so much. Thank you.

Speaker Change: They can really be extended and scale across categories and forums.

Speaker Change: Okay, great. Thanks, so much.

Speaker Change: Thank you. Our next question comes from the line of Megan Clark with Morgan Stanley. Please proceed with your question.

Megan Clapp: Our next question comes from the line of Megan Clapp with Morgan Stanley. Hey, good morning. Thanks. Thanks for squeezing me in.

Megan Clark: Hey, good morning. Thanks, Thanks for squeezing me in.

Megan Clapp: I guess, you know, I wanted if we were to put tariffs aside, maybe a follow up to Andrew's question earlier in 2026, I just maybe wanted to take your pulse on, you know, whether or not, if we put tariffs aside, you would feel you would have felt better about the ability to grow EPS next year. And I guess I asked because in the prepared remarks, you know, cocoa is still high, but it has retreated. And it doesn't seem like your stance on the outlook for cocoa prices has changed at all. And then Michelle, I think you did mention elasticities have been a lot better than the minus one you were you were assuming in the in the guide.

Megan Clark: I guess I wanted to if we were to put tariffs aside maybe a follow up to Andrew's question earlier on 2026, I just maybe wanted to take your pulse on you know whether or not if we put tariffs. Aside you you would feel you would've felt better about the early pay off next year and I guess I ask because in your prepared remarks, you know coke.

Megan Clark: Still high but it has retreated and it doesn't seem like your stance on the outlook for cocoa prices has changed at all and then Michele I think you did mentioned mentioned elasticity is had been a lot better than the minus one newer you're assuming in that in the guide so.

Unknown Executive: So, you know, if we were to put tariffs aside, again, I know it's challenging, and who knows what will happen. But I guess in the base business, you know, do you do you feel better about the ability to grow earnings in the base business absent tariff? I definitely feel better without a tariff. I'll say that unequivocally. Do we still see a path, though, and feel a level of confidence about a path to earnings growth if we take tariffs to the side? I think yes, based on where corporate prices are today. And again, that's going to require some aggressive action.

Megan Clark: Yeah, if we were to put terrorists side again, I know, it's challenging and who knows what will happen, but I guess in the base business.

Speaker Change: Do you feel better about the ability to grow earnings in the base business absent tariffs.

Speaker Change: It definitely feels better without tariffs play that quickly.

Speaker Change: Do we still see a task, though until a level of confidence about our past earnings growth. If you take tariffs to the size of the base business I think yes, based on where cocoa bright star today and again, that's going to require some aggressive action.

Unknown Executive: As Michele said earlier, those actions are teed up. We'll talk more about that as we get further into the year. But from a base business standpoint, our view hasn't changed.

Speaker Change: As Michelle said earlier those actions are teed up we'll talk more about that as we get further into the year.

Speaker Change: But from a base business standpoint, our view hasn't changed for a second.

Unknown Executive: Okay, that's helpful. Thanks. And then and then maybe just a quick follow up the as it relates to tariffs, the 100 million that you cited unmitigated, does that assume that we for cocoa in particular, does that assume we stay at that 10% paused tariff rate for, you know, some of the countries are were a bit higher initially. So does it? Can you just clarify whether it that would assume we stay at the 10% rate? Yes, it does. Okay, great. Thank you so much. Thank you.

Speaker Change: Okay. That's helpful. Thanks, and then and then maybe just a quick follow up the as it relates to tariffs the hundred million that you cited on mitigated does that assume that we for cocoa in particular does that assume we stay at that 10% paused tariff rates for.

Speaker Change: Some of the countries are were a bit higher initially is there does it can you just clarify whether that would assuming we stay at the 10% rate.

Speaker Change: Yes, it does.

Speaker Change: Okay, great. Thank you so much.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Tom Palmer with Citi. Please proceed with your question.

Tom Palmer: Our next question comes from the line of Tom Palmer with Citi. Morning, and thanks for the question.

Speaker Change: Good morning, and thanks for the question Steve.

Steve Voskuil: See, if I heard right, I think when you were answering Ken's question about tariffs, you noted that two thirds of the exposure is cocoa in Canada and some color on the the other areas where you would see impact and to what extent you think there could be, I guess, Exemptions or whatnot for those types of items because it sounded like the exemption discussion was more around cocoa and perhaps Canada. Yeah, you bet. So we have other raw material inputs that are imported, aside from cocoa. China, for us, is not used, but China is still in that calculation as well.

Speaker Change: If I heard right.

Speaker Change: When you were answering <unk> question about tariffs you noted that two thirds of the exposure is cocoa and in Canada and.

Speaker Change: Just some color on the other areas, where you would see impact and to what extent.

Speaker Change: Do you think there could be I guess.

Speaker Change: <unk> or whatnot for those types of items because it sounded like the exemption discussion was more around cocoa and perhaps Canada.

Speaker Change: Yeah, you bet. So we have other raw material inputs that are imported aside from Coco.

Speaker Change: China for us is not huge but China is still in that calculation as well and so those are those by comparison to telephone kinder are meaningful but somewhat small herself.

Steve Voskuil: And so those by comparison to cocoa in Canada are meaningful, but somewhat smaller. So we're looking at exemptions everywhere we can, but focusing on the most impactful pieces first. But we do have raw materials that come from other countries as well that also still have some tariff impact. And they're not off the table from mitigation.

Speaker Change: I said, we're looking at.

Speaker Change: Exemptions everywhere, we can but focusing on the most impactful pieces first but we do have raw materials that come from other countries as well. It also still have some tariff impact.

Speaker Change: And they're not off the table for mitigation is just looking first with Davidson.

Steve Voskuil: It's just we're looking first where the biggest Right, thanks for that.

Speaker Change: Alright, thanks for that.

Unknown Executive: In Salty Snacks, there was a in the repaired marks and note about a five percent volume headwind from pure super days. You were shipping days and also a planned reduction in private label. I don't think that private label commentary had been in previous. So is this a new headwind to think about in twenty twenty five? And just any framing of the impact, just given the shipping date timing, it seems like this could be maybe approaching a mid single digit headwind, at least in one cue.

Speaker Change: In salty snacks, there was and their prepared remarks, a note about a 5% to 6%.

Speaker Change: Volume headwind from fewer shipping days excuse me fewer shipping days and also a planned reduction in private label.

Speaker Change: I don't think that private label commentary had been in previous so is this a new headwind to think about in 2025, and just any framing of the impact just given the shipping day timing. It seems like this could be maybe.

Speaker Change: It may be approaching a mid single digit headwind at least in <unk>. Thanks.

Unknown Executive: Thanks. You know, we do some, some private label manufacturing in the popcorn space, but it's sort of subject to what we're doing in Skinny Pop and the branded business. And so to the extent that business, and it did for the first quarter, it continues to grow strongly, then by design, we do less private label and redirect that manufacturing towards our branded product. So it's part of the longer term strategy as that business grows. So it's a headwind of a sort, but it's also a reflection of the core something that is growing.

Speaker Change: Yes, we do some some private label manufacturing in the popcorn space, but it turned subject too.

Speaker Change: What we're doing at skinny pop in brand business and so to the extent depth and it did for the first quarter. It continues to grow strongly.

Speaker Change: And by design, we do less private label and redirect that manufacturing towards our branded products. So Cynthia its part of the longer term strategy as that business grows.

Speaker Change: It is a headwind of historic but it's also a reflection of the core something doesn't scrubbing.

Unknown Executive: Okay, thank you. Thank you.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Leo Jordan <unk> with Goldman Sachs. Please proceed with your question.

Leah Jordan: Our next question comes from the line of Leah Jordan with Goldman Sachs. Good morning. Thank you for fitting me in. I just wanted to ask about international as it came in ahead of your expectations. When we talked last quarter, it seemed like that competition was increasing in several regions, and we had heard recently that not all players were passing along costs. So just seeing if you could provide an update on the competitive environment there, and has anything notably changed? Yeah, as we look at our business, certainly we've seen strong growth on Reese's, which has been a key investment for us in those international markets.

Speaker Change: Good morning. Thank you for fitting me in I just wanted to ask about international as it came in ahead of your expectations. When we talked last quarter. It seemed like that competition was increasing in several regions and we had heard recently that they're not all players. We're passing on cost does it just thinking if you could provide an update on the competitive environment.

Speaker Change: Aren't there and has anything notably changed.

Speaker Change: Yeah, as we look at our business.

Speaker Change: Certainly we've seen strong growth on Reese's, which has been a key investments for us in those international markets. So we're seeing strength behind media activation and distribution wins in particular, we also saw strong organic sales growth in Brazil.

Michele Buck: So we're seeing strength behind media activation and distribution wins in particular. We also saw strong organic sales growth in Brazil, where we were up double digits behind a strong Easter and innovation. And the competitive environment there really did tend to normalize. So that was, you know, it's certainly still very competitive. But it, you know, it normalized, it didn't get worse. And so I think that helped some of the strengths that we've seen in some of the markets. And we also, we also just performed really well, we had shared needs in India and Brazil and our Mexico spicy business.

Speaker Change: Up double digits behind a strong Easter and innovation and the competitive environment. There really did tend to normalize. So that was you know it certainly still very competitive but.

Speaker Change: It yeah. It normalize it didn't get worse and so I think that helped some of the strength that we've seen in some of the markets that we also we also just performs really well we had share gains in India, and Brazil, and our Mexico business.

Speaker Change: Great. Thank you and just one follow up in the prepared remarks, you also noted that you're not planning any buybacks for this year I know, it's very dynamic we've talked about a number of things around tariffs and your mitigation efforts.

Speaker Change: But.

Speaker Change: Should think ear play out better than expected and the tariff headwind goes away you know whats your appetite for re engaging on buybacks versus other investments in the business as you think about capital allocation this year.

Unknown Executive: or Buck.

Speaker Change: Third being buybacks remains in our capital allocation philosophy and say it is.

Unknown Executive: I mean, buybacks remains in our capital allocation philosophy. As I say, it's good because it puts tension on all of the other choices. So from a long term capital allocation strategy, no change in terms of the role it plays in the near term, you know, M&A is episodic, we have opportunities when they come up, it's not always that frequent. And so this year, we put the focus on that.

Speaker Change: Because it puts tension on all of the other choices from a long term capital allocation strategy no change in terms of the role. It plays in the near term M&A is episodic we have opportunities when they come up it's not always that frequent and so this year, we've put the focus on that but going forward as we look more broadly at long term shareowner.

Unknown Executive: But going forward, as we look more broadly, long term share of purchase will continue to play And if I can go back just to mention Tom's question on a private label, I said skinny pop capacity, but it's actually dots capacity and pretzels that we were talking about there. So my apologies. Yeah, that's enabling the private label of the prior accusation. That's right. Thank you.

Speaker Change: We will continue to play a role.

Speaker Change: And if I can go back just mentioned Tom's question on private label <unk> Skinny pop capacity, but it's actually dock capacity and pretzels that we're talking about there. So my apologies yeah, that's enabling that private label the prioritization that's right.

Speaker Change: Thank you. Our next question comes from the line of Chris Carey with Wells Fargo Securities. Please proceed with your question.

Chris Carey: Our next question comes from the line of Chris Carey with Wells Fargo.

Chris Carey: Hi, good morning, everyone. I wanted to ask about, you know, the efforts that you're making on, you know, reformulation and price tag architecture, which certainly seem interesting. Can you expand a bit, maybe give us an early or some early insights on the evolution of your thinking over the past few months? What's worked? What hasn't? And, and perhaps, maybe, you know, give some insight on where you think you can perhaps gain some advantages out of this. You know, maybe price tag architecture allows you to offer more value and drive some more consumption. Maybe there's ingredient changes you can make to capitalize on on new trends.

Chris Carey: Hi, Good morning, everyone I wanted to ask about.

Chris Carey: The efforts that you're making on your reformulation and price pack architecture, which certainly Sam.

Chris Carey: Interesting.

Chris Carey: Can you expand a bit maybe give us an early or some early insights on the evolution of your thinking over the past few months what's worked.

Chris Carey: What hasn't and.

Chris Carey: And perhaps maybe give us some insight on where you think you can perhaps.

Chris Carey: Okay, and so advantages out of this.

Speaker Change: Yeah, maybe price pack architecture allows you to offer more value and drive some more consumption, maybe theres ingredient changes you can make to capitalize on new trends and so really just looking for a bit more insight on successes you've seen it where do you expect the press on reformulation and also just to get it from a more proactive perspective, how can.

Michele Buck: And so really just looking for a bit more insight on successes you've seen and where you expect to press on reformulation. And also, just again, from a more proactive perspective, you know, how can this turn into a bit of an advantage for you, potentially. Yeah, so we have price pack architecture actually going into the market now. So we're continuing to work on more, but I don't want to give the impression that that hasn't been a lever that we've already pulled. I think one of the benefits of price pack architecture, as you mentioned, is, you know, it's not a direct price point increase, but rather, you know, it's kind of a combination of sizing and price, which can tend to offer perhaps a better value perception for consumers.

Chris Carey: Turning to a bit of an advantage for you potentially.

Chris Carey: Yes, so we have price pack architecture actually going into the market now so we're continuing to work on more but I don't want to give the impression that that hasn't been a lever that we have already full I think one of the benefits of spray snack architecture as you mentioned is.

Chris Carey: It's not a direct price point.

Kris: Kris but rather.

Kris: It's kind of a combination of sizing and price, which can tend to offer.

Kris: Perhaps a better value perception for our consumers.

Michele Buck: So I think that's always an opportunity if done well, and we always try and balance how much of our price realization should come from that lever versus a straight price increase. So that was really part of our earlier August 24 pricing announcement that we did some PPA. We'll share more about our future plans and our full plans going forward. And if we think about, I guess, the competitive advantage component, the investments we've made in our supply chain really do enable us to have a lot of agility and flexibility, both in terms of being able to execute PPA, which involves sometimes the changes in packaging and being able to efficiently do that, also lets us really look at the formulations to make sure that we're providing the highest quality products at the best cost possible.

Kris: So I think that's always an opportunity if done well and we always try and balance.

Kris: How much of our price realization should come from that lever versus a strict strict price increase so that was really just part of our earlier August 24 pricing announcements that we did some some tpa will share more about our future plans on our full plans.

Kris: Going forward.

Kris: And as we think about.

Kris: I guess the competitive advantage component the investments we've made in our supply chain really do enable us to.

Kris: I have a lot of agility and flexibility both in terms of being able to execute PPA with <unk>, sometimes the changes in packaging and being able to efficiently do that.

Kris: Also lets us really look at the formulations to make sure that we're providing the highest quality products at the best cost possible.

Michele Buck: So that would be a competitive advantage of using our R&D folks or supply chain to make sure that we can really deliver those reformulations, get them in the market as quickly as possible, and do them incredibly well to continue to satisfy consumer demand.

Kris: So that would be a competitive advantages using our R&D folks from supply chain to make sure that we can really deliver.

Kris: Those re formulations get them in the market as quickly as possible and do them incredibly well to continue to satisfy consumer demand.

Unknown Executive: Unknown Speaker One quick follow-up would be just around the evolution of your thought process on mitigation tools. As you noted, there was probably a bit more focus on RGM and other revenue growth management and other mitigating factors, but as COCO has lingered, you know, how does pricing, you know, come into the equation? You know, has there been any evolution in your thinking of, you know, how large the sorts of tools that you'll need to kind of mitigate this over the next 18 months, you know, have become? So just, you know, any evolution of thought process there over the past few months would also be helpful.

Speaker Change: One one quick follow up would be just around the evolution of your thought process on mitigation tools.

Kris: <unk>.

Kris: There was probably a bit more.

Kris: Focus on our RG admin and other revenue growth management and other mitigating factors.

Kris: But as cocoa has lingered.

Kris: Does how does pricing come into the equation.

Kris: Has there been any evolution in your thinking of.

Kris: How large those sorts of tools that youll need to kind of mitigate this over the next 18 months.

Kris: Have become so just any any evolution of thought process here over the past few months what would also be helpful. Thank you.

Unknown Executive: Thank you.

Unknown Executive: So I guess I'd start by saying, for the very beginning, we have taken a holistic approach, you know, as evidenced by the transformation program that we put in place, which was really about attacking costs. So we did some of that already over these past couple years. We did take pricing, but we also did, you know, take a measured approach to balance the short and the long term. We didn't want to overprice. You know, if COCA were to take a massive retreat, but for us, it's never been a concern about an ability to price. So we've always had confidence in that.

Kris: So I guess I'd start by saying that.

Kris: The very beginning we have taken a holistic approach as evidenced by the transformation program that we put in place which was really about attacking cost. So we did some of that already over these past couple of years.

Kris: We did take pricing, but we also didn't.

Kris: Our measured approach to balanced assortment and the long term, we didn't want to overprice.

Kris: If if if coke or where to take a massive retreat, but for us it's never been a concern about an ability to price and we've always had confidence in that it's just kind of wanting to balance that that short and long term components to top and bottom line across the P&L.

Unknown Executive: It's just kind of wanting to balance that short and long term component, the top and bottom line across the P&L. So we're encouraged that we've seen some retreat of COCA, but clearly COCA hasn't retreated as much as we would all like. And so at this point, you know, we're ready to activate even more of the levers that we've been doing work against and have had underway. And we look forward to sharing more about that over the summer.

Kris: So we're encouraged that we've seen some retreat of cocoa, but clearly our focus.

Kris: It hasn't retreated as much as we would all like and so at this point.

Kris: We're ready to.

Activate even more of the levers that we've been doing work against and have had underway and we look forward to sharing more about that over the summer.

Unknown Executive: Okay, thank you. Thank you.

Kris: Okay. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Scott <unk> with Jefferies. Please proceed with your question.

Scott Marks: Our next question comes from the line of Scott Marks with Jeffries. Please proceed with your question. Hey, good morning. Thanks so much for fitting me in. First question would be based on commentary, it obviously sounds like you're expecting COCO, you know, prices to either remain status quo remain elevated.

Scott: Hey, good morning, Thanks, so much for fitting me in.

Scott: First question would be based on commentary it obviously sounds like you're expecting cocoa.

Scott: Prices to either remain status quo remain elevated.

Michele Buck: You know, let's say, for instance, COCO prices in the market do come down, whether it be next year or the year after, how would you think about reinvesting in the business to ensure long term health of the chocolate category? Yeah, well, and so we will, again, that's my dream come true, right? Global prices come down sharply. And that's the choices that we have. And so we always invest behind our brands, we want to make sure that we're investing in new capabilities, technology, the brands, relevant marketing and innovation. So that hasn't been curtailed in this environment.

Scott: Let's say for instance, cocoa prices in the market do come down whether it be next year or the year. After how would you think about reinvesting in the business to ensure.

Scott: <unk> long term health of the chocolate category.

Scott: Yes.

Scott: So we will again, that's my dream come true rice cocoa prices come down sharply in tough situations that we have and so we always invest behind our brands. They want to make sure that we're investing in capabilities technology, the brands relevant marketing and innovation, so that hasnt been curtailed.

Michele Buck: And certainly if we came out and went global fall, we'll revisit that to make sure we're doing our best to invest in those areas. But they haven't been shortchanged here. And, and, and then we'll have the opportunity to, you know, deploy cash back to shareholders, we talked about earlier, have more opportunities for capital allocation. So, so that's how we're thinking about it. We look forward to having that opportunity. And even with the cost cutting we've done to date, we've, you know, we've done some of that with a lens of, you know, where can we get net savings, but at same time be investing in technology and capability that let us emerge even stronger.

Scott: In this environment and certainly as we came out in <unk>.

Scott: Until the fall, we'll revisit that to make sure we're doing our best to invest in those areas.

Scott: But they haven't been short changed here.

Scott: And then and.

Scott: And then we'll have the opportunity to deploy cash back to shareholders and talked about her earlier have more opportunities for capital allocation. So so that's how we're thinking about it and look forward to having that opportunity and even with the cost cutting we've done to date.

Scott: We've done some of that with the lens of yes.

Scott: Where can we get net savings, but at the same time be investing in technology and capability that lets us emerge even stronger.

Michele Buck: So tools that let us be even more efficient in terms of how we're spending our investments in business and marketing and in trade, those types of things that both save money, but also give us kind of a long-term benefit. So we look forward to those as well. All of that will allow us to emerge even stronger than we were when we came into the commodity.

Scott: So tools that let us be even more efficient in terms of how we're spending our <unk>.

Scott: <unk> in the business and marketing and in trade those types of things that both save money, but also gives us kind of a longer term benefit. So we look forward to them as well and all of that will allow us to emerge even stronger than we were when we came into the commodity pressures.

Unknown Executive: Understood. And then second question for me. You've spoken a bit about some of the the C-STOR trends. Wondering if you can just share anything on maybe performance or trends you're seeing across other channels as it relates to your categories. Thanks so much. Yeah, I would say we're continuing to see, you know, a consumer focus on value that's showing up in areas like migration to club. Certainly dollar continues to be really strong online because of the value that it offers. So depending on who the consumer is, all consumers looking for value, each of them in different ways that best suit their specific needs.

Speaker Change: Understood and then second question for me you've spoken a bit about some of the the C store trends women you can just share anything on maybe performance or trends youre seeing across other channels as it relates to your categories. Thanks, So much.

Speaker Change: Yeah, I would say, we're continuing to see you know a consumer focus on value.

Speaker Change: That's showing up in areas like migration to club.

Speaker Change: Certainly dollars continues to be really strong online because of the value that it offers so depending on who the consumer is all consumers looking for value each of them in different ways that best suit their specific needs, but we haven't really seen a significant change in some of those channel trends.

Unknown Executive: But we haven't really seen a significant change in some of those channel trends, aside from, you know, the ups and downs that we see in in CSTOR. I think take home overall, as a segment has across the board been quite strong with with single digit growth there. Got it.

Speaker Change: Aside from the ups and downs that we see in.

Speaker Change: In C store I think take home overall.

Speaker Change: As a segment has across the board have been quite strong with mid single digit growth there.

Speaker Change: Got it will pass it on thanks, so much.

Unknown Executive: We'll pass it on. Thanks so much. Thank you.

Speaker Change: Thank you. Our next question comes from the line of thinking soon with Redburn Atlantic. Please proceed with your question.

Bingqing Su: Our next question comes from the line of Bingqing Su with Redburn Atlantic. Hi Michelle, thanks for taking my question. I have a question about the competitive landscape escape in the US chocolate. I think in the previous order of the quarter before, you mentioned the intensified competition from smaller players. Can you comment and provide more color on what you see in terms of the competitive situation in the US chocolate, both from the smaller player, private label, and maybe even signing a premium player there, please, and I'll have a follow up. Thank you. Yeah, I would say we haven't seen significant change in the competitive landscape versus what we have been tracking throughout the year.

Speaker Change: Hi, Thanks for taking my question I have a question about the competitive landscape in the U S chocolate and I.

Speaker Change: In the previous or the quarter before you mentioned intense competition from smaller players can you provide more color on what you're seeing in terms of the competitive situation is chocolate and basically a smaller player or a crime in April and maybe even funny a premium player and they're pleased and don't have a whole lot. Thank you.

Speaker Change: Yeah, I would say.

Speaker Change: Haven't seen significant change in the competitive landscape.

Speaker Change: Versus what we have been tracking throughout the year.

Michele Buck: You know, we have expected Some increased competition, certainly from the largest players. In terms of innovation, you know, we, we knew that there will be some of that coming. You know, smaller players and private label have been softening a little bit in terms of the momentum in the marketplace. They're certainly still out there. But in aggregate, there's been a little bit more internal sourcing across them. And then certain brands like Feastables and Tony's have been a bit more stable. But then again, they're sourcing more amongst that set of smaller brands. So we continue to track that over time.

Speaker Change: We had expected.

Speaker Change: Some increased competition certainly from.

Speaker Change: From the the largest players.

Speaker Change: In terms of innovation, we are we knew that there will be some of that coming.

Speaker Change:

Speaker Change: Smaller players in private label.

Speaker Change: Has been softening.

Speaker Change: In terms of the <unk>.

Speaker Change: Momentum in the marketplace. There is certainly still out there.

Speaker Change: <unk>.

Speaker Change: But in aggregate.

Speaker Change: There's been a little bit more internal sourcing across them.

Speaker Change: And then certain brands like feasible route Tony's has been a bit more stable.

Speaker Change: But then again there are sourcing more amongst that set of smaller brands. So we continue to track that over time, but overall no significant changes to the government about the highway.

Michele Buck: But overall, no significant changes. Okay, thank you. And then a follow up, if I can come back to pricing point, please, because your pricing in Q1 North America confectionery is 3%. That's lower than the market pricing, I think you called it the 8%. Obviously, you have the price tag architecture, but with the cocoa price pretty much blocking in 2025. And from what you said, elasticity is a bit better, or in line with your expectation. Do you see the possibility of having further pricing to increase in the rest of the year to not only mitigate cocoa invasion, but potentially some tariff impact?

Speaker Change: Okay. Thank you.

Speaker Change: And then a follow up if I can come back to pricing points today.

Speaker Change: I think in Q1, North America confectionery, 30%, that's lower than the market a pricing thing nucor to the 8%. Okay. You have the price pack architecture, the cocoa price pretty much blocking in 2025 and from what you said the elasticity is it better or in line with your expectation can you see the possibility.

Speaker Change: T O.

Speaker Change: Inside a pricing increase in the rest of the year to not only mitigate cultivation back potentially some cash impact. Thank you.

Michele Buck: Thank you. So you will see pricing go up in Q2 and Q3, as more of our seasonal pricing and price pack architecture kicks in from announced pricing actions that we've already taken. Obviously, we can't talk about any future pricing intentions in advance. But You know, we'll give you more color on both COCO and tariffs and our holistic plans as we get into the summer. Yeah, thank you, very helpful. Thank you.

Speaker Change: So you will see pricing go up in Q2, and Q3 as more of our seasonal pricing and price pack architecture kicks in.

Speaker Change: From announced pricing actions that we've already taken them, obviously, we can't talk about any future pricing intentions.

Speaker Change: In advance but.

Speaker Change: We'll give you.

Speaker Change: More color on both cocoa and tariffs and our holistic plans as.

Speaker Change: As we get into the summer.

Speaker Change: Okay. Thank you very helpful.

Speaker Change: Yeah.

Speaker Change: Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to management for any final comments.

Operator: Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to management for a final Thank you everyone for joining us this morning and we look forward to catching up with many of you throughout the day. Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Thank you everyone for joining us this morning, and we look forward to catching up with many of you throughout the day. Thank you.

Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.