What changed in this filing

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Item 1. Business

2023-02-17 compared with 2022-02-18 · 39 added, 41 removed, 158 unchanged (34% of the section changed)

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Reportable Segments

Since December 31, 2014, the Company has reported its operations through two segments:

(i) North America and (ii) International and Other.

After the completion of the Company’s acquisitions of Dot’s Pretzels, LLC (“Dot’s”) and Pretzels Inc.

(“Pretzels”) in December 2021, as described in Note 2 to the Consolidated Financial Statements, management of the Company has elected to begin reporting its operations through three reportable segments.

Therefore, effective in the fourth quarter of 2021, the Company realigned its former two reportable segments into three reportable segments:

The Company reports its operations through three segments:

(i) North America Confectionery, (ii) North America Salty Snacks and (iii) International.

This new organizational structure aligns with how our Chief Operating Decision Maker (“CODM”) manages our business, including resource allocation and performance assessment, and further aligns with our product categories and the key markets we serve.

We have retroactively reflected these changes in all historical periods presented.

This organizational structure aligns with how our Chief Operating Decision Maker (“CODM”) manages our business, including resource allocation and performance assessment, and further aligns with our product categories and the key markets we serve.

• North America Confectionery – This segment is responsible for our traditional chocolate and non-chocolate confectionery market position in the United States and Canada.

This includes chocolate and non-chocolate confectionery, gum and refreshment products, protein bars, spreads, snack bites and mixes, as well as pantry and food service lines.

This includes our business in chocolate and non-chocolate confectionery, gum and refreshment products, protein bars, spreads, snack bites and mixes, as well as pantry and food service lines.

This segment also includes our retail operations, including Hershey’s Chocolate World stores in Hershey, Pennsylvania;

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We currently have operations and manufacture product in Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute and sell confectionery products in export markets of Asia, Latin America, Middle East, Europe, Africa and other regions.

Financial and other information regarding our reportable segments is provided in our Management’s Discussion and Analysis and Note 13 to the Consolidated Financial Statements.

Financial and other information regarding our segments is provided in our Management’s Discussion and Analysis and Note 13 to the Consolidated Financial Statements.

Business Acquisitions and Divestitures

In December 2021, we completed the acquisition of Pretzels, previously a privately held company that manufactures and sells pretzels and other salty snacks for other branded products and private labels in the United States.

In December 2021, we completed the acquisition of Pretzels Inc.

(“Pretzels”), previously a privately held company that manufactures and sells pretzels and other salty snacks for other branded products and private labels in the United States.

Pretzels is an industry leader in the pretzel category with a product portfolio that includes filled, gluten free and seasoned pretzels, as well as extruded snacks that complements Hershey’s snacks portfolio.

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Pretzels provides Hershey deep pretzel category and product expertise and the manufacturing capabilities to support brand growth and future pretzel innovation.

Additionally, we completed the acquisition of Dot’s, previously a privately held company that produces and sells pretzels and other snack food products to retailers and distributors in the United States, with Dot’s Homestyle Pretzels snacks as its primary product.

Additionally in December 2021, we completed the acquisition of Dot’s Pretzels, LLC (“Dot’s”), previously a privately held company that produces and sells pretzels and other snack food products to retailers and distributors in the United States, with Dot’s Homestyle Pretzels snacks as its primary product.

Dot’s is the fastest-growing scale brand in the pretzel category and complements Hershey’s snacks portfolio.

Pretzels and Dot’s are expected to generate aggregate annualized net sales over $300 million.

The Hershey Company | 2021 Form 10-K | Page 2

In June 2021, we completed the acquisition of Lily’s Sweets, LLC (“Lily’s”), previously a privately held company that sells a line of sugar-free and low-sugar confectionery foods to retailers and distributors in the United States and Canada.

Lily’s products include dark and milk chocolate style bars, baking chips, peanut butter cups and other confection products that complement Hershey’s confectionery and confectionery-based portfolio.

Lily’s is expected to generate annualized net sales over $100 million.

The Hershey Company | 2022 Form 10-K | Page 2

In January 2021, we completed the divestiture of Lotte Shanghai Foods Co., Ltd.

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(“Krave”), which was previously included within the North America Salty Snacks segment, and the Scharffen Berger and Dagoba brands, both of which were previously included within the North America Confectionery segment results in our consolidated financial statements.

In September 2019, we completed the acquisition of ONE Brands, LLC (“ONE Brands”), previously a privately held company that sells a line of low-sugar, high-protein nutrition bars to retailers and distributors in the United States, with the ONE bar as its primary product.

Total proceeds from the divestitures and the impact on our Consolidated Statements of Income, both individually and on an aggregate basis, were immaterial.

Products and Brands

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We utilize a variety of promotional programs directed towards our customers, as well as advertising and promotional programs for consumers of our products, to stimulate sales of certain products at various times throughout the year.

The Hershey Company | 2021 Form 10-K | Page 3

In conjunction with our sales and marketing efforts, our efficient product distribution network helps us maintain sales growth and provide superior customer service by facilitating the shipment of our products from our manufacturing plants to strategically located distribution centers.

We primarily use common carriers to deliver our products from these distribution points to our customers.

The Hershey Company | 2022 Form 10-K | Page 3

Raw Materials and Pricing

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In addition, promotional allowances may be increased subsequent to the effective date, delaying or partially offsetting the impact of price increases on net sales.

Many of our confectionery brands enjoy wide consumer acceptance and are among the leading brands sold in the marketplace in North America and certain international markets.

Many of our confectionery and salty snack brands enjoy wide consumer acceptance and are among the leading brands sold in the marketplace in North America and certain international markets.

We sell our brands in highly competitive markets with many other global multinational, national, regional and local firms.

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We have also experienced increased competition from other snack items, and through innovation and acquisitions, we are continuing to expand the boundaries of our brands to capture new snacking occasions.

The Hershey Company | 2021 Form 10-K | Page 4

Working Capital, Seasonality and Backlog

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Additional information relating to our cash flows from operations and working capital practices is provided in our Management’s Discussion and Analysis.

The Hershey Company | 2022 Form 10-K | Page 4

Trademarks, Service Marks and License Agreements

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The trademarks covering our key product brands are of material importance to our business.

Depending on the country, trademarks remain valid for as long as they are in use or their registration status is maintained.

Trademark registrations generally are renewable for fixed terms.

We follow a practice of seeking trademark protection in the United States and other key international markets where our products are sold.

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The manufacture and sale of consumer food products is highly regulated.

In the United States, our activities are subject to regulation by various government agencies, including the Food and Drug Administration, the Department of Agriculture, the Federal Trade Commission, the Department of Commerce and the Environmental Protection Agency, as well as various state and local agencies.

Similar agencies also regulate our businesses outside of the United States.

In the U.S., our activities are subject to regulation by various government agencies, including the Food and Drug Administration, the Department of Agriculture, the Federal Trade Commission, the Department of Commerce and the Environmental Protection Agency, as well as various state and local agencies.

Similar agencies also regulate our businesses outside of the U.S.

We believe our Product Excellence Program provides us with an effective product quality and safety program.

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Through our Product Excellence Program, we evaluate our supply chain including ingredients, packaging, processes, products, distribution and the environment to determine where product quality and safety controls are necessary.

The Hershey Company | 2021 Form 10-K | Page 5

identify risks and establish controls intended to ensure product quality and safety.

We identify risks and establish controls intended to ensure product quality and safety.

Various government agencies and third-party firms, as well as our quality assurance staff, conduct audits of all facilities that manufacture our products to assure effectiveness and compliance with our program and applicable laws and regulations.

The Hershey Company | 2022 Form 10-K | Page 5

Environmental Considerations

Beyond ordinary course operating and capital expenditures we make to comply with government regulations, including environmental laws and regulations, we have made a number of voluntary commitments to protect and reduce our environmental impacts in recent years, including efforts to eliminate deforestation and reduce greenhouse gas (“GHG”) emissions across our supply chain.

Our climate change related investments and expenditures primarily focus on achieving a 50% absolute reduction in our Scope 1 and 2 GHG emissions and a 25% absolute reduction in our Scope 3 GHG emissions by 2030 (compared to a 2018 baseline), as well as having 100% of plastic packaging be reusable, recyclable or compostable and 25 million pounds of packaging be eliminated by 2030.

Beyond ordinary operating and capital expenditures that we make to comply with government regulations, including environmental laws and regulations, we have made a number of voluntary commitments to protect and reduce our environmental impacts in recent years, including efforts to eliminate commodity-driven deforestation and reduce greenhouse gas (“GHG”) emissions across our own operations and supply chain.

Our climate change related investments and expenditures primarily focus on achieving a 50% absolute reduction in our Scope 1 and 2 GHG emissions and a 25% absolute reduction in our Scope 3 GHG emissions by 2030 (compared to a 2018 baseline), as well as having 100% of plastic packaging be recyclable, reusable or compostable and 25 million pounds of packaging be eliminated by 2030.

The annual operating and capital expenditures associated with these ordinary course payments and additional climate change commitments are not material with respect to our results of operations, capital expenditures or competitive position.

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our Shared Goodness Promise, which guides how we empower the remarkable people who make and sell our brands, interact with farming communities that grow our ingredients, deliver on our commitments to consumers, customers, and external stakeholders, protect the environment and support children and youth.

To learn more about our sustainability goals, progress and initiatives, as well as review our annual ESG Report (formerly known as our Sustainability Report) and accompanying suite of ESG reporting frameworks, policies, and disclosures, access the Sustainability section of our website at:

To learn more about our ESG-related goals, progress and initiatives, as well as review our annual ESG Report and accompanying suite of ESG reporting frameworks, policies, and disclosures, access the Sustainability section of our website at:

https://www.thehersheycompany.com/en_us/sustainability.html .

Information found on the Company’s website is not part of this Annual Report on Form 10-K or any other report filed with the United States Securities and Exchange Commission (“SEC”).

Financial Information by Geographic Area

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Collective bargaining agreements covered approximately 6,470 employees, or approximately 33% of the Company’s employees worldwide.

During 2022, agreements are expected to be negotiated for certain employees at four facilities outside of the United States, comprising approximately 62% of total employees under collective bargaining agreements.

During 2023, agreements are expected to be negotiated for certain employees at five facilities, four of which are outside of the United States, comprising approximately 67% of total employees under collective bargaining agreements.

We believe our efforts in managing our workforce have been effective, as evidenced by a strong culture and a good relationship between the Company and our employees.

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We continue to invest in training, workplace resources and leading systems and processes to ensure the responsible management of all facilities.

Additionally, in 2021, we changed our global employee survey from an annual basis to continuous listening surveys throughout the year.

These shorter and faster surveys reach all of our

Additionally, continuous listening surveys are distributed throughout the year to all employees globally.

These short and fast surveys reach all of our employees around the world to hear their thoughts on the Company’s direction and their place in it.

These continuous touchpoints allow for real-time feedback and action from the Company.

These surveys are further supplemented with quarterly and

The Hershey Company | 2022 Form 10-K | Page 6

employees around the world to hear their thoughts on the Company’s direction and their place in it.

The change from an annual survey to continuous touchpoints allows for real-time feedback and action from the Company.

These surveys are further supplemented with quarterly and informative enterprise and team town halls, which, in conjunction with the continuous listening surveys, generate stronger employee engagement with the Company’s strategy, initiatives and leadership.

informative enterprise and team town halls, which, in conjunction with the continuous listening surveys, generate stronger employee engagement with the Company’s strategy, initiatives and leadership.

Further, in June 2022, the Company conducted its first annual Ethics and Compliance Survey to assess employees’ perception of the health of ethics and compliance at Hershey.

• Talent Acquisition, Development and Training .

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Additionally, we have co-created a culture of development with the enthusiastic support of our employees.

Through individual development plans, learning opportunities, feedback and coaching, employees can build careers at The Hershey Company, as evidenced by the fact that the majority of our eight executive officers were promoted from within the organization (see Information a bout Our Executive Officers ).

• Compensation, Benefits and Wellness .

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We believe that this flexibility improves productivity, job satisfaction and increases employee engagement.

Additionally, in 2021, we introduced the “Best of Both” flexible work model for corporate and commercial employees to balance work and personal well-being.

Additionally, the Company offers a “Best of Both” flexible work model for corporate and commercial employees to balance work and personal well-being.

This model allows employees the option to work either remote, in-office, or both, depending on individual needs, personal schedules and work demands.

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• Diversity, Equity and Inclusion .

Our diverse and inclusive culture makes the difference across all areas of the business.

Our gender representation includes women occupying many of the top positions in the Company, including Chief Executive Officer and Chairman of the Board, Chief Accounting Officer and Chief Growth Officer, and approximately 50% representation across the Company.

In 2020, we achieved 1:1 aggregate gender pay and in 2021, we achieved 1:1 aggregate people of color pay equity for salaried employees in the United States.

Additionally, five of our 12 Board members are women (42% representation, an increase of 6% compared to 2020).

Additionally, we create a welcoming and inclusive work environment for all employees around the world.

Our eight employee-led Business Resource Groups, which include Abilities First, African American, Asian, GenH (Generations), Latino, Prism (LGBTQ), Veteran’s and Women’s, play a critical role in attracting diverse talent, providing mentoring and career development opportunities, delivering commercial business insights and connecting people to the Company and the communities where we do business.

In 2021, the Company was ranked #10 on DiversityInc’s Top 50 Companies for Diversity and was ranked #1 on Forbes Top Female Friendly Companies.

Our diverse and inclusive culture makes the difference across all areas of the business around the world.

Our gender representation includes women occupying many of the top positions in the Company, including Chief Executive Officer and Chairman of the Board, Chief Accounting Officer and President, Salty Snacks, and approximately 50% representation across the Company.

Additionally, five of our 12 Board members are women (42% representation).

In 2022, we maintained fair and equitable pay achievements, including 1:1 aggregate people of color pay equity for salaried employees in the United States (2021) and 1:1 aggregate gender pay (2020).

Further, our eight employee-led Business Resource Groups, which include Abilities First, African American, Asian, GenH (Generations), Latino, Prism (LGBTQ), Veteran’s and Women’s, play a critical role in attracting diverse talent, providing mentoring and career development opportunities, delivering commercial business insights and connecting people to the Company and the communities where we do business.

In 2022, the Company was ranked #6 on DiversityInc’s Top 50 Companies for Diversity and was ranked as a top 50 company on Forbes Top Female Friendly Companies.

Additionally, the Company also ranked as a top 30 company on Wall Street Journal’s Top 250 Best-Managed Companies of 2022.

• Community and Social Impact .

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The Company's website address is www.thehersheycompany.com .

We file or furnish annual, quarterly and current reports, proxy statements and other information with the United States Securities and Exchange Commission (“SEC”).

We file or furnish annual, quarterly and current reports, proxy statements and other information, including amendments to these reports, with the SEC.

You may obtain a copy of any of these reports, free of charge, from the Investors section of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business