The Hershey Company · NYSE:HSY
The Hershey — Hershey — Investor Day (March 2023)
77 slides from The Hershey's investor day presentation, Mar 22, 2023
Slide 1: Investor Day 2023
Slide 2: Welcome & Opening Remarks
Welcome & Opening Remarks Melissa Poole VP, Investor Relations
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Many of these forward-looking statements can be identified by the use of words such as “anticipate,” “assume,” “believe,” “continue,” “estimate
Slide 4: Advancing Enterprise Strategies
ADVANCING Enterprise Strategies Michele Buck Chief Executive Officer
Slide 5: Great Brands
Great Brands
Slide 6: We Set Out to Deliver More
WE SET OUTTO ae more-e
Slide 7: Delivering more for our portfolio, people, customers, shareholders
S ..FOR OUR portfolio ..FOR OUR Capabilities ..FOR OUR people ..FOR OUR Customers ..FOR OUR environment ..FOR OUR Shareholders
Slide 8: We've Made Great Progress
We’ve Made Great Progress INVESTING IN Capabilities Media ROI+30%? @ Capital Investment © $218" Source: 1:1RI, 5-Year CAGR from 01/07/18 to 01/01/23 | 2: IRI Calendar Year w/e 01/01/23 | 3: Company Financials & Information
Slide 9: Brookside, Kettle
Ss BROOKSIDE Kettle | Nd pn
Slide 10: While Delivering Differentiated Results
Net Sales 5-Year CAGR' 6.8% ~ a S&P Food HERSHEY" While Delivering Differentiated Results Adjusted EPS 5-Year CAGR' 12.3% 2.7% S&P Food HERSHEY 1Net Sales and adjusted EPS are presented on a calendar-year basis. Source: Factset, Company Financials, see appendix for a reconciliation of GAAP to Adjust
Slide 11: Generated Peer-leading Market Performance
Generated Peer-leading Market Performance Market Performance Stock Price Index to 12/31/2017 HSY: $232 . S&P HSY: $114 Food ® @ @ @ @ @ Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2021 Dec 2022 source: Factset. _ nevrooxencccuancs +1Q4%
Slide 12: We Aspire To
ws we Aspire (0 5 *S @Y Bea portfolio of growing, consumer-loved brands © Lead the category in performance, insights and execution ¢Y Invest differentially in brands and capabilities ¥Y Bethe #1 CPG company to work for Y Deliver consistent, advantaged financial performance ~— — Ds
Slide 13: Transformational Strengths
@ Financial Capacity to Invest for the Future @ Unique Culture and Ways of Working @ Ability to Execute and Transform & Transformational Strengths Great Brands Advantaged Financial Structure Best People Differentiated Capabilities Executional Excellence
Slide 14: Our Fundamental Strategies Remain the Same
TO ACHIEVE THIS VISION, Our Fundamental Strategies | REMAIN THE SAME | UNDISPUTED LEADER SCALE U.S. CMG Salty Snacks PROFITABLE GROWTH IN . INCREMENTALITY VIA International LEED M&A A Leading Snacking Powerhouse
Slide 15: We are Evolving and Transforming
We are Evolving and Transforming Key Strategies for Next Phase of Growth aA Continue ) e & Elevate @ Transform Commercial Capabilities Network Capacity and Resilience Environment, Social & Governance (ESG)
Slide 16: Provide Differentiation
PROVIDE DIFFERENTIATION e gveryday At Hom INTER- NICHE FAVORITES| | NATIONAL SALTY SEASON | | ON-THE-Go
Slide 17: Continue to Focus on Confection and Salty Snacks
Continue to Focus on os ® | iuys @ g : Drive Confection Scale Incrementality Salty Snacks Increase Brand Awareness Expand Distribution Scale Operating Model
Slide 18: On-trend Categories
@ On-trend Categories @ Scale Brands @ Incremental Occasions @ Strong Gross Margins
Slide 19: Transforming Commercial Capabilities
—— Transforming Commercial Capabilities 2 La 2, w 1, a Holistic Integrated Agile Supply Commercial Investment Dynamic Planning Chain Network Trade and DME planned and optimized independently | [# ] Integrated Technology, Systems and Data
Slide 20: Business & Workforce Planning
Business & Workforce Planning Optimize Labor Through Prioritize and Enhance Global Business Solutions Talent Development g Simplify and Digitize Key Processes g Harmonize Technology Solutions
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Slide 22: We Listened to Your Feedback
—— We Listened to Your Feedback plans Promotions consumers capacity supply customer advertising pricing working trends. ™2rgins chain. confection ste FNNOVATION Esc opportunities capital prod uctivity digital 4 capabilities rowth strategy 9 international asin vaue SACK analytics India Competition al
Slide 23: Strategies for the Future
Strategies FOR THE FUTURE U.S. Confection Chuck Raup - President, U.S. Confection Salty Snacks Kristen Riggs « President, Salty Snacks Supply Chain Strategy & Investment Will Bonifant- Vice President, U.S. & Canada Supply Chain Quick Hits Financial Outlook & Capital Allocation Priorities Steve Vosku
Slide 24: Being the Undisputed Leader in U.S. Confection
Being the Undisputed Leader in U.S. Confection Chuck Raup President, U.S. Confection
Slide 25: U.S. Confection Leader
U.S. Confection Leader Leading Position Gaining Share HERSHEY Top 5 Competitors Combined Source: 1: IRI Calendar Year w/e 01/01/23 | 2:1RI, 3-Year absolute change, Calendar Year w/e 01/01/23
Slide 26: North America Confection
North America Confection Net Sales Growth Segment Margin Recent Performance 2019-2022 Recent Performance 2019-2022 +7.0% 32.9% 31.1% 2019 2022 OUTLOOK Low Single-Digit Growth Annual Margin Expansion « Net Price Realization ++ * Strategic Revenue Growth Management ¢ Volume + * Fixed Cost Leverage Man
Slide 27: Evolved Strategies for Sustainable Growth
Evolved Strategies for Sustainable Growth vb 2 yes Lc Innovation Pricing Omni-Channel Media Targeting Broad-reach Targeting Mass Approach, Episodic Capital-Intensive and Reactive Mass Personalization with Greater Effectiveness And Lower Cost Proactive Strategic Growth Driver
Slide 28: Capitalizing on Consumer Trends
Capitalizing on Consumer Trends (3) VW Home-Centricity eee ty +42B More At-Home Eating More Ways to Reach Consumers Occasions vs 2019 HERSHEY | Addressable Media From 20% to 65% Source: 1: The NPD Group: Eating Patterns in America, Trends in Meals & Snacks & Snack Track, Trend in Snack Categories by
Slide 29: White Space Opportunities
White Space Opportunities Growth ~dX Category Avg g Increase innovation, distribution and media 4 Grow Zero-Sugar Platform A Invest in gummy capacity iA Invest in new sugar reduction technology v Leverage partnerships Y Expand Lily's distribution and launch innovation Source: IRI. Retail Sales for C
Slide 30: Slide 30
Slide 31: Salty Snacks Growth & Margin Opportunities
Salty Snacks Growth & Margin Opportunities Kristen Riggs President, Salty Snacks
Slide 32: We Aspire to Win in Popcorn and Pretzels
We Aspire to in Popcorn and Pretzels
Slide 33: Categories are Primed for Growth
Categories are Primed for Growth Retail Sales 3-Year CAGR' 11.4% 11.5% 10.6% RTE Popcorn Pretzels SaltySnacks Edibles We are Positioned to Win Brands are Scaled, Fast-growing Fastest-Growing Pretzel Brand Over 3-Years Source: 1:1RI, Calendar Year w/e 01/05/20 to 01/01/23 | 2: IRI, Retail Sales for C
Slide 34: Expand Profitability
RA My = EXPAND a “4. Profitability &
Slide 35: We will Deliver Over Next Years
We will Deliver Over Next 3 Years BUILD BRAND INCREASE WIN INCREMENTAL AWARENESS DISTRIBUTION OCCASIONS SKINNY POP @!! NACK PAC py
Slide 36: Build Brand Awareness
2022 HOUSEHOLD PENETRATION %t 59% Dots Pretzels Build Brand Awareness 2022 HOUSEHOLD ts) PENETRATION ee 15% t 57% Increase Skinny Pop | RTE Popcorn Advertising Investment & Introduce First-ever Campaign for Dot’s a Launch New Campaign NETWT.5 02. (142g) @ ve a . for SkinnyPop Source: IRI, Calendar Y
Slide 37: Increase Distribution
Increase Distribution DISTRIBUTION - ACV, 2022 Geographical Expansion SKINNY Channel Expansion P@P ' i SkinnyPop Competitor A TOTAL U.S. Source: IRI, Average ACV Weighted Distribution by Quad for Calendar Year w/e 01/01/23
Slide 38: Win Incremental Occasions
Win Incremental Occasions PEANUT AND Y U =] } ‘TREE NUT FREE | cons ons Rl ) =i) % ak Or POPCORN @- / ~\ INDIVIDUAL Pye
Slide 39: Committed to Margin Improvement
Committed to Margin Improvement Near-Term Long-Term G Expand Gross Margin by 2026 Company Company Company Company Company E D c B A
Slide 40: Strong Pipeline for Margin Enhancement
—— Strong Pipeline for Margin Enhancement Longer-Term Scale Supply KA “N= Chain Network i Eee ss zm Net Price rt — Foundational 10) Realization = Productivity
Slide 41: Investing for Growth and Margin Expansion
Investing for Growth and Margin Expansion a a O,9 @ ey ale, wes Invest in people and capabilities
Slide 42: SkinnyPop
‘\ a a é 2 SKINNYPOP
Slide 43: Supply Chain Strategy & Investments
Supply Chain Strategy & Investments Will Bonifant Vice President, U.S. & Canada Supply Chain
Slide 44: Margin Expansion
Margin Expansion
Slide 45: Elevating Supply Chain Capabilities
Elevating Supply Chain Capabilities @ @ @ Flexible Agile Enhanced Manufacturing Fulfillment Portfolio Capabilities @ ® ® @ Food Safety Scale Productivity Core & Quality & Efficiency Capacity
Slide 46: Lean Manufacturing
-_ a Lean Manufacturing Robust Diligence Process to Maximize ROIC Rtpz x T - ‘i ® a a as :¥ | = 2 D aan sama vyy Portfolio Alternate Network Optimization Sourcing Expansion
Slide 47: Productivity and Efficiency is Foundational to Capital Efficiency
Productivity and Efficiency is Foundational to Capital Efficiency Replace Repurpose Leverage Excess Underutilized Assets Assets Capacity SS i] & From WZELF WREAINGL ses PRETZELS TNC S ST ol Increased Productivity
Slide 48: Capacity Investments will Enable Network Utilization
__._ Capacity Investments will Enable Network Utilization to __ Return to Optimal Efficiency & Service Levels by 2024 2017-2022 Utilization 2022-2024 Projected Utilization Over Target Capacity Under No Investment With Investment Source: Company Information
Slide 49: Core Brand Investments Focused on High-Volume Lines
Core Brand Investments Focused on High-Volume Lines to Support Growth 20% 7) =60% OF CAPACITY ceils INVESTMENT GROWTH TOWARDS since 2017 REESE'S’ in 2021-2025 =) it VO ol ac Capacity Chocolate Making Facility ‘ource: 1: IRI, Retail volume absolute growth from Calendar Year w/e 01/07/18 to 01/01/23.
Slide 50: Investment in Transformation Capabilities
Investment in Transformation Capabilities Enhanced Portfolio Capabilities
Slide 51: Flexible Manufacturing
Flexible Manufacturing Technology Technology Technology A+B+C Qj Capital Intensive Capital Efficient
Slide 52: Agile Fulfillment
Agile Fulfillment To Regional / Class of Trade Optimized Display Units soe Precision Display ise te : whe 550 Cartridge X40 Configurations Tower Sizes Mass Customization at Scale Enabled by Robotics and Digital Integration
Slide 53: Expanding Our Supply Chain Capabilities
Expanding Our Supply Chain Capabilities to Support Portfolio Evolution r st _ i ~ 3S —— , a. sf “~ > Ca Pretzel Produce Manufacturing + Sweet & Salty Seasoning Snacks
Slide 54: Slide 54
Slide 55: Quick Hits: International & ESG
~ QUICKHITS International & ESG Rohit Grover President, International Leigh Horner Chief Sustainability Officer
Slide 56: Building our Brands across Markets
Building our Brands across Markets Hershey’s asa Reese’s Carving Differentiating Global Powerhouse its Own Path with Local Jewels CR 10) ws Com) Lie ppoall ” coher ¥ Pelon ontrack to be #1 in Spicy in Mexico
Slide 57: ESG Priorities Aligned to Material Issues
ESG Priorities Aligned to Material Issues Responsible sf Sourcing & XY Environment Human Rights Using robust due diligence Enhancing our operations and leading standards to to meet high-impact protect people across our climate, waste and value chain packaging goals €% Community
Slide 58: Financial Outlook & Capital Allocation Priorities
Financial Outlook & Capital Allocation Priorities Steve Voskuil Chief Financial Officer
Slide 59: Growing Categories, Leading Margin Performance
@ Growing Categories @ Volume & Price Growth @ Leading Margin Performance @ Strong Cash Flow Enabling Portfolio Expansion Vv Disciplined Capital Allocation with Differentiated Reinvestment Peer-leading Return for Shareholders
Slide 60: Proven Track Record
5-YEAR CAGR Proven Track Record Adjusted Earnings Operating Dividend Per Share Cash Flow Per Share $2.3B | $3.87 $2.55 _ 2017 2022 2017 2022 2017 2022 Source: Company Financials, see appendix for a reconciliation of GAAP to Adjusted EPS
Slide 61: Balanced Price and Volume Growth
Balanced Price and Volume Growth Organic Net Sales Growth Price m Volume 10.4% 2018-20 = 2021-22 2023E Long-Term 6-8% 2-4% wom Price Volume NA NA Confectionery Salty Snacks aneernaonal Price ++ Price + Price + Volume + Volume +++ Volume ++ Source: Company Financials
Slide 62: Leading Margins
Adjusted Gross Margin Calendar Year 2022 HERSHEL NN Ceneral ils I 327 Kraft Heinz YS 31% Leading Margins Adjusted Operating Margin Calendar Year 2022 HERSHEY” (S000: 22% Kraft Heinz 18% General Mills 17% Smucker's 16% Mondelez 16% Campbell's 15% 15% Conagra McCormick | 14% Kelloggs 12% Source: Conse
Slide 63: Opportunities for Continued Margin Expansion
Opportunities for Continued Margin Expansion Adjusted Operating Vv Income Margin % +e 23.1% 22.9% 2017 2021 2022 2023-25E Fixed Cost Leverage Net Price Realization Productivity enabled via Enhanced Supply Chain & Digital Capabilities Snacking Scale and Network Optimization SG8A Discipline and Ways o
Slide 64: Increasing Productivity
Increasing Productivity Freight & Annual Productivity Logistics and Efficiencies 15% International 2022 Cost of Goods Sold $5.9B Raw Materials & Packaging 25% ‘Oo Manufacturing Overhead Source: Company Financials
Slide 65: Strong Cash Flow Conversion
Strong Cash Flow Conversion Cash Flow from Operations (6 Billion) Free Cash Flow Productivity’ 127% 126% 08% s 107% ooo 52. 3 98% 99% 1.6 $1.8 $1.7 7 an [| i . 2017-2018 )= 2019S 2020. 2021 = 2022 2017, 2018 = 2019S 2020. 2021 =. 2022 Focused Effort on Working Capital Improvement Expand Processes Ex
Slide 66: Capital Allocation Strategy to Support Growth
Capital Allocation Strategyto Support _ Growth and Create Value for Shareholders Business 1 2 Dividend Reinvestment Maintain a dividend Including M&A . payout >50% Sustain Financial Strength and Debt Reduction ry Flexibility 3 Share Buybacks ° Net leverage ratio * Consistent amount annually target o
Slide 67: Capex will Remain Elevated in 2024
Capex will Remain Elevated in 2024 and Normalize in 2025 Capital Expenditures as a % of Net Sales ~8% 5-6% . 5.5% 5.0% ~4% 2021 2022 2023E 2024E Long-Term Source: Company Financials Capital Investment Focused on: * Core confection capacity * Snacking scale and optimization « Supply Chain resilience
Slide 68: A Great Investment
A Great Investment Total Shareholder Return 5-Year Annualized Return HERSHEY Market Food Source: Factset, Total Shareholder Return for 12/31/2017 to 12/31/2022
Slide 69: Strong Visibility to Consistently Deliver Long-term Algorithm
Strong Visibility to Consistently Deliver Long-term Algorithm 2023 2026+ 6 - 8% 2-4% 9 - 11% 6 - 8%
Slide 70: Reaffirming 2023 Outlook
Reaffirming 2023 Outlook | 6-8% Reported Net Sales growth 9-11% Adjusted Earnings Per Share Growth
Slide 71: Keep the Momentum Going
KEEP THE INVEST MOMENTUM ~ §& DIFFERENTIALLY © RANSEORM, GOING & PRAGMATICALLY Deliver Peer-leading Shareholder Return
Slide 72: Reconciliation of GAAP and Non-GAAP Information
Reconciliation of GAAP and Non-GAAP Information Year-ending: December 31, 2022 ari Income In Millions of Dollars Except Per 3 - - Interest- Gross Profit Operating Profit Net Income Per Share- Share Amounts Expense, Net Diluted GAAP results $4,498.8 $ 2,260.8 $137.6 $1,644.8 $7.96 Adjustments: Deriva
Slide 73: Reconciliation of GAAP and Non-GAAP Information
Reconciliation of GAAP and Non-GAAP Information Year-ending: December 31, 2021 In Millions of Dollars Except Per Share Amounts GAAP results Adjustments: Derivative mark-to-market gains Business realignment activities Acquisition and integration-related activities Noncontrolling interest share of bus
Slide 74: Reconciliation of GAAP and Non-GAAP Information
Reconciliation of GAAP and Non-GAAP Information Year-ending: December 31, 2020 avn Income In Millions of Dollars Except Per - 5 5 Interest- Gross Profit Operating Profit Net Income Per Share- Share Amounts Expense, Net i Diluted GAAP results $3,7013 $17827 $149.4 $1,2787 $6 Adjustments: Derivative m
Slide 75: Reconciliation of GAAP and Non-GAAP Information
Reconciliation of GAAP and Non-GAAP Information Year-ending: December 31, 2019 Income illi 7 F 5 Interest- iniillions cfibe larsiexcepuncd Gross Profit Operating Profit Net Income Per Share- Share Amounts Expense, Net i Diluted GAAP results. $ 3,622.5 $1,596.0 $1441 $1,149.7 $5.46 Adjustments: Deriv
Slide 76: Reconciliation of GAAP and Non-GAAP Information
Reconciliation of GAAP and Non-GAAP Information Year-ending: December 31, 2018 In Millions of Dollars Except Per Share Amounts GAAP results Adjustments: Derivative mark-to-market gains Business realignment activities Acquisition-related costs Pension settlement charges relating to Company-directed i
Slide 77: Reconciliation of GAAP and Non-GAAP Information
Reconciliation of GAAP and Non-GAAP Information Year-ending: December 31, 2017 In Millions of Dollars Except Per Share Amounts GAAP results. Adjustments: Derivative mark-to-market gains Business realignment activities Acquisition-related costs Pension settlement charges relating to Company- directed