Why The Hershey Company Rallied Today

Shares of The Hershey Company (NYSE: HSY) rallied 6.8% on Monday, as of 1 p.m. ET.

There appeared to be a bit of a rotation today on the first day of the new quarter, with large-cap tech stocks mostly selling off and other stocks, such as small-caps and those in other left-behind sectors rising. However, Hershey also made a company-specific announcement today that added some extra oompf to its rally.

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Hershey vows to remove dyes

A spokesperson for Hershey spoke to Bloomberg reporters today, saying that Hershey plans to remove all artificial food dyes from its snacks and candies by the end of 2027. The spokesperson said, "Removing these colors is a natural next step in our program to ensure consumers have options to fit their lifestyle while maintaining trust and confidence in our products."

Consumer packaged foods companies have been under scrutiny since April, when Health and Human Services Secretary Robert F. Kennedy and Food and Drug Administration Secretary Marty Makary unveiled plans to remove synthetic dyes from the U.S. food supply. Back then, Kennedy said he had made a nonbinding "agreement" with major food companies to phase these dyes out. Additionally, several states have said they will ban synthetic dyes or require warning labels on foods with synthetic dyes in the 2027-2028 time frame.

Image source: Getty Images.

Investors cheer the news, if only for risk mitigation

While it's not clear if more people will all of a sudden start eating more Hershey chocolates, Twizzlers, or Jolly Ranchers just because they no longer have artificial dyes, the news does somewhat de-risk the Hershey story at the moment.

While Hershey will probably never be the next growth superstar, its 3.3% dividend is probably safer today, due to the removal of this potential regulatory headache.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hershey. The Motley Fool has a disclosure policy.