Hershey & Shaquille O'Neal Team Up on New Candy Launch

Hershey & Shaq: A New Partnership & Navigating the Candy Market

Key Concepts:

• Cocoa Price Volatility: Fluctuations in cocoa prices impacting candy manufacturing costs.
• Gummy Candy Expansion: Hershey’s strategic move to diversify into the gummy candy market.
• IP-Based Partnerships: Collaborations leveraging intellectual property (like celebrity branding) for product development.
• GLP-1 Medications: Weight loss drugs and their potential impact on confectionary consumption.
• Portfolio Diversification: Expanding beyond core chocolate products into salty snacks and other categories.
• Natural Dyes: Transitioning away from artificial coloring in candy production.
• Consumer-Led Innovation: Developing products based on consumer preferences and trends.

I. Market Context & Hershey’s Challenges

The conversation begins by acknowledging a “bittersweet year” for chocolate makers. While cocoa prices are stabilizing, they remain near record highs, creating cost pressures. This situation is opening opportunities for alternative sweets, specifically gummies, to gain market share. Hershey is actively responding to these challenges, seeking new avenues for growth and diversification. Data wasn’t explicitly stated, but the implication is that rising cocoa costs are a significant concern for profitability.

II. The Hershey-Shaquille O’Neal Partnership: “Shaq Alicia’s Slam”

Hershey’s new CEO, Kirk Tanner, highlights the strategic rationale behind the partnership with Shaquille O’Neal. This represents a first for Hershey, entering an “IP-based partnership” with a major celebrity. Tanner emphasizes the goal of “connecting with culture” and “co-creation,” noting O’Neal’s active involvement in the R&D process. The resulting product, “Shaq Alicia’s Slam,” is a gummy candy featuring “three crunchy gummy balls in the sour mango ring” designed for mix-and-match customization. O’Neal describes himself as the “ambassador of fun” and sees the partnership as a natural extension of his brand. He specifically recalls a childhood preference for gummy bears (referred to as “gummy bear” in his experience in Germany) as the impetus for focusing on gummies.

III. Strategic Shift Towards Gummies & Portfolio Management

The discussion pivots to Hershey’s broader strategy regarding gummies. Shaq’s existing gummy line includes Excel Gummies, Excel Sours, and sneaker-shaped gummies, with “Slams” being the latest addition. When asked why gummies over chocolate, O’Neal recounts a personal anecdote about his childhood fondness for gummy bears. Tanner confirms that gummies fit into the “sweets” subcategory, which is experiencing growth. He stresses the importance of a diversified portfolio, stating, “This is the right place for us to grow our portfolio.” He emphasizes that this partnership aligns with a strategy of connecting with culture and delivering a playful experience for consumers. Hershey also has a “salty portfolio” including Scott’s Pretzels, Pirate’s Booty, and Lesser Evil, further demonstrating diversification.

IV. Long-Term Business Partnerships & Brand Loyalty

Shaquille O’Neal reflects on his 30-year partnership with Pepsi, attributing its longevity to “relationships” rather than solely financial gain. He emphasizes the importance of “doing something that’s different and that’s fun.” He expresses confidence in Kirk Tanner’s leadership, drawing parallels to their successful collaboration at Pepsi. O’Neal states, “Kirk Turner is the right man for the job…he’s going to take it to the championship level.”

V. Addressing the Impact of GLP-1 Medications

The conversation addresses the potential impact of GLP-1 medications (like Ozempic and Wegovy) on the confectionery industry. Tanner acknowledges the trend and states Hershey is “studying the insights behind GLP one and the behaviors of consumers.” However, he remains optimistic, describing the confectionary category as “resilient” and driven by “occasions” – celebrations, rewards, social connection, and playfulness. He highlights strategies to mitigate potential risks, including portion control options, expansion into permissible salty snacks, and the development of a protein business through the “fulfill” platform. He reiterates that Hershey’s approach is always “through the lens of the consumer.” Shaq adds a personal perspective, advising individuals to consult with a doctor before using GLP-1 medications.

VI. Innovation & Natural Dyes

Tanner discusses Hershey’s commitment to removing artificial colors by 2027, driven by consumer demand for less processed ingredients. He acknowledges ongoing R&D challenges to maintain product quality and visual appeal. He states, “We do everything through the lens of the consumer.”

VII. Future Growth & Investor Confidence

Tanner expresses confidence in Hershey’s long-term growth potential, citing a “robust portfolio,” a “pipeline of innovation,” and “executional excellence” with retail partners. He believes these factors will enable Hershey to “out market and out execute our competition.” Shaq reinforces this sentiment, praising Tanner’s leadership and predicting continued success.

Notable Quotes:

• Kirk Tanner: “Bringing great brands to life and creating great moments and brands through a partnership like the one that we have with Shaquille was the genius behind this.”
• Shaquille O’Neal: “I’ve always, you know, consider myself the ambassador of fun.”
• Shaquille O’Neal: “Hershey’s is the Shaquille O’Neal of our candy business.”
• Kirk Tanner: “This is a sustainable long term growth company.”
• Shaquille O’Neal: “Kirk Turner is the right man for the job…he’s going to take it to the championship level.”

Conclusion:

Hershey is proactively addressing challenges in the confectionery market, particularly rising cocoa prices and the potential impact of GLP-1 medications. The partnership with Shaquille O’Neal represents a strategic move to diversify into the growing gummy candy segment and connect with a broader consumer base. The company is focused on portfolio diversification, consumer-led innovation, and maintaining its core chocolate business while exploring new growth opportunities. Leadership expresses strong confidence in Hershey’s long-term sustainability and ability to deliver value to investors.