Greetings, welcome to The Hershey Company Fourth Quarter 2022 question-and-answer session. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. I'd now like to turn the call over to your host, Ms. Melissa Poole, Vice President of Investor Relations for The Hershey Company. Thank you. You may begin. Good morning, everyone. Thank you for joining us today for The Hershey Company's Fourth Quarter 2022 earnings Q&A session. I hope everyone has had the chance to read our press release and listen to our pre-recorded management remarks, both of which are available on our website. In addition, we have posted a transcript of the pre-recorded 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 will provide useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations to the GAAP results are included in this morning's press release. Joining me today are Hershey's Chairman and CEO, Michele Buck, and Hershey's Senior Vice President and CFO, Steven Voskuil. With that, I will turn it over to the operator for the first question. Thank you. At this time, we'll be conducting the question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Andrew Lazar with Barclays. Please proceed with your question. Thanks so much. Good morning, everybody. Good morning, Andrew. Hi there. I guess just one from me. I'm trying to get a better sense of how you're thinking about elasticity for 2023 versus what you saw in 2022, which was very little, and what percentage increase in capacity you're expecting for this year. I guess I ask because, you know, if elasticity were to stay as benign as it has been and you ramp some capacity, trying to get a sense of whether it could render, you know, your flat to slightly down volume outlook for the year somewhat conservative or could continued capacity constraints limit the potential for top line upside from here? Yep. Thanks, Andrew. As we look at price elasticities, we are assuming that they will be closer to last year than they were to historic, but not quite as good as last year. As we look at our capacity, we will have low single-digit increases in capacity, which, you know, do give us some ability to flex with demand as we see it. Steven, anything to add? No, that's spot on. Yeah. Excellent. That's it. Thank you so much. Thanks, Andrew. Thank you. Our next question comes from line of Robert Moskow with Credit Suisse. Please proceed with your question. Hi. Thanks, and congrats, everyone, for such a great year. I wanted to know, you know, the guidance for 2023 is more aggressive than normal. Like, you normally start the year rather conservative, but this year you're guiding above your normal algorithm. I wanted to know, you know, if you could kind of isolate what the key drivers are and why you've raised it compared to three months ago. Maybe drilling down. Looks like gross margin is coming in better than you thought. Maybe you could explain why. And then also, on market share, are you expecting market share gains in confectionery in 2023? Thanks. Sure. Want me to start with that one? Yeah, go ahead, Steven. Just on, you know, the big movers on the top line, obviously price driven and, you know, we have good visibility into that. We saw that in fact, be part of the driver for the fourth quarter performance. We see that carrying forward, especially through the first three quarters of next year. We do have elasticity factored in. As Michele said in the last question, you know, our planning isn't quite down to the levels of historic elasticity, but something that looks more like last year. If you sort of drop further through the P&L, we do see some benefit from the gross margin side as we, you know, see more stabilization, the pricing coming down and some cost efficiencies and a return to more historic levels of productivity. We still have aspiration for more productivity, but at least this year we're starting to see something that we hadn't seen in the last two years. Those are some drivers through the P&L back bar. On the market share side, yes, we do expect to have a positive market share next year. I think that's one that we're disappointed about this year and want to see turn the other direction next year. Some of that market share will be helped by the incremental marketing investment, as we've taken that up, as we have additional capacity online and certainly the additional capacity as well. As we think about the pacing of the market share, you should think about it relative to the beginning part of the year will be slower, and we won't see those declines probably till we get into the spring. Once we hit the spring, that will really kick into gear. We know that we had some lost opportunity this year around season that we weren't able to, you know, fulfill totally all of the orders. Then also a little bit of a mix impact from refreshment, you know, being a late rebounder, given social behaviors. We think that'll, you know, neutralize going forward. Okay. Makes sense. Just one follow-up. on the gross margin side, are your costs, like inflation costs, coming in better than you thought? Is this really just productivity is accelerating more than you thought? Yeah, it's probably more on the productivity side. We have pretty good visibility into the COGS costs and, you know, with the hedging program and so forth, particularly on commodities. You know, we're still expecting high single-digit year-over-year inflation through commodities and a lot of the materials items and mid-single-digits on things like labor and logistics and other supply chain costs. I don't think that those assumptions have changed much from our outlook, but probably a little bit more productivity. Great. Thank you. Thanks. Thank you. Our next question comes from the line of Ken Goldman with J.P. Morgan. Please proceed with your question. Hi. Thanks. You're guiding to a gross margin of around 44.5% next year. I'm just curious, for this coming year, what do you see as a, I guess, quote-unquote, normal level, if there is such a thing in this kind of environment? I guess more specifically, if you can, you know, grow your gross margin by a healthy amount in an inflationary environment, is there any reason it can't ultimately get back to 45% or above? Sure. Yeah, I mean, our model is growing gross margin every year. That would be the goal. That's really part of the growth algorithm. You know, we've had two years where that's been a challenge. We see that now turning for 2023 and really getting back on the algorithm. I would like to say it's price and inflation agnostic in terms of the strategy. How we get there will change based on the external environment. But yes, we do see restoring to gross margins that we had in the past and frankly, continuing to drive that forward. How do we think about the breakdown of sales growth and operating margins by segment in 2023? You gave a little bit there, are there any unusual items we should be aware of for either of these segments, just as we consider our models, maybe drivers that aren't necessarily apparent at first glance? The only things that are unusual or different, if I kinda go to Salty, and we mentioned some of this in the remarks, you know Salty is gonna have a strong top line, y ou know, we're expecting that. We're also expecting to see gross margin improvement year-over-year. We saw some of that in the fourth quarter, finally seeing pricing catch up in that business a little bit to inflation, but still some room to grow. We'll see some reinvestment below that. you know, we're gonna activate more against the brands next year. We're gonna do some capability investments between the lines to really scale up the infrastructure, and part of that infrastructure is the ERP transition that we talked about in the prepared remarks. That's probably the one area where I see strong sales growth, some gross margin improvement, less drop through to operating margin than we might see in a normal year on the back of those capability investments. Other than that, I think the other segments are probably, you know, pretty traditional in terms of the growth characteristics. Thank you. Thank you. Our next question comes from the line of Bryan Spillane with Bank of America. Please proceed with your question. Thanks, operator. Good morning, everyone. Good morning. My question is just around the advertising and consumer spend investments. I guess I have two questions. One, in the prepared remarks, one of the things you talked about investing in is workforce. I wanted to just understand, is that, like, more merchandisers and people in the field or something else? Then maybe I'll start with that, then I had one other follow-up. I mean, as we look at some of the investments that we're making in our employee base, clearly one of our key strategic goals this year is really to integrate scale our Salty business. We are adding some incremental talent there to really make sure that we have the right skill sets and that we have all the employee base and talent needed to do that heavy lifting and the work. Some of that also around improving our planning systems. Some of the things that when you buy a smaller company, we need some more sophisticated capabilities. Obviously, given a lot of the work across the business on supply chain, where we are continuing to invest to build capacity and resiliency in the network, we have made investments in supply chain talent as well. Okay. It's not specifically adding merchandisers or like more people, frontline sales people. Oh, no. No. Okay. Then the second just was related to the kind of the thinking behind the double-digit increase in advertising and consumer spend. Is that partly a sort of a function of just, you know, inflation has been, you know, so persistent? Obviously, you've got price increases on your own product lines, but consumers are just seeing, you know, have seen a lot of inflation across a lot of consumables. Is it, you know, if you're gonna have that level of pricing, you really need to advertise in order to sort of make sure consumers stay engaged 'cause they're gonna have to start making some choices? Was there something else that, you know, kinda drove the decision or the need to increase advertising at that rate? Absolutely. You know our long-term model, we believe in advertising. We've seen the impact and the returns that we get on advertising in terms of having very strong ROI. We take a very data-based approach to media spending, and we invest where we see that incremental profitable growth. Over time, we do know that that advertising builds consumer connectivity, and we know that that consumer connectivity is part of what helps us to have the elasticities that we do. People are connected to our brands, and during the tough times, we know that that connectivity leads to them continuing to buy. Yes, it is important during an inflationary time, and we've done statistics over that analysis to validate that. As you know, we reduced spend last year really due to capacity constraints, and we did see an impact in demand on several of our brands. Those are really the priorities where we are reinvesting this year and we're also investing in some of our white space opportunities like Gummies and Better-For-You to strengthen the business. As well as our Salty brands, where we're really in a major growth mode, gaining household penetration, gaining market share, and we wanna continue that momentum. Right. Thanks, Michele. Sure. Thank you. Our next question comes from line of Michael Lavery with Piper Sandler. Please proceed with your question. Thank you. Good morning. Good morning. I just wanna start by following up on the spending. Could you give us a sense? I recognize last year you adjusted spending to match or better align with the capacity limitations. Would this year be restored levels to sort of the optimal targets, or do you still see that ramping into next year as well? Trying to understand a sense of if you'll be back on your sort of steady run rate or, you know, kind of ideal level, or if we're not even quite gonna be there yet until maybe 2024. Yeah, I mean, we are always looking at the returns that we're getting on our spending and making, you know, decisions as we go forward based on that. We think that we're, you know, we're in a reasonable ZIP code. I think we've said before that we don't think we have to go back up to the very highest levels that we were at historically. We've done a great job over time, getting a lot of efficiency, getting very tight in our targeting so that we're getting even greater returns. I wouldn't also commit that this is the high mark, above which, you know, we're not gonna move above. We're still probably not quite back to exactly the point we want to be. Okay. That's really helpful. Just wanna unpack a little bit more, if we can, a comment you made in the prepared remarks about seasons being a growth driver. You said it's off to a great start. Obviously, last year went really well as well. Just would love to understand a little bit better how that unfolds and how to be thinking about that? Yeah, we continue to anticipate very strong growth in the seasons. We've continued to see that in the category. You know, consumers, during the past several years have even dialed up their interest in seasons, so it is, you know, a strong part of our portfolio. It's a place where we do very well. It's a place where there's a lot of emotional connectivity. You know, there's an anchor event. People wanna participate in those anchor events with the brands that they love. We think that there's opportunity. We had some missed demand that we weren't able to fully fulfill because of capacity, and we're gonna be in a much better position this year to be able to more fully capture that opportunity. Now the first part of the year, as I mentioned earlier, from a share perspective, we won't be as strong as we anticipate that we will be for the seasons towards the back part of the year. Okay, great. Thanks so much. Thank you. Our next question comes from line of Cody Ross with UBS. Please proceed with your question. Good morning. Thank you for taking our questions. I just wanna go back to the last question on volume and perhaps unpack cadence throughout the year. You have increased capacity for seasons coming on, but you're also lapping the overshipment in the first half this year. Can you just unpack a little bit how you expect volume to progress throughout the year, understanding that you expect for the full year it to be flat to slightly down? That's my first question. Thank you. Steven, can you talk about that? Yeah. Going into the first part of the year, you know, the seasons we've got, already identified the, volume and shipments there. You know, as Michele said, we're dealing with some capacity constraints leading into the seasons in the front part of the year. When you look at the year overall, we're not expecting any big material differences by quarter for volume. Okay, that's helpful. Just one last question on capital allocation here. You're at the low end of your leverage target, or over the long term. Are you beginning to look at making additional acquisitions or perhaps return more cash to shareholders in the upcoming years? Thank you. I'd just say job one right now for us is integrating the amazing acquisitions that we've bought, SkinnyPop, Pirate's, and Dot's, you know, we're investing to leverage their full potential. We do always continue to be in the market, looking at assets that can continue to advance our strategies, expand our portfolio appropriately into high growth, consumer demand segments. We certainly do have a lot of balance sheet flexibility to be able to do the right M&A if it becomes available. That's right. I would say more broadly from a capital allocation standpoint, you know, no major changes. We definitely wanna be giving back cash and repurchasing shares as part of our strategy that puts good tension on the internal investments and M&A to make sure we're getting the best return. You know, that's an area we'll continue to monitor. We've got a lot of CapEx this year, and so that's one thing that we're, you know, taking into consideration as we look at the overall balance of capital allocation. Thank you. Our next question comes from line of Chris Growe with Stifel. Please proceed with your question. Hi, good morning. Good morning. Hi. I just had a question, first, if I could, and a bit of a follow on to an earlier question, but in particular in the Salty snacks division, with the margin being so strong in the fourth quarter and reaching over 20%, was there anything unique to the quarter? Then I certainly heard about investments you wanna make, both internally in advertising throughout 2023. I guess I just wanna understand how you expect the margin to fare throughout the year. Does the margin expand, but just not to the level of which it did here in the fourth quarter? Yeah, we're really pleased with the fourth quarter finish, probably two things drove that. One, we did have easier laps in the fourth quarter. Second, you know, we've said earlier, pricing catching up a little bit more to some of the inflation that we saw over the course of the year. We got a little bit of a benefit of that as well. As we look to margins for that business going forward and into next year, you know, we want to, again, on the gross margin line, expect to see some continued advancement. We've got a lot of plans still to optimize that business. We've talked before about streamlining the back office, streamlining the supply chain network, better integrating all of that with our existing Hershey systems and so forth. In fact, we'll talk more about that when we get to our March Investor Conference and spend some time on that. Have aspirations to continue to see that profile up over the course of the year. As Michele Buck said, we are gonna reinvest some of that back between the lines to accelerate the top line, to invest behind the brands and then on the capability investments like ERP. I would say that the key takeaway is we have still high margin aspirations for that business as we look forward over the next couple of years. Most of those will occur over the longer term. We don't expect, you know, significant margin expansion or margin expansion in 2023. Yeah. Okay. That's helpful. Thank you. Yeah. Just a quick follow-up, if I could, on to understand how inventory will fare through the year. You talked about depleting some inventory late in the year as you convert or move to the new ERP system. Should inventory grow through the year and then you deplete it? Or does it hold this level and then it just goes lower as you know, kind of move that inventory out? Have you built it already, I guess, is the question. Or do you expect to build more? We haven't built it all already. I mean, there will probably be some build, not that material. I mean, there's a limit to how much Salty inventory we can build. As you said, when we get to the fourth quarter, we expect a pretty significant depletion, and that's really just to allow the cut-over between systems. On a net-net basis, that will look like a negative for the year for that business. We would expect to see that come back next year, probably with a strong start to the year. Okay. Thanks so much for your time. Sure. Thank you. Our next question comes from line of Nik Modi with RBC Capital Markets. Please proceed with your question. Yeah, thank you. Good morning, everyone. Hi. Michele, hi. I was hoping you could just comment on fill rates, kind of where you guys are now versus kind of where you'd like to be. You know, I know things are below where they have been historically. Just curious, is that just a function of capacity? There's also a labor component to that. Then I had a bigger picture question. Yeah. I would say our fill rates are much better than where they were. There's been some significant improvement versus last year as we've been able to invest in capital and get additional capacity on the ground. And really there's minimal impact from labor. It was really largely very much tied to capacity. Now, we did staff up in labor to enable us to be able to, you know, obviously execute against the capacity and the incremental lines. You know, we're seeing less network disruption than we've seen in the past, not all the way back to the perfect situation it was before the pandemic, but it's certainly improved. Great. Thanks for that color. Then just the bigger picture question is, you know, look, these categories, especially on the, on the chocolate and confectionery side, you know, I think clearly we can see a renaissance and maybe it, you know, we can attribute some of it to COVID. But I'm just curious, like, what does your research, internal research say about what's actually going on with the consumer and these categories? Because I think we can all agree the underlying trend rate has been much better than I think anyone would have expected a couple of years ago. Certainly we know that snacking has been on the rise, has continued to be on the rise as a consumer behavior pre-pandemic and also post-pandemic. We know that there, you know, still is a bit more at home behavior versus folks cutting back on going to restaurants, certainly that's a benefit across packaged goods snacking. We also know based on our insights that consumers are interested in snacking and particularly in confection and chocolate on two diametrically kind of opposed parts of their emotional state. One is when they are incredibly happy and it's a treat time and they wanna treat themselves, the other is when there are down times and they want, you know, a bright spot. They do, you know, view these categories and especially chocolate as a part of kind of emotional wellness, you know, what it does and how it makes them feel. Of course, I think, you know, the more that we interact with consumers, and this really hasn't changed over time, consumers' emotional connectivity to our brands. Our brands are more about the more than just about the products. They are about the moments of connection. Many of them are used in special times, and we get letters all the time with people talking about the special role that some product played in their life. They remember when they were with a friend experiencing it or with their kids at a season. I think that continues to be timeless and perhaps has even dialed up a bit since the pandemic. Great. Thanks for that color. Thank you. Our next question comes from line of Jason English with Goldman Sachs. Please proceed with your question. Hey, good morning, folks. Thanks for swapping in. My apologies, I didn't get a chance to go through all the prepared remarks. We had a lot going on this morning, so I apologize in advance if I ask a redundant question. Two quick things. First, the capacity expansion. You gave some quantification for the year. What's the cadence? When should we expect to see that capacity coming online? Yeah, it's gonna be coming online, throughout the year. Again, this sort of fits into a broader discussion we've had on capacity expansion. I think we've talked in the past, you know, if you look at the 2020- 2024 period, you know, we're looking for a 15%-ish increase in capacity across the network. What we're gonna see in 2023 is gonna be a low single-digit contribution towards that goal. I would kind of think about it coming in ratably over the course of the year. Okay. The elevated CapEx, it sounds like this is a long slog. Should we expect this elevated level to continue into next year and the year beyond as well? Yeah, not at this level, but I would say at least for the next, for 2024, we will have some amount of elevated capital, or we'll still be finishing off the ERP program and still probably having some tail investments from a capacity standpoint. Those are the two things I would point to. You know, on the CapEx, as we talk about all the time, you know, the majority of that CapEx is targeted on capacity expansion. If you click into that, a large portion is driven by Reese's and the fantastic growth we've had there. Reese's capacity and network capacity has improved significantly, but we still have opportunities, some on recent, some on other brands, to unlock more efficiency and capacity. That capacity expansion plus the ERP investments that will eventually drop out are the two kind of biggest components of the CapEx right now. Understood. Last question for me. I've always considered your European venture to be a bit opportunistic. It's a small tactical export business. Yet recently, you've kind of carved it out as a standalone business with a designated head. Does this signal anything in terms of your strategic intent on expansion in Europe? No, not at all. If, if that's in reference to any of the, you know, talent changes that we made, they were really in the course of just normal development and expansion for people to get new opportunities. You know, Europe continues to be small. We, we continue to feel that we are making great strides and seeing a lot of growth there is no strategic change in our approach to that market at all. Understood. Thank you. Thank you. Our next question comes from line of Pamela Kaufman with Morgan Stanley. Please proceed with your question. Hi, good morning. Morning. Good morning. Can you talk about your key innovations plans for 2023? How are you thinking about the drivers of top line growth between innovation versus existing brands where you've been capacity constrained? Sure. Innovation continues to be an important part across our portfolio. We have several items that are launching this year that we think will generate a lot of consumer excitement and merchandising. If we look at our core confection business, the highlights there would be Reese's x Reese's Puffs. We have a limited edition, which is a Reese's Creamy and then a Reese's Crunchy product. A line of limited editions that let consumers pick their favorite, which texture they like. We have an exciting new KISSES flavor that is called Milklicious, which is a KISS filled with a milk chocolate filling. On our Salty business, we launched as a limited time edition this year, a Dot's cinnamon sugar flavor, folks will see that in the market as it's been very successful. Those are probably the highlights of some of the biggest innovation. You know, we continue with our strategy that we employed several years ago that's really helped to accelerate our top line growth, which is while innovation is important and we will support innovation across the board for news and excitement, we really don't wanna stray away from a primary focus on our core. Our core are brands that are sustainable. They have been out there for a long time. Consumers love them. The velocities on them will always be stronger than innovation. Across our entire portfolio, driving our core is job one, and then using new innovation for news and excitement. Great. Thank you. Just, in terms of your organic growth outlook for 2023, how are you thinking about the growth between North America Confectionery and Salty snacks? Maybe if you could just touch on some of the key growth drivers behind the Salty snacks business for 2023. I can talk about some of the growth drivers, and then let me have Steven talk a little bit about the other part of your question. As we look at Salty snacks, we will be, as Steven mentioned, investing in marketing to really continue to expand those brands and businesses and continue our growth in household penetration. That is clearly an investment that will drive growth. We continue to have some level of distribution upside, especially on Dot's. On Dot's, we saw distribution upside as well as increased item counts in 2022, and we'll see some of that growth continue as we go through 2023. Once we get beyond that, we think we'll then start to be going more to velocity increases and Price Pack Architecture opportunities. Those are some of the biggest ones. Investments in SkinnyPop in advertising as well will continue to unlock growth potential. I think those are some of the biggest growth drivers across the Salty business. Just at a very high level, from a confection standpoint, we're expecting, you know, high single-digits, top line price being the primary driver there. As we talked about earlier, seasons underneath that, seasons and then media investment behind the brands are gonna be big supporting, components of that. On the Salty side, double-digit growth, which is, you know, what we should expect from that business. More of a price there as well, but also volume. Again, as we said, there too, we're investing behind the brands, and we have some distribution opportunities, as Michele mentioned. On the international side, a solid mid-single-digit performance on the back of distribution volume, some pricing as well, and some innovation. At a high level, those are sort of the big targets. Thank you. Thank you. Our next question comes from line of Chris Carey with Wells Fargo Securities. Please proceed with your question. Hi, good morning. Thank you for the question. Good morning. Steven, you gave good information on gross margin ranges for the year, a little bit on cadence with the Q1 and the impact of inflation. You know, it's just striking to see, you know, high single-digit commodities, mid-single digit labor, which, you know, is, you know, this dynamic of sticky inflation that we're seeing, you know, across, you know, the staples landscape. You know, clearly, you have good visibility into that outlook. I guess what I'm wondering is, you know, this is going to be a probably a volatile environment for inflationary drivers, mainly commodities over the next year. I'm just trying to frame if there is a change in the commodity outlook, is that something that changes your own outlook, or are you so locked in on costs at this point that it's, you know, no, we have good visibility on the year and we're fairly locked in, and that's really more of a consideration, you know, from a year from now or something like that? I have a quick follow-up. Sure. On the, you know, in general, we have pretty good visibility, I would say, across costs and commodities. I'd say the hedging program gives us some of that visibility. The caveat is that if you look at the last two years where we've been bitten, in some cases, have been the things that we don't hedge and have been volatile, things like packaging and resins and specialty ingredients and so forth, dairy even in some spots. Those are ones that I'd say we keep an eye on, and movements in some of those material movements can move the needle. We saw some of those material movements in the last few years. I think our expectation is some of that will settle down, and with that settling down and our visibility into the rest of the costs, I agree with you, it's still potential for volatility, but we feel we've sort of picked the guidance range, to try to accommodate most of that volatility. Okay. That makes sense. One quick follow-up and perhaps something that's, you know, even better suited to, you know, the Investor Day coming up. You know, just this sounds confident on, you know, long-term margin improvement. Clearly we saw an inflection in the snacks business today with positive commentary on the medium term in that business. When you think about that long-term margin, you know, between the confection and snack side, do you have any sense of what would be driving that between those segments? Or is this just more of a holistic, you know, target for the organization over time? Thanks so much. That is a great one for the investor conference. But what I will say, you know, our expectation is we wanna see margin improvement across all parts of the business, all segments. So, you know, we've seen a lot of improvement in international in recent years, but we have the same expectation that that's gonna continue also, and that we're gonna optimize and grow, but grow in a sustainably profitable way there. Salty, probably expectations, you know, given the capital that we've deployed in those acquisitions and, you know, the opportunity, we touched on things like private label and the impact that still has on the business as we look to the future. You know, opportunities to extract more margin out of that business and always on the confection side, we wanna have a model that drives margin accretion. Okay. Thanks for the insights. Mm-hmm. Thank you. Our next question comes from line of David Palmer with Evercore ISI. Please proceed with your question. Thanks. Question on gross margin in this latest quarter, especially versus the third quarter? The reason I'm asking for color about what might have been your biggest unlocks that fourth quarter is because on a one and multi-year basis, it looks like pricing was rather similar to the third quarter, yet the year-over-year margin trend improved. That fourth quarter was actually higher than it was in the fourth quarter of 2019. Any color about unlocks and gross margin would be helpful. Yeah. I think the biggest driver that we touched on, you know, we did have some better productivity dropping through supply chain efficiencies that had ramped up. As Michele said, we're not all the way back in terms of that supply chain efficiency, but we did see an uptick in the fourth quarter. You know, I'll say the volume growth on the elasticity side, helping in dropping some fixed cost absorption through the P&L as well. Those are probably the, you know, if I had to point just a couple of things, those are the ones I'd point to. Just a big picture question, one I've been thinking about is, you know, during this COVID era, clearly at-home snacking did well. You guys have made your own thunder with S'mores and your seasons, and you seem to have a pretty good visibility into what you're doing each year in seasons. So it looks like you're poised to have a pretty good 2023. I'm wondering, just as you just think about the overall energy for at-home snacking as an occasion, do you have a view about whether that can sustain in terms of its growth rate? You know, I wonder about this not just for Hershey, but for other companies as well. Any comments there would be helpful. Thanks. Sure. Let me start by saying, as much as we have benefited on our take-home business, with at-home snacking, our instant consumable business has also been quite strong. We've really seen growth across all, what we say all three segments of our business: seasons, take-home, and instant consumable. We don't expect that, you know, that we're gonna lose volume on those segments going forward, so we don't see a reversal in the trend. We would say that, you know, growth may moderate. We would expect it to moderate a little bit versus where it's been as consumers shake out into their normal ongoing behavior. Thanks. Thank you. Our next question comes from line of Steven Powers with Deutsche Bank. Please proceed with your question. I wanted to go back to the two topics you talked about already, the A&P investments and the workforce investments. Just a little bit drilling down into those. Just any on the A&P side, any notable phasing of the incremental spending that you're planning? If so, just the drivers, you know, of that phasing, if you could. On the workforce side, you know, Michele, you walked through a number of priorities, especially on the Salty side, and I think they make sense and they're frankly intriguing. I guess the question is, you know, where are you with those hires? Is that something that we should anticipate, you kind of have, you know, in the near term pipeline and the investments show up, you know, early in the year and carry forward? Or is it something that builds and is more, you know, the spending, you know, progressively layers on as the year goes on? Just where you are in making those hires that you talked about earlier. Thank you. Yeah. As we look at the investments in marketing spending, you should think about the confection investments being fairly stable, you know, throughout the year. On Salty, our investments will be more front-loaded during the year because of the, you know, towards the end of the year is when we're doing the S/4HANA conversion. We're really gonna, you know, drive the volume harder at the beginning and those investments harder at the beginning of the year. SG&A spend, you know, we will see that across the quarters, especially beginning in Q1. Okay. Thank you very much. Thank you. Our next question comes from the line of Max Gumport with BNP Paribas. Please proceed with your question. Hey, thanks for the question. Just one for me, and it's on gross margins. You expect gross margins to be up 40 to 50 basis points year-over-year in 2023, given net price realization and higher levels of productivity, which are expected to offset inflation. It sounds like 1Q 2023 gross margins will be pressured due to lacking a timing benefit related to inventory valuation last year. I'm just trying to get a sense for if you could help us frame the magnitude of that 1Q 2023 impact. Thanks. Yeah. You're exactly right. For quarter one, that will be our most pressured gross margin quarter. In fact, I expect we'll be still down year-over-year for the first quarter because of those laps. I don't know that I'll dimension, you know, get as specific as the guidance for that. You're exactly right. That'll be our most pressured gross margin quarter. Great. I'll leave it there. Thanks very much. Thank you. Thank you. Our next question comes from line of John Baumgartner with Mizuho Securities. Please proceed with your question. Good morning. Thanks for the question. Good morning. Good morning. First off, Michele Buck, North America Confectionery, you're bringing more capacity online. You're increasing brand spending as well. How are you thinking about in-store activation at this point? I think going back pre-COVID, there was an increased focus in the aisle with the king size and some different shelf sets. You moved to the checkout lines, and I think you had taken some shelf space for magazine and non-consumables. If we think about 2023, and I guess even beyond at this point, where are the levers you see as most impactful from here? Where can you still benefit from activation going forward? You know, we are always looking to optimize across the entire mix of levers that we have to drive activation. You know, managing the shelf distribution, shelf space is always a priority. There were some areas as we were lighter on capacity, where we were unable to, you know, fill some of those distribution needs. We see some of that ahead of us as an opportunity as we have improved service. You know, we talked a little bit earlier about the marketing spending, where we had pulled back again because we were lighter on capacity. Reinstating that, we know that there's a very strong, return on that. Reinventing the front end. Retailers are always looking at how they optimize front-end space, and so we partner with them, and we continue to see opportunity there. As we look at our in-store promotional spending, you know, we do believe that, you know, getting visibility and display in store is important to our business. That said, our promotional spending is below COVID levels, and we've seen that we've continued to be able to drive the business where those promotion levels are today. That's not a key priority to reinstate back to the past. Okay. Thanks for that. Then Steven, on the Salty snacks margin, there was a lot of noise this year. You mentioned the catch-up on pricing. You had the warehousing in Q4. You had some reduced promo and advertising spending. If we think about the sequential increase in margin from Q3 to Q4, is it possible to bucket those tailwinds across the different elements? Or maybe what do you think the underlying run rate is for segment margin exiting 2022? Is it mid-teen? Is it high teens? Just trying to think about the moving pieces versus the structural improvements there just far. Thank you. Yeah, it's a fair question. There have been a lot of movements across the quarters. I think, you know, think about a run rate in the mid-teens. That's probably a good baseline to operate from. As I say, you know, there will still be movement across the quarters, you know, probably especially as we look to the back half of this year with that ERP transition that we talked about. As we get further into the year, we'll give more color to some of that variability. If you think about mid-teens, that's probably a good starting spot. Okay. Thank you very much. Yeah. Thank you. Our next question comes from line of Jonathan Feeney with Consumer Edge. Please proceed with your question. Good morning. Thanks very much. It's been about 15 points or so over the past two years of pricing, I was wondering if you could characterize. I know that's data-driven, but I wonder how you could characterize how much of that was driven by this narrative about rising costs. If costs continue to moderate or even decline, should we expect some, you know, Is the expectation from the retailer that some of that pricing goes away if costs go down? Or has this just all been a change in the conversation to, you know, let's work together to grow the category? I'm just curious about how much risk you have if costs, in fact, start to moderate and decline. Thank you. Sure. You know, we always work together with retailers to try and maximize category growth. That is our fundamental premise, especially being leaders in all of the categories that we are in. If the category is growing, we feel really good that, you know, we will benefit from that growth. Historically, there hasn't really been a move in the category to execute price declines or price rollbacks. As prices have gone up, they have tended to stick in the marketplace as a matter of principle of how the category dynamics have worked. Okay, thank you. What we really try and do is to leverage some of that favorability in price in our holistic model to reinvest for growth, whether that's reinvesting in capabilities to get smarter about managing the shelf with the retailer, helping them to find new points of interruption, or whether that is incremental consumer investment. Makes sense. Thank you. Thank you. Thank you. Ladies and gentlemen, that concludes our question- and- answer session. I'll turn the call back to Melissa Poole for any final comments. Thank you so much for joining us this morning. We will be available for any follow-up questions you have. Have a great day. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.