Dive Brief:
- The Hershey Company is investing heavily in its digital infrastructure, with execution underway of a new enterprisewide ERP system. The company expects capital expenditures of approximately $800 million to $900 million in 2023, which includes the ERP system implementation and expanded core confection capacity.
- Michele Buck, CEO and chairman of Hershey, expects the ERP project to continue into 2024, she said, speaking on last week’s Q4 2022 earnings call for the period ending Dec. 31, according to a SeekingAlpha transcript.
- Hershey’s unallocated corporate expense in Q4 was $205 million, a 22.7% increase from $167 million last year during the same time period. The company tied the increase to higher technology costs related to the new ERP and digital infrastructure upgrades.
Dive Insight:
In mid-2018, Hershey added two ERP modules as part of a multiyear implementation. Aspects of the project were put on pause during the pandemic, shifting the timeline of the project.
The ERP deployment has led to expected rises in capital expenditures and unallocated corporate expenses since the start. In the company’s Q4 2018 earnings call, Hershey expected capital expenditures to total around $330 million to $350 million.
“Capacity expansion plus the ERP investments that will eventually drop out are the two kind of biggest components of the CapEx right now,” Buck said.
Hershey has previously had a fraught relationship with ERP implementations.
In the late 1990’s, the company experienced issues with ERP implementation resulting in a 19% drop in quarterly profits and an 8% decline in stock price, according to consulting firm Pemeco’s study. When its system went live in July 1999, Hershey could not process $100 million worth of candy orders, despite having adequate inventory.
