Hershey Warns ‘Capacity Constraints’ Will Impact Ability to Meet Consumer Demand This Halloween and Christmas

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The Hershey Co. CEO Michele Buck has warned that “capacity constraints” will hinder the company’s ability to meet consumer demand during the Halloween and holiday season.

Buck made the comments on a quarterly earnings call with investors on July 28 in which she cited supply chain issues and Russia’s ongoing invasion of Ukraine as reasons for the constraints.

The CEO explained that the candy maker uses the same equipment to make both its everyday and seasonal products and that it has needed to balance production over the past several months to improve the availability of its everyday items while simultaneously building seasonal inventory.

Because of supply chain issues, the company has prioritized “everyday on-shelf availability” over the seasonal confectionery and had made a “tough” decision in the spring, when Halloween candy production typically starts.

“We had a strategy of prioritizing everyday on-shelf availability,” Buck said. “It was a tough decision to balance that with the seasons, but we thought that was really important. And so that was a choice that we needed to make. We had [an] opportunity to deliver more Halloween [candy], but we weren’t able to supply that.”

Despite this, Buck noted that seasonal consumer engagement is “expected to remain high, and we expect high single-digit sales growth for both our Halloween and holiday seasons,” but that despite the strong growth, Hershey Co. “will not be able to fully meet consumer demand due to capacity constraints.”

‘Struggles Across the Supply Chain’

However, Buck noted that the candy-maker feels “really good about having high single-digit growth” and hinted that it will have more capacity to fulfill more of the demand it is seeing during the season in the future.

Buck also noted that Russia’s invasion of Ukraine had led to a scarcity of some ingredients needed to make candy, while European sanctions on Russian natural gas were impacting Germany, where Hershey sources equipment and supplies.

“I think generally we continue to see struggles across the supply chain,” she said. “We’re now starting to see bigger concerns relative to scarcity of ingredients needing to leverage different suppliers at higher cost and price points in order to secure production.”

Halloween holiday sales of confectionery make up 10 percent of Hershey’s annual sales.

Despite the ongoing issues faced by the Pennsylvania-based company, a spokesperson said that consumers don’t need to worry about empty shelves.

“We’ll all still be able to enjoy our favorite Hershey treats this Halloween; those treats may just be dressed up in everyday packaging versus Halloween-inspired or seasonal designs,” Hershey spokeswoman Ashleigh Pollart told USA TODAY.

Buck’s comments come after Hershey reported better-than-expected earnings on Thursday, with net sales rising 19.3 percent to $2.37 billion over the three months ending July 3, which included a 5.3 point benefit from the acquisitions of Pretzels, Dot’s, and Lily’s.