How Does Hershey Make Money?
Hershey generates revenue primarily by manufacturing and selling chocolate, confectionery, and salty snacks across North America and international markets. The company’s iconic brands — Hershey’s, Reese’s, Kit Kat (U.S. license), Jolly Rancher, and SkinnyPop — dominate grocery store checkout aisles and convenience stores. Hershey earns roughly $11.2 billion in annual net sales, with the vast majority coming from its North America Confectionery segment. The company sells through retailers like Walmart, Costco, and Target, as well as convenience stores, dollar stores, and e-commerce channels.
Why Are Chocolate Prices So High?
If you’ve noticed chocolate bars costing more at the store, the answer traces back to cocoa commodity prices, which surged to record highs exceeding $10,000 per metric ton in 2024 — more than tripling from historical norms. West African droughts, aging cocoa trees, and disease have dramatically reduced cocoa supply from Ghana and Côte d’Ivoire, which produce over 60% of the world’s cocoa. Hershey, as the largest U.S. chocolate manufacturer, faces direct cost pressure since cocoa and sugar are its two largest input costs. The company has responded with price increases of 10-15% across its product line, smaller package sizes (shrinkflation), and hedging strategies. However, Hershey’s hedges roll off over time, meaning 2025-2026 will see even higher input costs hit the income statement.
What Candy Does Hershey Make?
Hershey’s portfolio spans over 100 brands across chocolate, non-chocolate candy, and snacks:
- Chocolate: Hershey’s Bars, Hershey’s Kisses, Reese’s Peanut Butter Cups, Kit Kat (U.S. only), Almond Joy, Mounds, York Peppermint Pattie, Cadbury (U.S. license), Brookside
- Non-Chocolate Candy: Jolly Rancher, Twizzlers, Ice Breakers, Bubble Yum, Payday, Whoppers
- Salty Snacks: SkinnyPop, Pirate’s Booty, Dot’s Pretzels
- Baking & Spreads: Hershey’s Cocoa Powder, Hershey’s Chocolate Chips, Reese’s Spreads
Reese’s alone generates over $3 billion in annual retail sales, making it the #1 selling candy brand in the United States. Hershey holds approximately 35% U.S. confectionery market share, more than double its nearest competitor Mars.
Hershey (HSY) Business Model
Hershey operates a branded consumer packaged goods (CPG) model. The company manufactures products in its own facilities (primarily in Hershey, Pennsylvania and plants across the U.S. and Mexico), then distributes them through retail partners. Unlike companies that license brands, Hershey owns its manufacturing end-to-end, giving it control over quality but also exposing it to commodity costs. The company spends heavily on advertising (~$600M annually) to maintain brand dominance, and benefits from impulse purchase dynamics — chocolate is a low-consideration, high-frequency buy. Seasonal events (Halloween, Valentine’s Day, Easter, Christmas) drive ~30% of annual sales, with Halloween alone representing Hershey’s single largest selling season.
Hershey Competitors
- Mars (private) — M&M’s, Snickers, Milky Way, Skittles
- Mondelez International (MDLZ) — Cadbury (global), Oreo, Toblerone
- Ferrero (private) — Nutella, Ferrero Rocher, Kinder
- Nestlé (NESN) — Kit Kat (global ex-U.S.), Butterfinger, Crunch
- PepsiCo/Frito-Lay — Competes in salty snacks with SkinnyPop/Dot’s
Mars is Hershey’s primary competitor in U.S. chocolate. Notably, Mars made a $36 billion acquisition offer for Kellanova in 2024, signaling consolidation in the broader snacking industry.
Revenue Breakdown
Hershey reports through two segments:
- North America Confectionery (~82%): Chocolate bars, candy, mints, gum sold in the U.S., Canada, and Mexico
- North America Salty Snacks (~10%): SkinnyPop, Dot’s Pretzels, Pirate’s Booty
- International (~8%): Growing presence in Brazil, India, Mexico, and select Asian markets
The company generates roughly 90% of revenue from the United States, making it one of the most domestically concentrated large-cap food companies. International expansion has been a stated priority but remains a small contributor, partly because Hershey’s sweeter, milk-chocolate-forward taste profile differs from European preferences for darker chocolate.
Income Statement Overview
| Metric | FY 2024 |
|---|---|
| Net Sales | ~$11.2B |
| Gross Profit | ~$4.8B |
| Gross Margin | ~43% |
| Operating Income | ~$2.2B |
| Operating Margin | ~20% |
| Net Income | ~$1.6B |
| EPS | ~$7.80 |
Hershey’s margins are under pressure as cocoa hedges roll off and the company absorbs higher input costs. Gross margin has compressed from ~45% historically to ~43%, and further compression is expected as unhedged cocoa purchases hit in 2025.
Key Financial Metrics
- U.S. Confectionery Market Share: ~35%
- Reese’s Retail Sales: $3B+ annually (America’s #1 candy brand)
- Advertising Spend: ~$600M/year
- Seasonal Sales Concentration: ~30% of revenue from 4 holidays
- Dividend Yield: ~3.2% (Dividend Aristocrat)
- Share Buyback: Consistent repurchaser, ~$500M annually
Is Hershey Profitable?
Yes. Hershey is a highly profitable business with operating margins around 20% and net margins near 14%. The company has raised its dividend for 15+ consecutive years and maintained profitability through every economic cycle, including COVID-19 (when at-home snacking actually boosted sales). However, 2024-2025 represents the toughest margin environment in decades due to cocoa prices. Hershey’s profitability advantage comes from brand pricing power — consumers will pay a premium for Reese’s over a store-brand peanut butter cup — but there are limits to how much pricing the market will absorb.
Where Does Hershey Spend Its Money?
- Cost of Goods Sold (~57%): Cocoa, sugar, dairy, peanuts, packaging, manufacturing
- Selling & Marketing (~12%): Advertising, trade promotions, retail partnerships
- Administrative (~5%): Corporate overhead, R&D
- Capital Expenditure (~$500-600M): Factory upgrades, capacity expansion, automation
- Dividends & Buybacks: Returns roughly $1.5B annually to shareholders
The single biggest line item is cocoa purchasing, which has become the defining financial story for Hershey. The company uses futures contracts to hedge 12-18 months ahead, but with cocoa remaining above $8,000/ton, future earnings face significant headwinds.
What to Watch
- Cocoa price trajectory — If cocoa stays above $8,000/ton through 2026, Hershey faces continued margin erosion and may need additional price increases that risk demand destruction
- Volume vs. price trade-off — Consumers may trade down to private label or reduce purchase frequency as chocolate prices rise
- Hershey Trust Company — The Hershey Trust controls the company through a dual-class share structure, making hostile takeovers impossible but also limiting strategic flexibility
- International growth — India and Brazil represent the largest untapped opportunities, but Hershey has struggled to crack global markets historically
- Salty snacks portfolio — The SkinnyPop/Dot’s acquisitions diversify beyond chocolate; growth here helps offset cocoa headwinds
Hershey (HSY) Financial Summary
Hershey is an American icon with 35% U.S. confectionery market share, anchored by Reese’s — the country’s best-selling candy. The company’s biggest challenge is the historic cocoa price spike, which is compressing margins and forcing price increases. Long-term, Hershey’s brand moat, dividend track record, and CPG defensive characteristics make it a classic consumer staples holding. Near-term, investors must weigh whether cocoa costs are cyclical or structurally higher, and whether Hershey can protect margins without losing volume.