HERSHEY CO

Throughout 2025, we experienced net sales growth, positive changes in consumer behavior, and price elasticity despite the persistent dynamic macro environment. However, increasing inflationary pressures, including ongoing price volatility for select commodities and higher manufacturing costs, continued to challenge the business. Despite a strategic pricing action in the third quarter combined with other specific actions taken to mitigate these gross margin pressures, our direct inputs continue to be the primary incremental cost to our business (see Consolidated Results of Operations included in this MD&A). We utilize many exchange traded commodities for our business that are subject to price volatility, specifically cocoa products, which continued to experience elevated market prices compared to historical levels (see Item 7A - Quantitative and Qualitative Disclosures about Market Risk included in this Annual Report on Form 10-K).

Furthermore, changes in global trade policies, including tariffs on U.S. imports, continue to increase global economic and political uncertainty. For the year ended December 31, 2025, the imposition of tariffs on U.S. imports and retaliatory tariffs, had a material negative impact on our results of operations and commodity prices. We are continuing to monitor the ongoing negotiations related to tariffs, specifically, goods imported into the U.S. from Canada, Mexico and other countries, as well as export markets, in which we have significant business operations, all of which may result in material adverse effects on our results of operations. The scope and length of tariffs, including their effects on the broader economy and our business, remain uncertain. These outcomes may be influenced by factors such as continued U.S. negotiations with impacted countries, retaliatory measures from other nations, possible tariff exemptions, public sentiment toward U.S. products and companies, and the domestic availability of lower-cost alternatives.

Additionally, evolving priorities of the U.S. administration, such as leadership changes at the U.S. Department of Health and Human Services and the U.S. Food and Drug Administration (“FDA”) in early 2025, as well as the Make America Healthy Again movement, subject the food industry to increasing laws and regulations, including nutrition, food date labeling and traceability recordkeeping requirements, as well as changes in consumer expectations and behavior. For example, in April 2025, the FDA announced that it would be phasing out the approved use of petroleum-based synthetic dyes in food products. Therefore, in an effort to be responsive to the evolving regulatory environment and to ensure consumers have options to fit their lifestyle while maintaining trust and confidence in our products, we announced our decision to remove all certified Food, Drug & Cosmetic colors from our great tasting snacks by the end of 2027. The estimated costs associated with this removal are not expected to have a material impact on our financial position, results of operations or liquidity.

As of December 31, 2025, we believe we have sufficient liquidity to satisfy our key strategic initiatives and other material cash requirements in both the short-term and in the long-term; however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can operate effectively during the current economic environment. We continue to monitor our discretionary spending across the organization (see Liquidity and Capital Resources included in this MD&A).

Based on the length and severity of the fluctuating macroeconomic environment, including price volatility for our commodities, the possibility of a recession, changes in consumer shopping and consumption behavior, and changes in geopolitical events, including the imposition of tariffs and retaliatory tariffs, we may continue to experience increasing supply chain costs, higher inflation and other impacts to our business. We will continue to evaluate the nature and extent of these evolving impacts on our business, consolidated results of operations, segment results, liquidity and capital resources.