Commodity Price InflationCocoa, HSY's largest commodity, is at an all-time high with prices surging over 200%, leading analysts to predict a total Cost of Goods Sold (COGS) inflation of +14.5% in 2025 for HSY, marking the highest inflation in the past decade.
Demand And Pricing PressureHSY will need to implement significant pricing strategies due to increased inflation in 2025, potentially affecting demand and margins, while tough consumer demand and retailer backdrop make it difficult for Hershey to raise prices further without negatively impacting volumes.
Earnings And Valuation ConcernsThe company's stock is trading at a ~30% premium to Packaged Food peers, which seems generous given the negative outlook for EPS in 2025, with analysts lowering estimates and target price due to mounting cocoa inflation and anticipated lower volume and margins despite pricing adjustments.