Good morning, everyone. Thank you for joining us today for The Hershey Company's third quarter 2025 earnings Q&A session. I hope everyone has had the chance to read our press release and listen to our prerecorded management remarks, both of which are available on our website. In addition, we have posted a transcript of the prerecorded remarks. At the conclusion of today's live Q&A session, we will also post a transcript and audio replay of this call. Please note that during today's Q&A session, we may make forward-looking statements that are subject to various risks and uncertainties. These statements include expectations and assumptions regarding the company's future operations and financial performance. Actual results could differ materially from those projected. The company undertakes no obligation to update these statements based on subsequent events. A detailed listing of such risks and uncertainties can be found in today's press release and the company's SEC filings. Finally, please note that we may refer to certain non-GAAP financial measures that we believe provide useful information for investors. This information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations for the GAAP results are included in this morning's press release. Joining me today are Hershey's President and CEO, Kirk Tanner; and Hershey's Senior Vice President and CFO, Steve Voskuil. With that, we'll open it for the first question.

Maybe to start off, I'd love to dig in a little bit deeper on your commentary around 2026. The company is looking for a non-algorithm top and bottom line year. This is consistent with the commentary you provided last quarter. Since then, cocoa costs have moderated significantly, even though Hershey still looks for year-over-year inflation. The company slightly lowered its tariff estimate and base momentum certainly appears to be continuing, if not accelerating. I think in the prepared remarks, you made mention of sort of earnings recovery over time. And in fairness, you still need to see what elasticity looks like as the pricing flows through. So I guess I'm just curious how you sort of balance these various factors as you think through how next year could shape up because as you know, there are some expectations out there for maybe much more significant year-over-year EPS growth next year.

Thank you, Andrew. I believe it's crucial to begin the morning with this topic. As I reflect on 2026, I'm pleased with the balanced growth we've achieved across our portfolio. This momentum gives me confidence as we approach 2026. It's essential to define what success means for us in that year. For me, it involves examining the category's performance and ensuring we grow with or ahead of it while restoring our margins to their full potential. This won't happen in just one year, but over a few years. Our primary focus is on both growth and excelling at the category level as we work to rebuild margins. This strategy aligns us with our long-term revenue expectations, which we project to be between 2% and 4%. This estimate reflects our view on the category's direction. Historically, the Easter category has hovered around a 2% top line growth rate. In terms of earnings per share, I see potential for some upside, but we will approach 2026 with a long-term focus. We will continue to invest in our business and brands while rebuilding margins and competing effectively in our category. That will represent success for us in 2026.

That's really helpful, appreciate that. And then just quickly, I know it may be far too early to really opine on this with any accuracy. But I guess what are you seeing thus far from an elasticity standpoint? I know there's more pricing still to flow through. And I guess what's your expectation for elasticity in the context of your guidance for next year?

Sure, I'll take that one. It's still early, and we'll have more insights next time we talk. The category remains stable, and nothing we've observed causes concern or strays from our expectations. Our pricing strategies are in line with those of competitors, which are still being implemented. Earlier in the year, we noticed competitors raising their prices and premium and private label prices increasing. Everything associated with our pricing has aligned with our expectations. As for next year, we understand that elasticity is a significant assumption. Some have questioned if we're being too cautious or conservative in anticipating a minus 1 elasticity. We believe this is an appropriate estimate while planning for next year. This year has performed somewhat better due to price increases, along with various positives such as a longer Easter, merchandising advantages from earlier in the year, and notable innovation benefits. Thus, when we consider these factors for 2026, we think planning for a minus 1 elasticity is appropriate. We are keeping a close watch on the market, and currently, nothing raises any concerns.

Great. Just following up on that elasticity response, and I realize it's early, but if you can just focus on the everyday business and give us a bit more color on what you're seeing in these first few weeks, particularly given the comments around double-digit growth across the everyday business over the past 5 weeks, what you think that means for elasticity? I realize it's early, I realize you're planning on the minus 1, but just any incremental color that would be helpful.

Yes. I would just say, again, no concerns on what we're seeing so far. If you look at everyday CMG where the price increases hit, we're up double digits in the last 4 weeks. So I feel good about what we're seeing so far. But more to play. We'll have more to say the next time we talk.

Great. And then on competition, I think there's been a narrative that some competitors are not following, and you just touched on this. But when I look at the data, it's not as clearly that's the case. I think if you look at your largest branded competitor, while their pricing might not be as high on a year-over-year basis, it looks like perhaps 2 are simply moving at different cadences with them moving harder earlier in the process. I think if you go back to where you all were 4 years ago, it looks like you're actually still just catching up on pricing relative to that period. So with that backdrop, I'm hoping you can provide a bit more color on what you're seeing to be competitive pricing environment right now.

Yes, I believe that's an important point. I've had the chance to analyze the competitive landscape and our pricing strategy. The priority for us is putting the consumer first. We assess our business and set our pricing in a way that makes sense for both our business and our consumers. We are collaborating closely with our customers to ensure we can meet consumer needs effectively. This approach is crucial for us. Our pricing strategy may differ a bit from historical patterns, but I focus on what serves the category, our consumers, and our business best.

And a pretty significant part of our price increase, and you mentioned this, was catching up to what happened earlier that competitors have done. So there was a time in history where everything moved in lockstep. Now I think everyone is more precise, more strategic as the way they execute pricing and it leads to different phasing. But overall, we're not concerned about price gaps across the portfolio.

Yes. And I would say one thing to look at is this category has been very resilient and rational. I think that's really important when you look across the industry. That gives us the confidence that we're making the right decisions, and we don't have concerns at this time.

In the prepared remarks, you mentioned that Halloween has been disappointing. Can you provide some details on how disappointing it has been? You also mentioned factors like the warm weather on Halloween Friday. Have you encountered similar challenges with these dynamics, or do you think there might be something affecting consumer focus on the seasons and the competitive environment? Additionally, you mentioned using this opportunity to analyze trends and adjust the product lineup and marketing strategies for upcoming seasons. I'm curious about your thoughts as you reflect on this so far.

Yes, thank you for the question. It's definitely timely. We're pleased with the overall strength of the business and the balance across our portfolio. Our everyday CMG business has been growing in double digits over the past four weeks. There is some typical interplay we observe. The season got off to a slow start, and historically, when Halloween falls on a Friday, about one-third of our business tends to be sold in the final week. Therefore, it's crucial to keep that in mind. That said, we recognize there are opportunities for improvement. While it may not be broad-based, we can learn from consumer insights and customer feedback to enhance every season, including next year's Halloween. We will assess pack types, offerings, opening price points, and product mix from the consumer perspective. I view this as a chance for us to learn and improve with each season.

And just a follow-up on, you noted that cocoa is going to be inflationary in '26. Does it feel like retailers are sympathetic to where you are with your pricing and your input inflation? You seem to have hedged very well in '25, maybe somebody didn't out there and their timing of their pricing might be mismatching yours. And so I'm wondering if there could be some noise out there with regard to competitors and other pricing actions that could affect near-term results? And I'll pass it on.

Yes, thank you, David. It’s essential for us to build trusting relationships with our customers, which is a top priority for me and our entire organization. We maintain a customer-focused approach. With our pricing, we have collaborated closely with our customers to develop solutions that cater to consumers’ needs. Currently, cocoa prices are still 70% higher than they were in 2023, which provides context for our situation. While we remain optimistic about recent developments, it’s important to reflect on past performance. Our pricing strategy is very deliberate, and I have reassessed our communication and partnership strategies with customers. I’ve had direct conversations with many of them, and ensuring we get this right is critical.

I wanted to ask about innovation. It's obviously been working well this year, especially in the back half here. So as we look to '26, could you provide some color on how you're thinking about the pipeline there? What are the key focus areas? And how are you thinking about balancing growth in the core versus innovation into next year, especially as we're going to lap some strength here in the back half?

Yes. I think that's a really good question. Innovation is so important to the category. Consumers are continuously looking for it. The recent innovation that we put out with REESE'S Oreo has been really the top driver of growth from an innovation standpoint in the category. So something to look at and be excited about. But when I step back from that, I look at our core business even in Q3, where our core business was close to 5% growth without REESE'S Oreo. And that says something about the balance of what we expect. Now we're going to have the benefit of most of next year with REESE'S Oreo, and we'll continue to build on that momentum and find exciting ways to connect consumers with that innovation. Having said that, we have a robust pipeline in 2026 of innovation and 2027. So we feel like we're building this pipeline of innovation because that's, again, engaging with consumers is important, all while balancing your growth with your core business. I think that is really important. And that's kind of how we see this. We cannot rely just on innovation to drive our business. It's a balance between the two. And if I look at Q3, we have struck that balance with really good innovation.

That's very helpful. And maybe just a quick follow-up here. It sounded like there was increased brand investments in the quarter. Maybe you could just talk about where you're making those investments, and what you're seeing in the competitive environment broadly? And do you see a need to make more investments just in the current environment?

Yes, I believe it's crucial to invest. There are smarter and more efficient ways to invest in brands. With Halloween and the holidays approaching, we've put resources into digital marketing to enhance performance and flow-through. We’ve also had some fun with innovation around REESE'S Oreo. These investments have provided us with momentum and align well with our strategic vision for the future of our business.

I wanted to come back to the commentary on 2026 and Andrew's question at the beginning. Last quarter, there was a comment on the call that there were multiple paths to EPS being well into the double-digit range in 2026. I think the biggest factors mentioned at the time were what happens with tariffs and cocoa costs. And I understand, Kirk, I think you said there's still upside to the algo. But as you think about some of those puts and takes today, and would you say that anything has changed that would affect that view? Cocoa has obviously come down. Maybe you're a bit more covered for 2026, though at this point? And broadly, any visibility on potential tariff relief as well?

Yes. Thanks, Megan. Again, to comment on the potential upside for EPS, I'll let Steve kind of go through the puts and takes that you asked. Thanks for the question, Megan.

Yes. As Kirk said earlier, above algorithm performance is definitely on the table. There's a handful of things that we're going to be watching really closely, especially as we finalize the plan. Consumer demand, of course, the health of the consumer right now, big focus. Right now, we're optimistic on that for next year, but we'll be watching that. We talked about innovation. I feel really good about our innovation, Oreo continuing, a lot of tentpole events next year. So we think that's going to be a big year for innovation. Elasticity, of course, as we touched on in the question earlier. And then as you said, cocoa and tariff relief. We're feeling marginally better about cocoa. I think when we talked last time since then, it's moderated a bit, and we're in the process of layering in our hedges according to our program, and we'll have more visibility when we talk next time. But net-net, feeling a bit better from a cocoa standpoint. And tariffs, ongoing changes week to week. I think the first prize we were hoping for a blanket exemption is probably not in the near-term cards, but we've seen significant acceleration on trade deals. And so now that cocoa and other commodities we can't make here are part of that third annex as those deals come in, we're optimistic we could see some positivity there. For now, we've modeled $200 million incremental on tariffs and still have in our model cocoa inflation for next year. But I would say that level of inflation is moderating, and we'll know more when we talk next time. So overall, it's not that much different from last quarter other than maybe a little bit more optimism on tariffs and cocoa.

Awesome, that's super helpful. And then maybe just more near term on the implied 4Q. It does seem like most of the increase in the full year top line guide was driven by what you saw in the third quarter. I think depending on rounding, implied 4Q is maybe a little bit below where the street is modeling, maybe part of that's due to the international shipment timing. But could you just maybe give us what you're expecting for the fourth quarter explicitly and whether the outlook for North America confectionery has just changed at all just given the puts and takes between Halloween and Everyday?

Most of the impact is related to the timing of international shipments. From a U.S. CMG perspective, we see ongoing momentum. We're making additional investments to boost Halloween sales and ensure a strong start to the holiday season. This is part of why the earnings per share doesn't match the sales in the latter half of the year, and why the EPS guidance is slightly more conservative than the sales forecast. We are also monitoring the timing of cocoa hedges, which were beneficial in the third quarter, but we don't anticipate the same level of benefit as we approach the year's end. Thus, the biggest factor affecting the top line is the international shipment timing, and we expect CMG momentum to sustain.

I'm going to maybe stick to Halloween for a second. You noted the slower start to Halloween and that when Halloween falls on a Friday, there can be this last week waiting. If we do get 1/3 of your Halloween sales in the last week, would it be more on track with how you're thinking about it, or do you need even more of kind of a disproportionate catch-up when we think about this year? And in particular, I want to make sure like how this relates to kind of what's embedded in guidance?

I believe that, to be direct, things might still be somewhat slow. It seems that Halloween on its own will be a bit underwhelming this season. However, I do notice that our core brands are interacting well, which is reflected in the insights we are reviewing. This is quite apparent. Additionally, we have significant new innovations, and our core products are performing admirably. Therefore, the connection between Halloween, the season, and our main offerings is something we're closely examining, and we can discuss it further later. Let's wait to see how this week plays out, and then we can share our insights and action plans for moving ahead. Winning this season is extremely important to us, and we are continuously enhancing our capabilities through insights and necessary actions to advance the business.

Okay. And then just, look, I think on the cocoa commentary, I want to clarify, one, at some point next year, your cocoa costs likely turn deflationary even if they're up for the full year. And I'm curious your views on pricing as inflation eases. I don't think you've historically given back pricing, but we are facing kind of unusual levels of both inflation and potentially deflation. So I wanted maybe a clarification on how you're thinking about it this time.

Sure. Regarding the first part of your question, I expect that as we move further into 2026, we may begin to see some deflation in cocoa prices. We will have a clearer understanding of this when we meet again. Currently, cocoa prices are still up 70% from when we began experiencing inflation in that area, so we haven't fully recovered. Pricing isn't the only strategy we have; we are also implementing our transformation program and pursuing cost savings. We will use all available strategies to achieve our goals. At the same time, we are committed to investing in our brands and fostering strong partnerships with retailers to ensure we grow at or above the category average. Our focus will be on a balanced recovery, as Kirk mentioned earlier.

Steve, not to belabor the pricing dynamic point again, but I do think some of the hesitation maybe is stemming from the fact that one of your peers operating in Europe kind of talked about a need maybe to solve some price gap issues. You obviously have a peer that competes both in the U.S. and Europe. So the translation of that dynamic happening in Europe, back to the U.S., is there kind of a future where the same thing happens. So maybe it would be helpful just compare and contrast just the structural factors that might make the U.S. market where you operate different from that pricing standpoint. And I think that would help clarify a bit of the fear that's out there that, hey, there's all this pricing that's coming in the market, but with cocoa coming down, are they really going to be able to kind of hold through?

Yes, you bet. So I do think it's two different markets, and I think we have to be careful kind of taking the assumptions from one and applying them to another. The U.S. category, CMG has been very resilient. It's been very rational. And we just aren't seeing today any major price gaps that are causing us concern. Obviously, we're watching consumer health. We're partnering closely with retailers to make sure that the category stays healthy and growing, and we want to be part of that with our innovation and brand investment, et cetera. But it is a different situation here than what you're seeing in Europe. And that rationality here, I guess we have no reason to believe that's not going to continue based on everything we're seeing even in the market right now.

Great. Super helpful and clear. And maybe as a follow-up, Steve, I actually wanted to ask on international. I know you had the shipment favorability dynamic, but it was actually a loss-making quarter in that business. So I guess just applying that forward, right, if you don't have the favorability on shipments in Q4, like should we be expecting, I don't know, the next couple of quarters that you might still be playing catch-up to get back to profitability, or how we should think about that segment specifically?

Yes, it's a great question. We don't always have time to discuss international markets. It's a challenging environment because a large part of our international business is driven by cocoa, and in some markets, the cocoa content is a key part of advertising. This means we feel the impact of cocoa costs more acutely. However, we will also see a stronger recovery once we move past these challenges. We have been more aggressive with pricing internationally, but since we are a smaller player in some of those markets with our products positioned as premium, the impacts from price elasticity are more pronounced than what we see in the U.S. That being said, we are optimistic about the business. In fact, we are gaining market share in nearly all of our core markets. We're particularly pleased with our performance in Brazil. While we aren't profitable at the moment, we remain confident about the market and our potential for growth and eventual return to profitability. We recognize we need to navigate through the cocoa challenges more intensively than in the U.S., but despite the current numbers, we are hopeful about the future.

I wanted to maybe shift gears a little bit and ask on salty snacks, given the strong performance you guys saw there. I think you mentioned in the prepared remarks, you did 14% year-over-year increase in consumption, saw share gains in salty, particularly driven by volume, which is in pretty stark contrast to a category that's been anemic kind of at best this year. Can you just walk us through what are kind of the driving factors there? And maybe any commentary on 4Q about how we should think about that business kind of closing out the year and anything we should be aware of maybe on the innovation side?

Thank you for the question, Jim. I'm very excited about our salty business. We're continually enhancing our capabilities within our salty team and overall business. Looking at our brands, particularly SkinnyPop, which is leading in the popcorn category, we've undergone a refresh that has improved its growth trajectory. We're also focusing on portion control, and our multipacks are performing well. This emphasis on permissible, premium snacking makes a significant difference. Regarding our pretzel business, Dot's has truly made a mark, and it is now the leader in the pretzel category—a remarkable feat for a young brand. It resonates well with consumers and is contributing to category growth. Additionally, we see considerable potential with Pirate's Booty in the Puffs segment, which is the third largest in the category, and we're just beginning to explore that opportunity within a $4.5 billion market. Our lineup of brands in the right segments of permissible snacking positions us well for growth beyond the category average. We will keep building on this momentum and strive to scale our salty business, and with my experience in this area, I feel optimistic about our future in the salty category.

Great. And maybe just any commentary you could provide on innovation and to the extent that you can maybe point us in a direction for 4Q, I mean, should we expect kind of continuation of where we're at now, acceleration? Just any thoughts around that to close out the year.

Yes, we see the same momentum moving forward into 2026. I am really excited about the innovation we have planned for Dot’s and for SkinnyPop across the portfolio. We have explored multiple areas across all three brands, and there is a strong pipeline of innovation that will drive growth and delivery. There will be more details on these upcoming launches, and there are some exciting developments in Dot’s, SkinnyPop, and Pirate’s Booty.

I have two questions. First, Steve, when discussing the factors that might influence the potential for double-digit growth, you mentioned several. Would it be accurate to say that elasticity is likely the most significant determining factor? Given the challenges in predicting it, would you consider providing a broader range than usual for the 2026 guidance to account for that? Secondly, I have a quick follow-up.

Sure. Great question. I would say elasticity is likely the most significant factor, though cocoa is important as well. We will be monitoring elasticity very closely. Currently, I’m not concerned, but we will keep an eye on it. Regarding the range, that's a valid point. It's something we will consider as we approach the time for guidance, based on what we observe. I believe we will gain more insight into elasticity and have a clearer understanding of cocoa by then. There may be tariffs to consider, but it's a good point that we'll likely think about.

Okay. And in doing a deeper dive into these price gaps that emerged, what we really found was some pretty sizable ones in king size in the convenience channel after you raised price between you and your biggest competitor. But I think your competitor raised prices since then. So is it fair to say that, that gap does exist, but it's just kind of temporary and will close soon?

Yes. I would say I don't want to get down to pack type by pack type retailer sort of detail. But like I say, we have all of that. We've seen what you're talking about on king size. We look at every packing of retailer. Right now, there are some gaps in places. Some of those gaps are closing. Some of those gaps may hang around for a while. But as we look at them in the aggregate, there's nothing that's concerning us at this stage. Recall, there is this sort of give and take, and we talked about it before about the cadence of the follow can take a little while. Sometimes we choose to take a little while to follow. And so this is part of the category, which is still rational. It just doesn't fall in a perfect cadence all the time.

Can I ask about the C-store channel? I think Rob mentioned it. It seems as though you were having some trouble with that earlier in the year. It seemed to be in recovery, I think, over the last few months. Is that still going fairly strongly at this point? And then I have a follow-up.

Yes. Thank you. I appreciate the question. I'm really passionate about the convenience channel. I just had the opportunity to be at NACS in Chicago and talk to a lot of our customers. Look, I think about the performance of the category in convenience right now and CMG is performing at a plus 6. So pretty healthy cadence in CMG right now. I think there are still some opportunities for us to get stronger. And we are hyper-focused on IC and our ability to execute, and we've rolled out these gold standard merchandising plans. We've built this innovation pipeline. We're building on tentpole moments, all with the lens of delivering for our convenience customers. So there is a level of intensity that we're putting against the convenience channel because we know it is a priority. We know IC is a real priority for us as it's a big brand builder and an area where we can continue to grow our brand. So we're going to show up strong. We like the momentum that we have. We still think there's opportunity for us to get better, and we'll do all that with the partnership with our convenience customers.

And as a follow-up, there's been a lot of questions on innovation. Are you able to put any numbers around that in terms of percentage of sales from new products introduced either over the last year or last 3 years? And how that's ramped over time because it seemed as though innovation dropped off in the years immediately after the pandemic.

Yes. Innovation is such an important lever for sure. But I think being consistent with innovation is also important in balance with your core business. I'd tell you one thing that I really liked about this last innovation that we launched with REESE'S Oreo, especially in convenience as we're talking about that channel is. We co-merchandised it with our core brands, and we saw our core brands elevate with innovation. And I think that is just a testament to the execution that we have in the marketplace, not just highlighting our innovation, but bringing our core along with it, I think, is a really good thing for us to do. It's a fundamental that we believe in. And so that, I think, takes the total portfolio into account. I think innovation is critical. Consumers are looking for it. But if it can help build your core brands as well, I think you're in a much better place.

You've made some comments today about monitoring the consumer health. And I think we've heard from some of your peers about more broadly just weakening U.S. consumer sentiment. So just wondering if you can share with us your thoughts around what exactly you're seeing with the consumer, and how you're thinking about that as we head into the holidays and 2026?

Yes. I think that's an important topic, and I've had the opportunity to talk to a lot of our customers as well. I think the consumer certainly is continuing to be challenged. It's a challenging consumer market, and there's a lot of headlines that have been talked about driving that concern. But I would say, our category remains resilient. I think that's an important thing to think about. So the impact of consumers, how that interacts with the category and how it's reacting to our business. I think those are the dynamics we look at. But I would say, in large part, the other consumer is certainly under pressure. Our category is showing up resilient, I think really importantly. And then as we look into '26, we see the category running at historic levels with those pressures. So I feel really confident about where we're at in light of a challenged consumer.

Appreciate that. And then just a follow-up question. We've also started to hear from some of your peers about expected headwinds from changes to the SNAP program, both policy changes, which could be more structural and then maybe more temporary government shutdown-related issues. Just wondering if you can share with us some context around how you're thinking about potential SNAP headwinds for the business?

Yes, I think this is a significant topic. We've had ongoing discussions with our customers to understand the overall impact of SNAP. If we take a moment to consider SNAP, about 2% of the SNAP funds are allocated to the CMG category specifically. Currently, there hasn't been much of an impact, but it's still early to tell. Looking ahead to 2026 and considering the interactions between state and federal governments regarding SNAP, we anticipate that the effect on the category will be minimal for now. However, we are closely monitoring the situation to gain a better understanding. Ultimately, it depends on how consumers involved in the SNAP program choose to spend their funds, but at this point, we believe that in 2026, the impact on our business will be minor based on what we observe.

Just wanted to come back to cocoa and you said that you could get some benefit if costs fall further, but it sounds like you're maybe also a bit decently committed, and that you're focused with your hedges on visibility and less volatility. Maybe could you just give a sense of how wide a range is still ahead of you? You're forecasting it to be inflationary. That might moderate a bit, but would you be positioned such that it wouldn't be deflationary, or just maybe give us a sense of how wide a range of possibilities are still in front of you?

Sure. Yes, I'd be happy to. So the fundamental hedging program, as you said, Michael, hasn't really changed. We're hedged, I would say, to the normal level we would be at this time of the year, given that we still believe cocoa does have some room to fall based on the fundamentals that we've talked about in the past. And so right now, we see it on a full year basis, we see it inflationary, but there is a possibility of deflation. And the way we've structured our program, as many do, we have a mix of some things that are price fixed and some things that allow downside participation. And so between the unhedged portion looking forward and downside participation, there is potential if we continue to see some fall in cocoa that we could see some deflationary, but it just a lot depends on timing and the magnitude.

Okay. That's helpful. And you've said in the past that around 75% of your portfolio is less than $4, I guess, how does that look after this latest pricing? And then is that sort of the key threshold? We hear $3 from some other snack peers as maybe a key focus point as well. Any sense of maybe kind of where you are sitting today relative to maybe either one of those thresholds?

Yes. I believe that 75% of our units are priced below $4. It's important to understand consumer behavior in relation to price points and our offerings. I would say this is largely still accurate today.

We are nearing the end of the call, so I have a couple of clarifying questions. Regarding the discussion about the algorithm for next year, despite the lower cocoa prices, would it be correct to say that if cocoa prices had not decreased, you would likely have needed to implement even higher pricing next year, but now that is not the case?

I was going to say no. I don't think we're currently focused on pricing. We have the price increase we recently announced that is being implemented. However, we are also working on other areas, regardless of whether cocoa prices go up, down, or remain stable, including improving productivity and achieving transformation savings. At this moment, our priority is to maintain the momentum in the business and ensure effective execution of the pricing already in place, while also taking a balanced approach to drive the business for the long term.

Great. Is it fair to say that if cocoa prices had not declined, you would need to evaluate if further pricing adjustments would be necessary? Also, could you clarify the recent changes to the tax rate and discuss your medium-term tax planning and opportunities?

In 2026, we do not expect to implement additional pricing even if cocoa prices remain unchanged. Looking at the long term, pricing will still be considered a key lever for us, but not in 2026. Regarding cocoa, we are actively working to ensure that the announced price increases are implemented. As for the tax rate, we have seen some changes this year, which have been a consistent topic each quarter. There are several factors impacting the tax rate this year, including some adjustments in reserves related to legacy positions and litigation, although there were no adjustments in the third quarter. Earlier in the year, we explored alternative sourcing strategies for cocoa, which provided good returns on investment but were less tax efficient compared to our usual procurement methods. Additionally, we have not identified as many appealing opportunities for tax credit investments recently, which meet our return on investment and quality criteria. These three factors have affected our tax rate this year, and we will provide further guidance on the tax rate for next year when we get to that stage.

Chris, I just wanted to share my point of view on '26 and the pricing questions that you asked. Look, I think if you go back to what we talked about, what '26 looks like from a success standpoint, certainly getting back on algorithm. We talked about the potential for EPS. But I think it's really important to get this message across. We retain the flexibility to invest in our business. We're playing this for the long haul. We have a lot of energy and enthusiasm in the business right now. We want to keep that momentum. There's also a lot of great new ideas to drive growth and health for the business over the long term while we recover our margin that we've gone backwards on. So I think that balance, I think, is what I would leave you with is we still have that flexibility. We're enthusiastic about what we see with momentum, but also the opportunities we have to invest in for the future. So certainly a balance of how we build the business.

Maybe just sticking with convenience stores, Kirk, just bigger picture, I'd like to hear your observations of the retail landscape for competitive merchandising and promo, just having seen it in your seat across multiple categories over the years, how promo/merch has evolved given the rise of smaller brands, healthy snacks, non-CMG categories. Just how has competition changed for that high visibility merchandising? How do you see confectionery positioned today to compete? And are there any changes you think Hershey can make in terms of either existing spend levels or types of promotion?

Yes, I think that's the right question, and I think it is changing. I think, John, you've asked a good question in convenience, if you spend time with the retailers, you'll see certainly, new solutions to drive the customer performance from their standpoint. We've seen a lot of new merchandising strategies, a lot of new ways to deliver value for consumers across multiple categories in convenience. I think it's really important that we play a growth driver role inside the store, and that is delivered across our core innovation, and how we deliver value in multiple transactions and things that consumers are doing. I think that there's also new tools that are exciting. So there's loyalty and tools that retailers are using that we're participating in that drive personalization and loyalty. So there's so many new fascinating ways to grow the business. And again, I'm super passionate about this channel and our opportunities to build brand and build momentum. And it will be a focus point for us moving forward.

Thank you, everyone, for joining us this morning. We look forward to our follow-up calls this afternoon. Thanks.

This concludes today's conference. You can disconnect your lines at this time. Thank you for your participation.