The Hershey Supply Chain

The Hershey Company - headquartered in Hershey, Pennsylvania - generated revenues of $11.7 billion in the year ending December 31^st, 2025. They have approximately 20,000 employees. The reporting segments include North America Confectionery, the largest segment, accounting for over 81% of revenues, North America Salty Snacks, and the International segment. 89% of revenues are generated in North America.

Product Development

Stacy Taffet also spoke at the Investor Day. As the chief growth officer at Hershey, she oversees demand creation. Hershey, she said, is “innovating for the future of demand. This means building technical capability to deliver advantaged organic innovations.” Consumers are evolving, asking for healthier products that don’t compromise on taste. With the advent of GLP-1 drugs, which dampen hunger pangs, healthy choices become more important. These include reduced sugar, protein bars that also provide fiber, and “precision time-release nutrients. Just imagine,” Ms. Taffet exclaimed, “a snack that can deliver benefits where, when, and how your body needs them.”

Source

In terms of sourcing, no raw material is more important than cocoa. These raw materials were historically purchased directly from third-party suppliers. However, the company now has a program to put in place long-term contracts with farmers in Côte d'Ivoire.

The cocoa market has been brutal. Until mid-2023, cocoa traded around $3,000 per ton on the New York futures exchange. But by the end of that year, prolonged droughts in Ghana and Côte d’Ivoire drove prices to $12,500 per ton. Today’s prices are nearly 170% above levels seen two years ago. Analysts expect cocoa to stabilize at a price between $7,500 and $8,500 per ton. Their annual report reported $491.0 million in commodity hedging losses last year.

Jason Reiman, Hershey’s chief supply chain officer, largely equates resilience with achieving greater sourcing diversity. “Just five years ago, Côte d'Ivoire and Ghana represented almost two-thirds of the world's cocoa production. Today, they're less than 50%.”

Their trading company in Switzerland performs all aspects of their cocoa procurement. This includes price risk management, physical supply procurement, and sustainable sourcing oversight. The company believes they employ world-class commodities traders who drive strong collaboration with commodities trade groups and sustainable sourcing resources.

Despite the recent hedging losses, Mr. Reiman believes that procurement is a competitive advantage for the company. At Investor Days, Mr. Reiman showed a chart showing that over ten years, the Hershey team had significantly outperformed its peers.

And that pricing advantage, he says, comes from their team, their process, and their technology.” They have invested in market intelligence to gain insights into price movements and technology to better understand where supply and demand changes are occurring. Hershey’s has developed a disciplined sourcing process with robust governance. They also report having a sophisticated tool set for hedging.

More varied sources of supply are driving the need for related production research and development. Cocoa beans from different regions have distinct flavor profiles. But consumers expect a uniform and predictable taste. The multi-stage production process may need to be adjusted to achieve a uniform taste.

Make

Their supply chain network reflects their reliance on the North American market. Hershey has 15 plants that it leases or owns. 12 are in the US, 2 in Mexico, and 1 in Malaysia. The US, Canada, and Mexican plants primarily support the North American market. The Malaysian plant supports their international sales.

Hershey has invested in production capacity across their factory network. Last year, Hershey opened a 250,000-square-foot chocolate processing facility in Hershey, Pennsylvania. This was not the first investment in capacity in recent years. In 2023, for example, Hershey purchased two popcorn operations from a co-manufacturer to increase production capacity and flexibility for its SkinnyPop brand.

The newest plant is part of a multi-year, $1 billion investment that also includes adding 13 production lines and upgrading 11 existing lines across Hershey’s North American facilities. This will help the company produce goods more efficiently. Because some of their lines are multi-category assets - capable of producing different product categories - this also improves agility.

The salty product line is projected to grow faster than their core chocolate business. Hershey has been investing ahead of that growth to ensure it can capture the planned growth in this category. For salty products, the company now manufactures over 80% internally. Five years ago, the company relied totally on external manufacturing partners for this product category. “This has allowed us to accelerate the growth of these businesses,” the chief supply chain officer said.

Given the number of stock-keeping units the company has, production efficiency is important. Andrew Archambault, the president of Hershey North America, admitted that the company has a large number of SKUs. An SKU is a specific product, inclusive of size, packaging, and color variations. The more SKUs, the more complex the supply chain becomes. This makes it harder to run a responsive, efficient supply chain.

Nevertheless, variety is important. Hershey has a tentpole strategy. A tentpole strategy is a marketing approach that anchors campaigns around major, high-interest events—such as holidays, sporting events, or product releases. This drives engagement, brand visibility, and sales.

While there is a tentpole strategy, SKU proliferation should be avoided whenever possible. “We want everything on the aisle out of the Hershey portfolio to have a clear reason for existing, a clear occasion that it impacts,” Mr. Archambault explains, so that the supply chain can be run “at scale.”

A Tech-Enabled Supply Chain

“In supply chain,” Mr. Reiman stated, “nothing moves ahead without technology.” The company has examined how they source, manufacture, fulfill, and how they plan. They have implemented technologies in each of these areas.

From a sourcing standpoint, they have invested in spend visibility and “should-cost modeling. This allows the food giant to give sharper category strategies to their sourcing team.

“From a make standpoint,” Mr. Reiman continued, “we've implemented Connected Worker.” This allows every operator on the factory floor to understand the production line's efficiency. If there is a problem, the solution surfaces the root causes. Finally, corrective actions to fix the problem quickly are presented. The company is using an AI-powered solution with AI agents from Augmentir for this. At a conference at the end of last year, Hershey’s digital manufacturing program lead emphasized that a “digital transformation only succeeds when it starts with the people doing the work.”

The chief supply chain officer also talked about their “deliver” solution. They have implemented a solution they call Precision Assortments. This store-specific assortment is powered by geo-demographic data and store-specific input from its sales teams. These store assortments are supported by easy-to-assemble merchandising displays. This solution appears to be SAP’s Trade Promotion Management application.

“The other technology I want to talk about,” Mr. Reiman continued, is Decision Intelligence.” This agentic AI solution comes from Aera Technology. And think about decision intelligence as sitting at a layer above our supply chain. It's taking information all across our supply chain (various SAP and Kinaxis solutions) and it's sensing what's happening, it's making sense of it, and it's creating an automatic response.” For example, if production on the factory floor is running ahead of schedule, packaging materials need to be expedited to keep the operation in sync. We're seeing some good results from our investments in the technology. An AI agent would automatically send a signal to ensure that the packaging was sent to the line.

“Now,” Mr. Reiman explained, “there are thousands of decisions that happen every day across complex supply chains. We see Decision Intelligence as an opportunity to increase productivity by $50 million and reduce our inventory by $100 million over the next two years.”