Hershey's Building Future on Core Brands, Innovation

In a dynamic meeting with trade press editors, top executives at The Hershey Co. outlined the global confectionery company’s vision and strategy, as well as upcoming new product innovation, which is driving momentum in all segments of its business, which includes chocolate, non-chocolate, mints and gum.

Michele Buck, president, North America, described where the company plans to grow, in what categories it will focus and outlined five strategies that will turn the company’s vision into reality. “North America is the foundation for success,” said Buck. “We aspire to be No. 1 in the marketplace there and I’m proud to state that we have regained the No. 1 share in the U.S. after losing it due to consolidation among some of our competitors.”

Buck noted that Hershey’s will also be focusing growth in emerging markets and in confectionery categories that are convenience-oriented and fall along the “snacking continuum – from better-for-you to indulgence” products.

The company’s goal is to increase sales from $6.6 billion in 2012 to $10 billion in 2017. “That’s very doable and achievable,” declared Buck.

The five core strategies that will propel Hershey’s to that number are:

• Deliver predictable, profitable and sustainable North American business.
• Expand geographic footprint in focused markets (such as China).
• Create and expand a consumer-centric portfolio of products.
• Win with talent and knowledge, and create a capable and high performance culture.
• Execute with excellence.

The company’s "excellence in execution" is evidenced in distribution gains across all channels of retailing, according to Buck. In convenience stores, for example, Hershey’s has increased its items per store by 2.3 items (or 3.9 percent) in the last year. Even larger increases have been seen in drug (5.5 items), food (3.1 items) and mass (11.7 items).

While discussing Hershey's insights-driven initiatives for its platform of widely admired iconic brands that reside within an "advantaged category" that offers expandable consumption opportunties with highly impulsive, recession-resistant products, Buck said the company's dedicated, in-house sales force is working collaboratively with related corporate teams to achieve the central goal of "winning with excellence."

Its solid in-store execution is robustly fortified with strategic core brand merchandising, agressive consumer advertising, seasonal celebrations and new product distribution, which when combined with supply chain efficiencies and sustained innovation, propels what Buck says is Hershey's "flywheel," in reference to management consultant Jim Collins' (“Good to Great”) theory of the additive effect of many initiatives that act on each other like compound interest.

During the meeting, Chuck Raup, vice president of U.S. Sweets & Refreshment, also discussed Hershey’s non-chocolate business, which is focused around such brands as Twizzlers, Breathsavers and Jolly Rancher. Raup talked about the innovation that has extended Hershey’s “hand to mouth” category with products like Twizzler Bites and Jolly Rancher Bites. He announced that the company is introducing new packaging that allows instantly consumed products like these to fit into a car’s cupholder, and said to watch for a big announcement of a new global brand at the NACS Show in October.

In regards to its chocolate business, year-to-date chocolate sales for the company are up 7.6 percent so far. “For 2014, Hershey chocolate will focus on our core brands and consumer-driven news,” said Jenn Podhasky, VP of U.S. Chocolate Category for Hershey.

The company launched Kit Kat Minis in May and they are doing “phenomenally well,” Podhasky reported. The category is getting more competitive and cluttered, but Kit Kat and Reese’s Minis are leading share, she noted.

Brookside – a new acquisition by the company that mixes fruit with dark chocolate – is “on track to be our next iconic brand,” Podhasky declared. “We hit our year-one repeat sales rates only seven months into the launch.” Brookside has quickly risen to become the No. 5 dark chocolate brand and Podhasky predicts it will be No. 2 or No. 3 within a year. Later this month, Brookside is set to see its introduction into convenience stores, which should boost its market share position.

Podhasky also spoke about Hershey’s growth in summer/holiday/seasonal chocolate sales. Chocolate bar sales around the S’mores occasion total $130 million, she noted, and Halloween and holiday bar sales have also grown immensely.

In other related news, Podhasky said Hershey’s is relaunching Reese’s Nutrageous bars and will begin advertising the brand in January 2014. Hershey’s miniatures is also getting a relaunch with new, eye-catching packaging around Easter 2014, and Kisses continues to be a healthy and growing brand. Hershey is also making an aggressive foray into the spreads category with a trio of new products that further enhance its new retail products' engines.

Capping Hershey executives' trade press presentations was the well-timed news of Google's announcement of the name of the latest version of its mobile operating system, Android KitKat, after one of America's most beloved confectionery brands, full details of which can be found here.