Every year for over 30 years, consumers have been shown the exact same Christmas commercial. The Christmas Bells from The Hershey Company (HSY 0.87%) shows Hershey's Kisses playing a Christmas song like a handbell choir. It feels appropriate that Hershey's most famous commercial features Hershey's Kisses. After all, the company is all about chocolate candy, isn't it?

While it's true that Hershey makes most of its money from candy, management is aggressively trying to change that fact. Actually, it's betting the future of the company on something else entirely.

What's the future for Hershey?

Michele Buck became CEO of Hershey in 2017, bringing her experience from Frito-Lay (owned by PepsiCo) and Nabisco (owned by Mondelez International). Those operations have a heavy emphasis on salty snacks. And that's exactly the vision Buck had for Hershey from the start.

In Harvard Business Review, Buck wrote, "We set a bold new strategy: to make Hershey a snacking powerhouse by expanding into the savory and better-for-you product categories." This expansion has come through acquisitions.

After acquiring Dot's Pretzels and Pretzels, Inc. in 2021 for a combined price of $1.2 billion, Hershey started breaking out snacks as its own business segment in financial reports. And now investors can see that snacks are an increasingly big part of the business. Through the first three quarters of 2023, Hershey's North America Salty Snacks segment accounted for 10.4% of its total net sales.

There's evidence that Buck's out-of-the-box strategy is working out for shareholders. From January 2010 through December 2016 (the full seven years before Buck became CEO), Hershey grew trailing-12-month revenue by 40% and diluted earnings per share (EPS) by 76%.

However, since January 2017, Hershey's revenue is up 50% and diluted EPS is up 177%. In other words, growth has been slightly better since the pivot to snacks started. And profits have gone up considerably.

HSY Revenue (TTM) Chart

HSY Revenue (TTM) data by YCharts

This is exactly what shareholders want to see. Over the long term, profit growth leads to strong stock performance.

Can Hershey keep it going?

Finding growth via acquisitions isn't an easy strategy to pull off. Many companies overpay for acquisition targets. And "synergies" rarely materialize, at least to the extent that management promised. But Hershey seems to be pulling it off better than most.

For example, even though Hershey has spent billions of dollars acquiring other companies, these acquisitions haven't been at the expense of shareholders. The company's debt is being paid back down, the cash position isn't down by a troubling amount, and management has marginally reduced its outstanding share count.

All things considered, Hershey's shareholder value isn't getting destroyed and free cash flow per share is growing at a healthy clip, as seen in the chart below.

HSY Total Long Term Debt (Quarterly) Chart

HSY Total Long Term Debt (Quarterly) data by YCharts

Through the first three quarters of 2023, net sales for Hershey's salty snacks segment are up 17.2% from the comparable period of 2022, making this its fastest growing segment. That said, this segment has only supplied 6% of the company's income -- the profit margins just haven't been as good.

That could change going forward, which is why Hershey may be a stock to watch now that it's trading at a cheaper valuation. With its legacy and its scale, the company does have advantages and expertise that it's hoping will translate to its snack business.

By 2026, Hershey hopes it can boost its overall gross profit margin by 300 basis points -- the difference between its gross margin of about 46% year to date and a gross margin of closer to 49%. Consider that it's on pace for $11 billion in sales this year. That small difference in margin is huge to its overall gross profit.

All of this said, I believe there's a stronger case for holding Hershey stock than buying shares today. The company is pursuing a good strategy with snacks and unlocking better growth and profitability. But I wonder if it will be enough to consistently outpace the average returns for the stock market.

In its long-term guidance, Hershey's management only expects EPS to grow at a single-digit compound annual rate. While that can allow the stock to post positive returns overall and continue increasing its dividend, it might not be enough to beat the market.

Therefore, while I wouldn't buy the shares today, I believe Hershey is a good stock to continue holding for those who already own it.