Snackers are feeling salty, leaving chocolate sales melting

The candy maker unwrapped second-quarter earnings on Thursday that revealed consumers are putting off purchasing chocolate and are instead reaching for savory snacks.

That prompted Hershey’s to slash its full-year outlook for the first time in seven years. The company expects its annual profit to be down between 1% and 3%. Still, shares of Hershey were up slightly in early trading hours.

“Today’s operating environment remains dynamic with consumers pulling back on discretionary spending,” said Michele Buck, Hershey’s chief executive officer, in a statement. “Our business has been impacted by these trends, but we are pleased to see continued growth in the confection category and momentum building in our Salty Snacks portfolio.”

Hershey’s profit margins may also be suffering because of surging cocoa prices that have been driven by poor crop conditions in key regions around the world, such as western and central Africa. The lingering effects of high cocoa prices mixed with sugar inflation are likely to “more than offset net price realization and supply chain productivity,” Hershey’s chief financial officer Steven E. Voskuil told investors during the earnings call.

At a time when consumers are spending a little more on home goods and kitchen essentials, confectionary purchases are taking a hit.

In North America, confectionery sales slid 21% year-over-year, in part due to a planned reduction in inventory levels to match a decline in demand. Meanwhile, salty snacks sales in the U.S. increased 6.4% as consumers opted to buy SkinnyPop popcorn and Dot’s Homestyle Pretzels, which recently launched a parmesan garlic pretzel. International sales fell 8.9% compared to the same period a year ago.

Hershey’s Buck said the chocolate giant is “well-positioned to meet the changing needs of consumers,” and that it is “confident” it will be able to grow its business and manage profitability over time.