What changed in this filing

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Item 1A. Risk Factors

2025-02-18 compared with 2024-02-20 · 35 added, 32 removed, 177 unchanged (27% of the section changed)

15 unchanged sentences

• Natural disasters;

• Pandemics, epidemics or other outbreak of disease (such as the coronavirus disease 2019 (“COVID-19”) global pandemic);

• Pandemics, epidemics, coronavirus disease and/or other outbreak of disease;

• Climate change and severity of extreme weather;

28 unchanged sentences

Additionally, any non-compliance with legislative and regulatory requirements could negatively impact our reputation and ability to do business.

Investors, customers, advisory services, government regulators and other market participants have increasingly focused on the environmental or sustainability practices of companies, including Hershey.

Shareholders and financial institutions have increasingly evaluated a company’s ESG practices, disclosures and performance before making investments or other financial decisions.

Investors, customers, advisory services, government regulators and other market participants may be focused on the environmental or sustainability practices, disclosures and performance of companies.

We believe our sustainability practices, disclosures and performance are focused on the most material risks and opportunities to our business and support our environmental goals and continue to evolve to meet the growing needs of our stakeholders.

2 unchanged sentences

A failure to meet investor or other external stakeholder expectations or standards may adversely affect our results of operations, ability to manage our liquidity, or ability to implement our strategies.

The Company publishes its environmental goals, with a particular 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 eliminating 25 million pounds of packaging by 2030.

The costs of these voluntary commitments may be greater than expected, and there can be no assurance the Company will achieve its goals, or meet the evolving sustainability expectations and standards of our investors or other external stakeholders.

Any failure to achieve our goals, a perception of our failure to act responsibly with respect to the environment, or failure to respond to new or evolving legal and regulatory

The Company publishes its environmental goals, with a particular focus on achieving an absolute reduction in our Scope 1 and 2 GHG emissions, Forest Land and Agriculture (FLAG) emissions, and non-FLAG emissions consistent with global environmental standards.

The costs of our voluntary commitments may be greater than expected, and there can be no assurance the Company will achieve its goals, or meet the evolving sustainability expectations and standards of our investors or other external stakeholders.

Any failure to achieve our goals, a perception of our failure to act responsibly with respect to the environment, or failure to respond to new or evolving legal and regulatory requirements or other sustainability concerns could adversely affect our business, reputation and increase risk of litigation.

The Hershey Company | 2024 Form 10-K | Page 10

requirements or other sustainability concerns could adversely affect our business, reputation and increase risk of litigation.

The effects and costs of climate change, or any failure to meet related requirements and expectations, could have a negative impact on our reputation, financial condition and results of operations.

17 unchanged sentences

Although we use forward contracts and commodity futures and options contracts to hedge commodity prices where possible, commodity price increases ultimately result in corresponding increases in our raw material and energy costs.

If we are unable to offset cost increases for major raw materials and energy, there could be a negative impact on our financial condition and results of operations.

For example, our cost of sales during the year ended 2024 compared to the same period of 2023 experienced an incremental $563.0 million of favorable mark-to-market activity on our commodity derivative instruments intended to economically hedge future years’ commodity purchases, more than offsetting higher commodity costs.

During the year ended 2024, market prices for the majority of our exchange traded commodities increased, including cocoa, which has increased approximately 130% since the beginning of the year.

We continue to monitor and use our risk management strategy where possible to hedge commodity prices in order to mitigate corresponding increases in our raw materials and energy costs, however, if we are unable to offset cost increases for major raw materials and energy, there could be a negative impact on our financial condition and results of operations.

Price increases may not be sufficient to offset cost increases and maintain profitability or may result in sales volume declines associated with pricing elasticity.

1 unchanged sentence

however, higher product prices or decreased product sizes may also result in a reduction in sales volume and/or consumption.

If we are not able to increase our selling prices or reduce product sizes (including if inflation outpaces our pricing elasticity) sufficiently, or in a timely manner, to offset increased raw material, energy or other input costs, including packaging, freight, direct labor, overhead and employee benefits, or if our sales volume decreases significantly, there could be a negative impact on our financial condition and results of operations.

If we are not able to increase our selling prices or reduce product sizes (including if inflation outpaces our pricing elasticity) sufficiently, or in a timely manner, to offset increased raw material, energy or other input costs, including packaging, freight, tariffs, direct labor, overhead and employee benefits, or if our sales volume decreases significantly, there could be a negative impact on our financial condition and results of operations.

The Hershey Company | 2024 Form 10-K | Page 11

12 unchanged sentences

We must maintain mutually beneficial relationships with our key customers, including retailers and distributors, to compete effectively.

Our largest customer, McLane Company, Inc., accounted for approximately 28% of our total net sales in 2023.

Our largest customer, McLane Company, Inc., accounted for approximately 27% of our consolidated net sales in 2024.

McLane Company, Inc.

18 unchanged sentences

If the acquisitions, divestitures or joint ventures are not successfully implemented or completed, there could be a negative impact on our financial condition, results of operations and cash flows.

In 2024, we completed the acquisition of the Sour Strips brand from Actual Candy, LLC.

Sour Strips is an emerging sour candy brand.

In 2023, we completed the acquisition of certain assets that provide additional manufacturing capacity from Weaver Popcorn, a manufacturer of SkinnyPop popcorn, which helped us strengthen our supply chain capabilities.

In 2021, we successfully completed the divestiture of LSFC as we better prioritize resources against assets and brands that fit our business model and scale capabilities.

Additionally, we completed the acquisitions of Lily’s in June 2021 and Dot’s and Pretzels in December 2021.

While we believe significant operating synergies can be obtained in connection with these acquisitions, achievement of these synergies will be driven by our ability to successfully leverage Hershey’s

In addition, the acquisitions of Dot’s and Pretzels in

The Hershey Company | 2024 Form 10-K | Page 12

resources, expertise, capability-building, distribution locations and customer base.

In addition, the acquisitions of Dot’s and Pretzels are important steps in our journey to expand our breadth in snacking, as they should enable us to bring scale and category management capabilities to a key sub-segment of the warehouse snack aisle.

If we are unable to successfully couple Hershey’s scale and expertise in brand building with Lily’s, Dot’s and Pretzels’ existing operations, it may impact our ability to expand our snacking footprint at our desired pace.

2021 were important steps in our journey to expand our breadth in snacking, as they should enable us to bring scale and category management capabilities to a key sub-segment of the warehouse snack aisle.

If we are unable to successfully couple Hershey’s scale and expertise in brand building with the existing operations of our acquired brands, it may impact our ability to expand our snacking footprint at our desired pace.

Our international operations may not achieve projected growth objectives, which could adversely impact our overall business and results of operations.

11 unchanged sentences

• Potentially negative consequences from changes in tax laws;

• The imposition of tariffs, quotas, trade barriers, other trade protection measures and import or export licensing requirements;

• The imposition of tariffs on U.S.

imports and retaliatory tariffs in response, quotas, trade barriers, other trade protection measures and import or export licensing requirements;

• Increased costs, disruptions in shipping or reduced availability of freight transportation;

9 unchanged sentences

Additionally, from time to time we implement business realignment activities to support key strategic initiatives designed to maintain long-term sustainable growth, such as the International Optimization Program, which we commenced in the fourth quarter of 2020 and completed in 2023.

This program was intended to increase our operating effectiveness and efficiency, to reduce our costs and/or to generate savings that can be reinvested in other areas of our

This program was intended to increase our operating effectiveness and efficiency, to reduce our costs and/or to generate savings that can be reinvested in other areas of our business.

Additionally, in February 2024, the Board of Directors approved the Advancing Agility & Automation

The Hershey Company | 2024 Form 10-K | Page 13

Additionally, in February 2024, the Board of Directors approved the Advancing Agility & Automation Initiative, which is a multi-year productivity program to improve supply chain and manufacturing-related spend, optimize selling, general and administrative expenses, leverage new technology and business models to further simplify and automate processes, and generate long-term savings.

Initiative, which is a multi-year productivity program to improve supply chain and manufacturing-related spend, optimize selling, general and administrative expenses, leverage new technology and business models to further simplify and automate processes, and generate long-term savings.

We cannot guarantee that we will be able to successfully implement these strategic initiatives and restructuring programs, that we will achieve or sustain the intended benefits under these programs, or that the benefits, even if achieved, will be adequate to meet our long-term growth and profitability expectations, which could in turn adversely affect our business.

Risks Related to Governmental and Regulatory Changes

Changes in governmental laws and regulations could increase our costs and liabilities or impact demand for our products.

Changes in governmental laws, regulations and policies could increase our costs and liabilities or impact demand for our products.

Changes in U.S.

laws and regulations and the manner in which they are interpreted or applied may alter our business environment.

These negative impacts could result from changes in food and drug laws, laws related to advertising and marketing practices, accounting standards, taxation compliance and requirements, competition laws, employment laws, import/export requirements and environmental laws, among others.

laws, regulations and policies and the manner in which they are interpreted or applied may alter our business environment.

imports and retaliatory tariffs in response, competition laws, employment laws, import/export requirements and environmental laws, among others.

For example, the European Union’s Deforestation Regulation (“EUDR”) will require the Company to conduct extensive diligence on seven commodities, including cocoa, palm oil and soy, as well as products derived from these commodities, such as chocolate, and the value chain, to ensure the goods do not result from recent deforestation, forest degradation, or breaches of local laws in order to sell such products in the European Union market or exported from it.

The EUDR is scheduled to be effective in December 2024.

The EUDR is scheduled to be effective in December 2025, following a one-year postponement.

The EUDR, and other current or proposed regulations in markets in which we operate, are likely to increase our compliance costs, could depress sales in such markets if our products are not in compliance by applicable effective dates, and could result in fines and penalties or reputational harm if we do not fully comply.

2 unchanged sentences

Our operations are impacted by consumer spending levels and impulse purchases, which are affected by general macroeconomic conditions, consumer confidence, employment levels, the availability of consumer credit and interest rates on that credit, consumer debt levels, energy costs and other factors.

Volatility in food and energy costs, sustained global recessions, broad political instability, rising unemployment, pandemic, or other outbreak of disease (such as COVID-19), climate change, weather, natural and other disasters and declines in personal spending could adversely impact our revenues, profitability and financial condition.

Volatility in food and energy costs, sustained global recessions, broad political instability, rising unemployment, pandemic, or other outbreak of disease, climate change, weather, natural and other disasters, changing consumer demand, and declines in personal spending could adversely impact our revenues, profitability and financial condition.

Changes in financial market conditions may make it difficult to access credit markets on commercially acceptable terms, which may reduce liquidity or increase borrowing costs for our Company, our customers and our suppliers.

26 unchanged sentences

Despite continued vigilance in these areas, disruptions in or failures of information technology systems are possible and could have a negative impact on our operations or business reputation.

For instance, in September 2023, we experienced a smishing breach, which did not have an impact on our consolidated financial statements.

Promptly after extracting the threat actor, we worked with a cyber expert firm and determined that certain employee and third-party personal information was exposed.

Failure of our systems, including failures due to cyber attacks, ransomware or other security breaches that would prevent the ability of systems to function as intended, could cause transaction errors, loss of customers and sales, and could have negative consequences to our Company, our employees and those with whom we do business.

4 unchanged sentences

We are in the process of a multi-year implementation of a new global enterprise resource planning (“ERP”) system;

This ERP system will replace our existing operating and financial systems.

The ERP system is designed to accurately maintain the Company’s financial records, enhance operational functionality and provide timely information to the Company’s management team related to the operation of the business.

The ERP system implementation process has required, and will continue to require, the investment of significant personnel and financial resources.

We may not be able to successfully implement the ERP system without experiencing further delays, increased costs and other difficulties.

If we are unable to successfully design and implement the new ERP system as planned, our financial positions, results of operations and cash flows could be negatively impacted.

Additionally, if we do not effectively implement the ERP system as planned or the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess those controls adequately could be further delayed.

specifically, in April 2024, we operationalized the final phase of our project by implementing our new ERP system in the North America Confectionery segment and select business units included in our International segment.

This ERP system replaces our legacy operating and financial systems and is designed to accurately maintain the Company’s financial records, enhance operational functionality and provide timely information to the Company’s management team related to the operation of the business.

The ERP system implementation process has required, and will continue to require, the investment of significant personnel and financial resources as we support post-implementation efforts and system functionality.

We may not be able to successfully support post-implementation efforts without experiencing delays, increased costs and other difficulties.

Any disruptions or difficulties in using our ERP system could result in harm to our business, including our ability to forecast, manufacture or facilitate the shipment of our product, record net sales and collect our outstanding receivables.

If we are unable to successfully manage post-implementation efforts related to our new ERP system as planned, our financial positions, results of operations and cash flows could be negatively impacted.

Additionally, if the ERP system does not operate as intended, the

The Hershey Company | 2024 Form 10-K | Page 15

effectiveness of our internal control over financial reporting could be adversely affected or our ability to assess those controls adequately could be further delayed.

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 1A. Risk Factors