The Hershey Co – Risk Profile
- As per GlobalData's proprietary risk methodology, Hershey's overall risk score is 3.58, signifying a strong risk profile
- The company's country and operational risk pillars have boosted the overall risk profile of the company
- Low liquidity and a higher proportion of debt have negatively impacted the financial risk scores
The Hershey Co (Hershey) has a strong risk profile and is one of the top twenty companies based on our proprietary risk assessment of the food sector in the consumer industry. Country and operational risk pillars have boosted the overall risk score for Hershey. The company's manufacturing and distribution network and R&D are its significant strengths, while the dependence on a limited customer base and high debt is a concern.
About the Company
Hershey manufactures and distributes chocolate and non-chocolate confectionery. Its main products include chocolate; sugar confectionery; gum and mint refreshment products; pantry items, including baking ingredients, toppings, beverages; and snack items such as spreads, meat snacks, bars, and snack bites and mixes. The company markets its products under various brands, including Hershey's, Reese's, Kisses, Jolly Rancher, Whozeewhatzit, and Ice Breakers.
Hershey is one of the leaders in the food industry, with reported revenue of $8.97 billion in financial year (FY) 2021, which increased 10.09% over FY2020. The company's net income also increased 15.56% in FY2021 compared to FY2020.
Risk Pillars
Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. Scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.
Nestle is one of the top twenty companies in the food sector, while companies like Dali Foods Group Co Ltd, Calbee Inc, and Foshan Haitian Flavoring Food Co., Ltd. lead the sector.
Country Risk: Hershey has a substantial presence in North America, from where it derives the majority of its revenue (91.00%). The same has resulted in a strong country risk score of 4.52.
Industry Risk: The company's primary exposure is to the food sector. It generates 100% of the revenue from the food sector, characterized by low-profit margins and weak growth projections compared to other sectors.
Operational Risk: Our operational risk score is based on four pillars – business positioning, scale, operational efficiency, and profitability. The company has over 50 brands and sells and distributes its products in more than 85 countries worldwide. Strong profitability margins and return ratios also have resulted in a robust operational risk score.
Financial Risk: A higher proportion of debt on its balance sheet has resulted in a debt-to-equity ratio of greater than 2, negatively impacting the leverage ratios. High inventory days have also affected the liquidity ratios, resulting in a below-average overall financial risk score of 2.68.
About our Methodology:
GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData's proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company's risk and returns potential based on its critical operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.
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