Our conversation occurred on the morning of the WCF Partnership Meeting, a couple of days before Hershey reported its Fourth-Quarter and Full-Year 2023 Financial Results that announced sales had fallen 6.6% in 4Q, despite a year-over-year increase of 7%. The news was also breaking after seeing months of record high prices in the futures market for cocoa, events that will impact Brannigan’s strategy as the company’s chief procurement officer in the year ahead.
We are a big company, and we always have to anticipate there's going to be volatility in commodity prices
While Brannigan is responsible for the company’s global procurement across all areas, she and her team work closely with the overall sustainability team and the Chief Sustainability Officer to drive business resilience and impact through responsible sourcing.
“We are a big company, and we always have to anticipate there's going to be volatility in commodity prices. As part of that, we do try to take a conservative approach so that we're ensuring that our business and our consumers can enjoy affordable chocolate.
“No one has anticipated the [cocoa] price escalating to this level. I don't know if we've reached the peak or not. And so, the question is, is this really a structural change? Or is this more of a specific supply-and-demand occurrence? And that's what we're really trying to assess, as a business and as an industry.”
Commodities basket
She said because of Hershey’s scale, it could hedge the risks through pricing action, but it can also hedge the risk in different ways from a pure procurement perspective as well. “The good news is we have a market basket of commodities that we buy; certainly, cocoa, sugar, and many others are part of that basket. So, there's an ability for us to look across our portfolio to mitigate risk.
“The commercial teams are constantly evaluating what makes the most sense from a retail environment, from a consumer acceptance, and from an overall business perspective. So, while we don't disclose specific pricing actions or when those will happen, we're continuously evaluating what makes sense for the business.”
The farmer is central to Hershey’s entire cocoa strategy .... Without the farmer, the family, and the community operating in a way that’s profitable and allows them to have a prosperous future, we won't have cocoa
Sustainability
Hershey is a founding member of WCF, and Brannigan is the organisation’s Vice-chair & treasurer, so sustainability is also at the forefront of her thinking.
“The farmer is central to Hershey’s entire cocoa strategy,” she said. “Without the farmer, the family, and the community operating in a way that’s profitable and allows them to have a prosperous future, we won't have cocoa. So it is core to our strategy, and it’s core to how we think about the work that we're doing across our sustainability procurement team.
“Having said that, poverty is a root issue around children’s wellbeing and many of the structural sector challenges … lack of healthcare, lack of access to education and even financing presents problems. We aim to keep the farmer at the centre of our work to maintain long-term partnerships with these farming families. And then, as a product of that, to ensure not only are we professionalising the work they do so they can earn an income they so deserve, but also ensure we're raising up the community.”
Hershey launched an income accelerator programme last year in Côte d'Ivoire, that will benefit farmers in its supply chain.
“We also hope to learn a significant amount … we certainly don't profess to be experts on all things in the community by any stretch of the imagination, but what we really appreciate is that we're partnering with a number of organisations like CARE and the Rainforest Alliance, as well as working with the government to ensure that across these families, there's up to a $500 cash incentive for professionalising their farms as well as incentivising for families to enrol, and keep their children in school.”
Cocoa for Good
Brannigan cited Hershey’s Cocoa for Good sustainability strategy as an example of the work it is doing in this area and said that first and foremost, the company is trying to make sure that there's a healthy and prosperous cocoa supply “and that our consumers can enjoy cocoa for years to come.”
Of course, chocolate is also an impulse buy, and consumers will be influenced by, above all, price and, in some cases, healthy options. Brannigan said Hershey is active in the Better for You space and is pleased with the response to its Reese’s plant-based alternative. “I think consumers are having to make difficult choices. Their grocery basket differs from what it might have been three years ago, but I think it has evolved.”
European Union Deforestation Regulation (EUDR)
With the United States in an election year, no specific legislation on the environmental agenda is expected to come out of Congress, like the European Union Deforestation Regulation (EUDR). The confectionery industry aims for a prosperous, responsible, and sustainable environment and on that note, Brannigan said: “It is important for Hershey to be transparent in our practices as required by government regulation, but it’s more important to drive impact and address the farm and community-level challenges that our sector is facing,” she said.
Brannigan also acknowledged challenges with the sugar supply in Mexico because of the weather and a poor crop. She reaffirmed Hershey would have a continuous supply and no issues servicing the manufacturer of its products. “Having said that, when you run into supply and pricing challenges, there will be adjustments in demand for maybe the smaller players with a little bit less leverage. The vast majority of our business is US-centric, but we do need to see, much like in cocoa, stronger years of yield and crop and good weather and the ability for this market to recover.”
The World Cocoa Foundation
Speaking at the start of the WCF Partnership Meeting as part of Amsterdam Cocoa Week, Brannigan turns her thoughts to the following two days of high-level discussions and the role of the WCF in the cocoa sector.
“I sit on WCF’s board of directors, where I represent The Hershey Company as a board member, and then specifically, I serve as the board treasurer and vice chair. So my role is really twofold … to help support the organisation as it advances its strategy to improve the sustainability of the cocoa sector. Then secondly, as treasurer, I have fiduciary oversight and work directly with our CFO.”
The WCF has a crucial role to play in convening actors in many different spaces
She believes it is an incredibly exciting time to be part of the organisation. “We have new talent and a new strategy. It's a difficult time in the sector, so to have an organisation that crosses the many actors in this industry globally, I think it plays a vital role.”
The WCF has a crucial role to play in convening actors in many different spaces - public, private, governmental, non-governmental areas. A large part of WCF’s role is to bring people to the table to have the difficult conversations and to try and find alignment on some of the key issues, whether that's human rights or deforestation.”
Brannigan said there is always room for improvement, especially in a set-up like the WCF, a non-profit membership organisation with more than 90 member companies and varied supply chains.
“But we also need to continue to improve …. There's a lot of good work happening across the industry. It may not be fast enough or far enough, but there's a significant amount of work that all of the members of the organisation are doing.”
She said all the partners are committed to positive action and momentum. “Convening is great, but you also then need to turn that into results and impact.”