Problems at Hershey (HSY)
Investors view Hershey (NYSE: HSY — $49.6 billion) as America’s dominant chocolate company, a safe bet with over a century of consistent growth, and a richly valued royalty on chocolatey cravings. Those days are over. Today, 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.
Launched in January 2022, Feastables sells “better for you” chocolate bars in direct competition with Hershey and gained traction in its first months by offering ten lucky chocolate bar purchasers the chance to win a “golden ticket” to compete for a chocolate factory in a MrBeast YouTube video.
MrBeast is arguably the most popular YouTube creator in history. His videos, often a mix of charitable giving and competition, consistently earn over 100 million views and are particularly popular in the roughly 10 to 18-year-old demographic. For example, the June 2022 video promoting Feastables titled, “I Built Willy Wonka’s Chocolate Factory,” where the ten “golden ticket” winners competed for the factory, has over 214 million views.
With this great marketing came rapid growth, and by the end of 2022 Feastables was stocked in every Walmart and “selling a couple hundred thousand bars a week.” By comparison, in 2022 Hershey derived about 28% of its $10.4 billion in revenue by selling to McLane Company, the primary distributor of Hershey products to Walmart.
In a January 2023 interview, MrBeast talked positively about his experience with Feastables and ambition for rapid growth:
“Feastables is something I’ve always wanted to do because American snacks are just full of so many horrible ingredients and I feel there hasn’t been any innovation in American snacks in quite a while… Feastables has just been crushing… We get a 100 million views a video so a lot of people know us… It just gets so crazy. I didn’t think we would be doing the kind of revenue we are and we are about to launch in some other, I don’t know if I’m allowed to say, other big retail locations and convenience stories. By the end of next year, we could be in 40,000 or 50,000 locations… The biggest problem has been keeping the shelves in Walmart stocked to be honest… I had to stop promoting it because every time I’d mention it 40% of people would be like ‘it’s not there.’ It’s not in Walmart. I can’t buy it… This year in 2023 we are going to 10x the number of locations we are in and we are going to try and launch new products... It’s been doing way better than I ever thought.”
This year, Feastables may be eclipsing those high expectations.
One important nuance for investors to understand is that while Hershey has customers, Feastables has fans. For example, a March 2023 tweet from MrBeast asking for help cleaning up Feastables display cases has over 144,000 likes and over 44 million views.
Many followers obliged and tweeted before and after pictures showing organized Feastables displays, often right next to Hershey’s bars and other Hershey brands like Reese’s and Mr. Goodbar.
One of The Bear Cave’s favorite satirical accounts “@greg16676935420” even spent an hour cleaning a Feastables display in a tweet that got nearly 10,000 likes. By comparison, Hershey hasn’t tweeted since October 2022 and its last tweet got only 178 likes.
Other signs of Feastables rapid growth over Hershey abound.