Hershey Adds Capacity as Salty Snack Demand Outpaces Supply

Demand has outpaced Hershey’s snack capacity

Hershey’s salty snacks business is growing faster than its current production can support. The gap has constrained sales of Dot’s Pretzels and multipacks for at least two quarters, while slowing the company’s recovery and adding pressure to operating profit. That makes the supply problem more than a logistics detail: when products aren’t available in the formats shoppers want, demand can’t translate fully into sales.

“Demand is definitely outstripping supply, but we are catching up,” CEO Kirk Tanner told analysts. Third-quarter service levels improved from the previous quarter, though the rebound took longer than Hershey expected. Better service suggests the company is making progress, but it doesn’t mean the constraint has disappeared. Until production can meet orders more consistently, the business may struggle to capture the full benefit of its brands’ momentum.

This is more significant than it looks. Hershey has spent years building a snack portfolio, and shortages in a leading brand can complicate efforts to turn that portfolio into a larger, more dependable source of growth. A product that’s missing from a shelf can’t support a repeat purchase or introduce a shopper to a new format.

New production capacity is planned for 2027

Hershey expects new manufacturing lines to begin operating in the first half of 2027. The company is also investing in automation to produce more single-serve and multipack formats, Tanner said. Those formats serve different occasions and purchasing habits, so expanding their output could help the company meet demand across more than one type of snack purchase.

“A lot of this is behind us, but there is still this capacity coming online that will give us good growth in 2027 on our salty business and a more efficient way to get to market,” he said. The timing makes added capacity central to the next stage of Hershey’s growth in snacks. The company’s near-term recovery depends on improving service with its current operations; its longer-term ambitions depend in part on lines that won’t be running until 2027.

That leaves a meaningful wait between improved service and the arrival of the planned capacity. Automation may help Hershey produce more of the formats it wants to sell, but the announcement doesn’t establish how much extra output the new lines will provide or how quickly they’ll reach full operation. Those details matter because capacity only supports growth when it can deliver the right products at a steady rate.

Dot’s anchors a growing portfolio

Hershey has built a portfolio spanning pretzels, popcorn and puffs as it pursues its ambition to become a “snacking powerhouse.” Its salty snacks brands include LesserEvil, SkinnyPop, Pirate’s Booty and Dot’s. The segment generated $1.3 billion in fiscal 2025, about 11% of the company’s business. That share gives the category weight inside Hershey, while also showing that salty snacks remain one part of a larger business.

Dot’s is the portfolio’s largest salty snack brand, with $626 million in sales over the last year, according to Circana data. Hershey is looking to extend the pretzel brand into areas such as snack mixes and has set a $1 billion sales target for it. Reaching that goal will require more than stretching the brand into adjacent products: Hershey also needs enough production and distribution capacity to keep those products available.

Here’s the thing: a brand extension can create more ways for shoppers to buy, but it also adds complexity for a business already catching up on supply. If you’re working in this space, the relevant question isn’t just whether a familiar brand can travel into new formats. It’s whether the company can make those formats reliably enough to turn interest into repeat sales.

Recent results show momentum, with limits

The segment’s momentum is already visible in recent results. Salty snacks net sales rose 22.3% in Hershey’s latest quarter, with CFO Dave Hulays saying LesserEvil continued “to outperform our year-to-date expectations.” Dot’s third-quarter retail sales increased 9%. The figures point to demand across multiple brands, though they don’t show how much additional sales Hershey could have captured if supply had been less constrained.

The contrast matters. Strong growth can signal that the portfolio is resonating with shoppers, but the reported results also sit alongside the company’s account of supply limits. For Hershey, the operational task is to translate interest into consistent availability, especially as it seeks to grow Dot’s and broaden its range. That’s a practical test of whether portfolio momentum can last.

Growth amid cautious consumers

Hershey reported third-quarter net sales of $3.28 billion, up 3%. For fiscal 2026, it forecast net sales growth of 4.5% to 5%, with organic growth of 3% to 3.5%. Those forecasts set a broader context for the snack business: Hershey is pursuing growth while managing a production shortfall and contending with shoppers who may be more selective about spending.

Tanner said the company is increasing marketing and product development as consumers grow more cautious amid elevated gas prices, inflation and rising interest rates. “It is our job to stimulate demand here, and we have got those plans to do that,” he said. Marketing can give shoppers reasons to consider a product, while product development can widen the choices on offer. Neither can fully compensate if the products aren’t available when customers want them.

And yet, Hershey is committing to both demand creation and added production capacity. That combination makes sense for a company trying to grow a category, but it puts the sequencing under scrutiny: stronger promotion could intensify pressure on supply before the new lines arrive. (And this is the part most people overlook.) Generating interest is only one half of the job.

The next test is execution

Hershey’s salty snacks business has several sources of momentum: Dot’s scale, growth in recent results and a broader set of brands and product types. The production constraint is the counterweight. The company says service levels improved in the third quarter, but it also expects more capacity to arrive in 2027, which indicates that the current catch-up effort hasn’t made future investment irrelevant.

For now, the near-term test is whether service continues to improve while consumers remain cautious and Hershey works to build demand. The longer-term test is whether the planned lines and automation support the growth the company expects from salty snacks. There’s a real opportunity here, but its value will depend on execution. Until supply catches up, demand alone won’t tell the full story.