Hershey CEO Flags C-Store Softness as Q3 Net Sales Rise 3%

Hershey grew net sales 3% in the third quarter, which ended Sept. 27, but its CEO singled out convenience stores as the one retail channel where sales turned soft.

President and CEO Kirk Tanner told analysts on Friday's earnings call that U.S. sales in the candy, gum and mint category — a segment that includes several Hershey brands — declined nearly 5% in September. "As September progressed, we saw consumers become more deliberate about spending, particularly in channels most exposed to higher gas prices like convenience stores," Tanner said.

He added that consumer caution carried into October, "though our categories are holding up comparatively well." During the Q&A portion of the call, Tanner identified c-stores as an outlier among the retail channels where Hershey sells.

Where is the shopper going instead?

Dave Hulays, senior vice president and chief financial officer, said shoppers who pulled back at c-stores were spending more at mass-market retailers and online. He framed the problem as fixable within Hershey's own toolkit rather than a structural decline in candy demand.

"When we do step back, we see it as more of a channel and trip problem, not as much a category issue, and so we're focused on value levers: innovation, price pack architecture, surgical promotion," Hulays said.

That diagnosis matches industry data. NACS, the association for convenience retail, reported that total in-store transactions during the first half of this year fell 4.5% year over year. "It's not pretty," Chris Rapanick, managing director of NACS Research, said during a presentation at the association's annual conference last month.

What could change in the coming months?

Two indicators point toward possible relief for the channel. Consumer confidence rose in October, and fuel prices have come down from a month ago. Because Tanner tied the c-store slowdown directly to gas prices, cheaper fuel could ease the pressure on trips to those stores.

Hershey itself remains constructive on the channel despite the dip. "I really think the category is in a decent place with all these consumer headwinds," Tanner said on the call. "Obviously, we expected the c-store business to soften a little bit with gas prices, but we still see a robust category."

For marketers selling impulse categories, the signal is direct: the demand has not disappeared, it has moved. Shoppers are consolidating trips into mass and online, which means convenience-store promotions, pack sizes and innovation need to work harder to recover the transaction volume the channel lost in the first half.