Hershey Geared for Growth
Making confections more convenient and healthful and venturing outside its candy comfort zone into the snack segment figure prominently in Hershey’s strategic plans for 2004 and beyond.
By Mary Ellen Kuhn
Hershey, Pa. – Marketers here in the nation’s chocolate capital have some pretty healthy growth aspirations. Or one might say that they have aspirations for healthful products growth.
Both statements are accurate.
Hershey’s 1 Gram Sugar Carb bar — targeted to the fast-growing ranks of the carb-conscious — will make its retail debut in March. It is the first launch from Hershey’s newly formed Snacks Division, and company marketers see the carbohydrate-reduced bar as a product with considerably more than mere niche-market sales potential thanks to the estimated 10 million to 40 million Americans currently pursuing carb-reduced diets.
“We think this is going to be an important entry for us,” Andrew England, Hershey’s recently appointed vice president and general manager of the Snacks Division, told Confectioner last month during an interview on a frosty day in Hershey.
But the single-digit temperatures outside did nothing to diminish the energy radiated by England and Chief Marketing Officer Thomas Hernquist as they spoke of Hershey’s plans to leverage its core strengths into new confectionery and snack products.
Shortly after that interview, the company announced that it would venture into the nutritional bars segment with a rollout in the third quarter based on the Zone Diet nutritional program. (See page 15 for additional information.)
Hershey’s move to form a Snacks Division in the fourth quarter of 2003 should have come as no surprise to company watchers. When Hershey Chairman, President and CEO Rick Lenny came on board in 2001 after three years as president of Nabisco Biscuits Co., he was quick to suggest that the candy maker would explore opportunities in the $50 billion U.S. snack market.
Lenny’s desire that Hershey move boldly into new market segments has not diminished. “We have a clear message from Rick that he would like to expand our portfolio quickly and boldly,” said England.
In the past year, Hershey has been working hard (and successfully) to position itself for profitable growth by selling off non-core brands, rationalizing SKUs, and leveraging its core brands with new products and limited edition line extensions such as Reese’s white chocolate peanut butter cups.
Hernquist laid out Hershey’s strategic focus in this way. “We’ve seen some real positive top-line momentum and share growth,” he said. “And going forward, we’re going to accelerate our top-line growth. Domestically, there are two primary areas where we’ll accelerate top-line growth. The first is our core confection business. The second is to pursue new ventures in adjacent snack markets.”
Hershey’s 1 Gram Sugar Carb Bar takes the company into a new section of the store — the nutritional products aisle. “We will most likely get placement in both the confections and nutrition bar sections, but our focus will be on the nutrition aisle,” England stressed. “Our research shows that if you’re looking at people who are shopping for low-carb products, they’re not shopping the candy aisle,” he said. “They’re shopping the nutrition aisle.”
“We think nutrition is an area where we can be extremely successful,” England continued. “If you look at the nutrition aisle in general, about two-thirds of the flavors are candy flavors. The No.1 flavor is chocolate.”
And who better to go after chocolate lovers than Hershey, he reflected. The success of Hershey’s sugar-free candy line, unveiled last year, has demonstrated the company’s ability to successfully court the health-conscious crowd.
“The performance of those products exceeded our expectations,” said Hernquist. “Four of the top five sugar-free SKUs, according to IRI [Information Resources Inc.], are Hershey’s.”
Neither England nor Hernquist would reveal what’s up next from the Snacks Division or name the “adjacent snack markets” into which the company is headed. Hernquist said only that, “We’re evaluating a number of different categories.”
Keeping it convenient
Meanwhile, Hershey will remain focused on delivering convenient confectionery options.
“There’s a tremendous need and demand for more convenient products in the marketplace,” said Hernquist. “Today, consumers have less and less time, they’re eating on the run, and there’s a lot of growth in the channels of distribution that provide products for convenience-minded shoppers.
“Going forward, focusing on convenience — via packaging and new product forms — will be a key thrust for us,” he said.
Hernquist cited the example of Swoops — curved chocolate slices packaged in single-serving plastic cups that come three per canister — and Ice Breakers Liquid Ice — round, liquid-filled mouth fresheners in a purse- or pocket-friendly package — as examples of the kinds of fun and easily portable products Hershey will continue to offer.
Expanding Hershey’s horizons
Is America’s candy category leader shooting for snack sector prominence as well as confectionery dominance? Definitely, Hernquist and England agreed.
“Hershey has a rich history of producing and marketing great tasting products,” said Hernquist. “The Hershey and Reese’s brands have outstanding appeal and a deep emotional connection with consumers. We have the opportunity to take those brands, our heritage, and our history, and our ability to make and distribute great tasting products to branch into other categories of business.
“Our products are available in over two million points of distribution,” Hernquist continued. “We like to say that we have ubiquitous distribution. So if you’re looking for a snack, Hershey products are there.”
Added England, “Ten years from now, we want to be just as well known for snacks [as for candy].”