More Problems at Hershey (HSY)
In July 2023, The Bear Cave published on problems at Hershey (NYSE: HSY — $40.4 billion) in what was the most mocked article in The Bear Cave’s history. The Bear Cave wrote, in part,
“Hershey faces rapidly growing competition from one of the world’s youngest, most talented, and most influential entrepreneurs: 25-year-old YouTube star Jimmy Donaldson, AKA MrBeast. His new chocolate brand, Feastables, has waged an all-out war against Hershey in retail and on social media — and is winning. The Bear Cave believes Feastables rapid growth will soon take a major bite out of Hershey’s profits.”
The blowback was swift.
On Twitter, multiple accounts began spreading memes, ridicule, and insults. One prominent account asked,
“How do I short The Bear Cave?”
Other commentators wrote, “You are not a serious person,” “brainwashed,” and “complete garbage.” Another reader said, “I like your takes the majority of the time, but this one ain’t it.”
MrBeast himself even responded and tweeted,
“I wouldn’t recommend shorting a company, seems lame. But I will say these next few years between Feastables and Hershey’s will be interesting once I actually ramp up.”
Since then, Hershey stock has fallen ~20% and The Bear Cave is more confident than ever that Feastables is taking share from Hershey. In short, Hershey is a melting giant. Let’s explore.
Hershey does roughly $11 billion in annual revenue, of which about $9 billion is from its North America Confectionery segment. Within North America Confectionery, Hershey owns brands such as Almond Joy, Payday, and Mr. Goodbar, and the strong majority of the company’s sales comes from its flagship brands Hershey’s and Reese’s, brands that Feastables is best positioned to compete against.
Although Feastables does not publicly disclose financials, news reporting and interviews from MrBeast can provide some insight into the company’s rapid growth.
For example, in May 2022, four months after Feastables January 2022 launch, Business Insider reported that “[Feastables] has made over $10 million in sales since its launch,” a rate equivalent to ~$30 million per year.
More recently, at the September 2023 All-In Podcast Summit, MrBeast talked about the growth of Feastables. Host David Sacks asked,
“How big is [Feastables] for you?” (16:46)
MrBeast replied,
“This is our second year. We will do a couple hundred million.” (16:50)
Mr. Sacks continued,
“The chocolate bars will do $200 million?” (17:05)
MrBeast replied,
“We aren’t really public about it, but it will do a lot of revenue.” (17:09)
Later in the interview, MrBeast also hinted at launching a direct Reese’s competitor and said, in part,
“The simplest thing is doing milk chocolate and then going down and maximizing chocolate, doing Reese’s cups and that kind of stuff. Past chocolate, I haven’t really thought about it because that’s basically all I’m thinking about for next year.” (19:14)
And when asked if Feastables could be a “billion-dollar revenue business,” MrBeast replied,
“Yeah, of course, look at Hershey…” (19:32)
Last month, MrBeast was profiled on the cover of Time magazine, which also covered the growth of Feastables. The profile said, in part,
“His sway has grown such that in 2022 he launched a line of snacks, Feastables, that by 2023 was in multiple countries and will have, according to him, $500 million in annual revenue this year.”
The profile continues:
“[MrBeast is] happy to talk about how much revenue he brings in: about $600 million to $700 million a year… Feastables brought in about 70% of MrBeast’s revenue.”
And although the exact numbers may be fuzzy, it’s clear Feastables has grown sales rapidly from $0 in January 2022 to ~$30 million per year in May 2022, to “a couple hundred million” in September 2023, to ~$400 to $500 million per year today.
Feastables is showing no signs of stopping in its quest to fight Hershey. In January, Feastables hired Amanda Jones as Vice President of Sales. Ms. Jones previously served as General Manager for Global Walmart Sales at Hershey, where she worked for nearly a decade according to her LinkedIn. And in October 2023, Feastables also hired Alex Zigliara as its new CEO. Mr. Zigliara previously served as CEO at Clif Bar for Mondelez and before that was an executive in various positions at Coca-Cola for 17 years, including as Vice President of Coca-Cola’s U.S. Walmart business.
Five weeks ago, MrBeast announced Feastables revamped its chocolate packaging and formula and now has “the best tasting chocolate” across seven different varieties: Milk Chocolate, Peanut Butter, Milk Crunch, Peanut Butter Crunch, Almond, Dark Chocolate, and Dark Chocolate Sea Salt. The announcement video, which has been viewed 15 million times on Twitter and 21 million times on YouTube, repeatedly takes aim at Hershey with lines including:
“[Feastables] tastes better than a Hershey’s bar” (0:02)
“Doesn’t everything taste better than Hershey’s?” (0:20)
“Doesn’t anything on the planet taste better than a Hershey’s bar?” (0:25)
“If everything tastes better than Hershey’s, then what makes us special?” (0:38)
“What’s better than being better than Hershey’s?” (0:56)
“It’s not Hershey, Hershey is not that good” (2:30)
“Better than Hershey’s flat out” (2:32)
“This might bankrupt Hershey’s” (2:35)
In an informal interview with Deal or No Deal host Howie Mandel, published two days ago, Mr. Mandel visited a Feastables office and remarked, in part,
“And I noticed on the walls over there, these are the competitors right?”
MrBeast replied,
“Yah, we just have a list of Hershey’s top 100 SKUs and M&M’s [Mars] top 100 SKUs because I was just studying it… Hershey’s has over 70 SKUs that do over $10 million per year in revenue. They are pretty big.” (9:38)
MrBeast’s distaste for Hershey extends to his widely watched YouTube channel as well. For example, in an adventure themed MrBeast video titled “World’s Most Dangerous Trap” a contestant needs to go through ten increasingly difficult stages, winning an additional $100,000 for each completed stage.
The sixth stage was a room titled “Hurshey’s Sucks” with Hershey’s intentionally misspelled as “Hurshey’s.” The only challenge in that stage was to throw a Hershey’s bar in a trash can to win $100,000.
That video has been viewed over 215 million times.
Other MrBeast content prominently highlights his Feastables offerings. In just the last month, three MrBeast videos — “Stop This Train, Win a Lamborghini,” “I Survived 7 Days In An Abandoned City,” and “Face Your Biggest Fear To Win $800,000” — had prominent promotion of Feastables. Those videos have earned nearly 400 million views so far.
In “Face Your Biggest Fear To Win $800,000” MrBeast tells 170 million+ viewers:
“What you grabbed is our brand new Feastables bar. We’ve got all new branding and a better tasting formula... These new and improved Feastables bars are rolling out now. Give us a couple of days to get them on the shelves of your local Walmart, Target, or 7-Eleven, and I cannot wait to see what you think of them.”
Despite hundreds of millions in sales, nationwide distribution, and an experienced executive team, Feastables is still regularly selling out. On March 13, MrBeast tweeted,
“Feastables is basically sold out at the moment (around 20% of stores still have some) I’m doing everything I can to get some more chocolate factories up and running! Sorry for not being able to buy it right now.”
MrBeast added,
“Fun fact, the stores on the border sold out first. People would buy every bar in every Walmart/Target in a city and then drive into Mexico or Canada and resell them. Once I catch up to USA demand I’ll prioritize launching Mexico/Canada so they stop draining stores here.”
When is the last time someone drove across a border for a Hershey’s product?
Feastables has fans, while Hershey only has customers.
For example, one developer made a Feastables-infused minigame in Fortnite, over 26 million people watched a MrBeast video showing commercials other people made for Feastables, and one YouTuber visited Walmart and cleaned up the Feastables display. Over 7 million people liked a promotional video of MrBeast giving $10,000 to someone buying Feastables, some kids save the wrappers of Feastables, and even Kim Kardashian was recently photographed holding Feastables.
In sum, MrBeast’s reach and depth of audience is unrivaled. According to Time, MrBeast “estimates he appears on a screen somewhere in the world about 30 billion times a year” and, at the end of 2023, MrBeast’s various social media accounts had around 550 million total followers, up nearly double from 2022.
Hershey’s path forward is less clear. For the twelve months ending December 2023, Hershey disclosed a roughly 2% volume decline for its North America Confectionery segment, offset by price increases of ~9%, driving ~7% total sales growth. In the fourth quarter, volume declines for Hershey’s North America Confectionery segment were roughly 5%. In Hershey’s February 2024 press release for its Q4 results, Hershey said the volume declines in North America Confectionery were “related to price elasticity in everyday candy.”
So far, no analysts have publicly questioned Hershey management about competition from Feastables.
As for MrBeast, in October he became the first YouTuber to pass 200 million subscribers and tweeted, in part,
“This is just the beginning, I still have decades left in the tank.”
Caveat emptor.
Because of our strong belief in this article, The Bear Cave is offering to do complimentary phone calls with any paid readers interested in this story. If you’d like to have an up to 30-minute phone call to discuss anything in this article, please hit reply or email edwin@585research.com to set up a time! Thank you for your support.
This article is not investment advice and represents the opinions of its author, Edwin Dorsey. You can reach the author by email at edwin@585research.com or on Twitter @StockJabber. This article is for paid subscribers of The Bear Cave newsletter. If this article was forwarded to you, please consider becoming a paid subscriber to receive articles like this twice every month. Learn more here.