Analysis of Reportable Segments
Hershey Co. operates in 3 segments: North America Confectionery; North America Salty Snacks; and International.
Segment Profit Margin
Hershey Co., profit margin by reportable segment
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| North America Confectionery | 32.93% | 32.23% | 32.10% | 31.11% | — |
| North America Salty Snacks | 15.54% | 18.14% | 17.31% | 12.39% | — |
| International | 12.65% | 10.11% | 0.00% | 6.64% | — |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The segment profit margins exhibit divergent trajectories across the three reportable business units, characterized by steady expansion in the core confectionery business, volatility in the salty snacks division, and a recovery phase within international operations.
- North America Confectionery
- This segment demonstrates consistent and stable margin expansion. Profitability increased progressively from 31.11% in 2019 to 32.93% by the end of 2022. This segment maintains the highest profit margin of all reported units, indicating strong pricing power and operational efficiency.
- North America Salty Snacks
- A non-linear trend is observed in this segment. Margins grew significantly from 12.39% in 2019 to a peak of 18.14% in 2021. However, a contraction occurred in 2022, with the margin declining to 15.54%, suggesting increased cost pressures or pricing headwinds during that period.
- International
- The international segment shows the highest degree of volatility. Following a profit margin of 6.64% in 2019, a sharp decline to 0.00% was recorded in 2020. Subsequent years show a strong recovery trend, with margins climbing to 10.11% in 2021 and reaching 12.65% in 2022, marking a significant improvement over the 2019 baseline.
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Segment Profit Margin: North America Confectionery
Hershey Co.; North America Confectionery; segment profit margin calculation
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segment income (loss) | 2,811,066) | 2,475,873) | 2,274,584) | 2,120,212) | —) |
| Net sales | 8,536,480) | 7,682,416) | 7,084,860) | 6,815,111) | —) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 32.93% | 32.23% | 32.10% | 31.11% | — |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Segment profit margin = 100 × Segment income (loss) ÷ Net sales
= 100 × 2,811,066 ÷ 8,536,480 = 32.93%
The North America Confectionery segment demonstrated consistent financial growth from 2019 through 2022, characterized by simultaneous increases in net sales, segment income, and overall profit margins.
- Net Sales Trajectory
- Net sales experienced an uninterrupted upward trend, increasing from US$ 6.82 billion in 2019 to US$ 8.54 billion in 2022. The growth rate accelerated in the latter two years of the period, indicating strong top-line momentum.
- Segment Income Performance
- Segment income grew steadily, rising from US$ 2.12 billion in 2019 to US$ 2.81 billion in 2022. The most significant year-over-year increase occurred between 2021 and 2022, reflecting a robust increase in absolute profitability.
- Profit Margin Expansion
- The segment profit margin exhibited a continuous expansion, starting at 31.11% in 2019 and reaching 32.93% by the end of 2022. This positive trend indicates that segment income grew at a faster rate than net sales, suggesting improved operational efficiency and effective cost management during the period of revenue growth.
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Segment Profit Margin: North America Salty Snacks
Hershey Co.; North America Salty Snacks; segment profit margin calculation
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segment income (loss) | 159,935) | 100,777) | 75,845) | 50,816) | —) |
| Net sales | 1,029,405) | 555,424) | 438,224) | 410,005) | —) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 15.54% | 18.14% | 17.31% | 12.39% | — |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Segment profit margin = 100 × Segment income (loss) ÷ Net sales
= 100 × 159,935 ÷ 1,029,405 = 15.54%
The North America Salty Snacks segment experienced substantial growth in both top-line revenue and absolute profit between 2019 and 2022. While the scale of operations expanded rapidly, the efficiency of profit generation exhibited a fluctuating trend, peaking in 2021 before contracting in 2022.
- Net Sales Expansion
- Net sales demonstrated a consistent and accelerating upward trajectory, rising from US$ 410,005 thousand in 2019 to US$ 1,029,405 thousand in 2022. The most significant surge occurred between 2021 and 2022, where sales increased by approximately 85%, indicating a period of aggressive growth or significant portfolio expansion within the segment.
- Segment Income Growth
- Absolute segment income increased every year throughout the analyzed period, growing from US$ 50,816 thousand in 2019 to US$ 159,935 thousand in 2022. This upward trend confirms that the segment successfully translated higher sales volumes into increased absolute earnings.
- Segment Profit Margin Trends
- The profit margin exhibited a non-linear pattern. An initial phase of margin expansion was observed from 2019 to 2021, with the margin increasing from 12.39% to a peak of 18.14%. However, in 2022, the margin declined to 15.54%. This contraction occurred despite the record increase in net sales, suggesting that the costs associated with the rapid scale-up in 2022 grew at a faster rate than the corresponding revenue gains.
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Segment Profit Margin: International
Hershey Co.; International; segment profit margin calculation
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Segment income (loss) | 107,927) | 74,170) | (14) | 50,535) | —) |
| Net sales | 853,409) | 733,497) | 626,635) | 761,136) | —) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 12.65% | 10.11% | 0.00% | 6.64% | — |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Segment profit margin = 100 × Segment income (loss) ÷ Net sales
= 100 × 107,927 ÷ 853,409 = 12.65%
The international segment experienced significant volatility between 2019 and 2022, characterized by a sharp contraction in 2020 followed by a consistent upward trajectory in both absolute profitability and operational efficiency.
- Net Sales Trends
- Net sales saw a notable decline from US$ 761.1 million in 2019 to US$ 626.6 million in 2020. This contraction was followed by a steady recovery, with sales increasing to US$ 733.5 million in 2021 and reaching a period high of US$ 853.4 million by December 31, 2022.
- Segment Income Performance
- Segment income exhibited extreme variance, falling from US$ 50.5 million in 2019 to a near-breakeven loss of US$ 14 thousand in 2020. A strong rebound occurred in 2021, with income rising to US$ 74.2 million, and further accelerating to US$ 107.9 million in 2022.
- Profit Margin Analysis
- The segment profit margin mirrored the income volatility, dropping from 6.64% in 2019 to 0.00% in 2020. The subsequent recovery demonstrated significant margin expansion, increasing to 10.11% in 2021 and concluding the period at 12.65% in 2022. This trend indicates that profitability grew at a faster rate than sales during the recovery phase, suggesting improved operational leverage or enhanced pricing strategies.
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Net sales
Hershey Co., net sales by reportable segment
US$ in thousands
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| North America Confectionery | 8,536,480) | 7,682,416) | 7,084,860) | 6,815,111) | —) |
| North America Salty Snacks | 1,029,405) | 555,424) | 438,224) | 410,005) | —) |
| International | 853,409) | 733,497) | 626,635) | 761,136) | —) |
| Total | 10,419,294) | 8,971,337) | 8,149,719) | 7,986,252) | —) |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
Total net sales exhibited a consistent upward trajectory from 2019 through 2022, increasing from $7.99 billion to $10.42 billion. This growth was characterized by an accelerating pace, with the most significant year-over-year increase occurring between 2021 and 2022.
- North America Confectionery
- This segment remains the primary driver of total revenue, maintaining a steady growth pattern. Net sales rose from $6.82 billion in 2019 to $8.54 billion in 2022, underscoring a stable and expanding market presence in the core confectionery business.
- North America Salty Snacks
- The most aggressive growth was observed in this segment, which experienced a rapid acceleration in revenue. Net sales more than doubled between 2021 and 2022, rising from $555.4 million to $1.03 billion, indicating a successful scaling of operations within this category.
- International Operations
- The international segment showed a period of volatility, with a notable decline in net sales in 2020 to $626.6 million from $761.1 million in 2019. A subsequent recovery trend followed, with sales increasing to $853.4 million by 2022, surpassing the initial 2019 levels.
The diversification of revenue streams is evident as the Salty Snacks segment increased its contribution to total net sales over the period, while the core confectionery business continued to provide the foundational revenue base for the organization.
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Segment income (loss)
Hershey Co., segment income (loss) by reportable segment
US$ in thousands
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| North America Confectionery | 2,811,066) | 2,475,873) | 2,274,584) | 2,120,212) | —) |
| North America Salty Snacks | 159,935) | 100,777) | 75,845) | 50,816) | —) |
| International | 107,927) | 74,170) | (14) | 50,535) | —) |
| Total | 3,078,928) | 2,650,820) | 2,350,415) | 2,221,563) | —) |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
Total segment income exhibited a consistent upward trajectory between 2019 and 2022, growing from 2,221,563 thousand US dollars to 3,078,928 thousand US dollars. This represents an overall increase of approximately 38.6% over the four-year period, with the rate of growth accelerating in the latter years.
- North America Confectionery
- This segment serves as the primary driver of total income, maintaining a strong and accelerating growth pattern. Income rose from 2,120,212 thousand US dollars in 2019 to 2,811,066 thousand US dollars by 2022. The year-over-year growth rate increased steadily, peaking at 13.5% between 2021 and 2022, reflecting sustained operational strength in the core business.
- North America Salty Snacks
- A rapid expansion is observed in this segment, which demonstrated the highest relative growth among all reportable segments. Income increased from 50,816 thousand US dollars in 2019 to 159,935 thousand US dollars in 2022. This more than threefold increase suggests significant successful scaling or market penetration within the salty snacks category.
- International
- The international segment experienced the most volatility, characterized by a sharp decline in 2020 where income fell to negative 14 thousand US dollars. However, a strong recovery followed, with income rebounding to 74,170 thousand US dollars in 2021 and further increasing to 107,927 thousand US dollars in 2022, eventually surpassing pre-2020 levels.
- Aggregate Income Composition
- While the North America Confectionery segment remains the dominant contributor to total income, the relative contribution from Salty Snacks and International segments has grown. The diversification of income streams is evident as the non-confectionery and international components expanded their share of the total income pool by the end of 2022.
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