Hershey taking measured approach to acquisition, innovation

by Monica Watrous
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HERSHEY, PA. – Portion control may best describe the Hershey Co.’s approach to innovation and acquisition.

“I am far more interested in the quality of our expansion than I am the quantity of the expansion,” said J.P. Bilbrey, president and chief executive officer, during a July 25 call with financial analysts to discuss second-quarter results.

During the quarter, the company gained market share in every channel and segment in which it competes: chocolate, non-chocolate, mint and gum. Core brands of Hershey’s, Reese’s and Kit Kat scooped up share, as did the Brookside brand of dark chocolate-covered fruit, which Hershey acquired at the end of 2011.

“Brookside has been a benefit from a financial marketplace perspective,” Mr. Bilbrey said. “You have a couple of things going for this brand. You have the hand-to-mouth occasion. You have the halo effect of the antioxidant value of dark chocolate. Then, the super fruit packed in the centers – that resonates with consumers.”

Hershey plans to expand the brand, which currently includes three varieties of dark chocolate with fruit juice-based centers: acai with blueberry, pomegranate and goji with raspberry.

“We have a new initiative that will be coming up that you’ll see in 2014, that begins to look at different types of centers and things around the same brand concept.”

But for all of Hershey’s success with Brookside, the company isn’t bullish to buy up more businesses.

“I really think about the quality of the activities we have as being important,” Mr. Bilbrey said. “So, as we look at assets, it really has to be the right assets versus just racing to have something. We’ve really learned over time that if we don't execute against our basic business model that we are succeeding behind in each of these markets, we just don’t do that well. You don’t have a sustainable position. So I actually believe that for us, it’s so important that we continue to respect the fact that we’ve got this very, very precious North American business, which is a real engine for us. We don’t want to get out of balance or ahead of ourselves in a way that we can’t recover.”

That quality-versus-quantity philosophy applies to the company’s innovation strategy.

“While you may see us do different things, our real focus is on trying to be very, very consumer concentric, do fewer, bigger, better innovation initiatives that will be sustainable,” Mr. Bilbrey said. “So again, I want to innovate — I want to emphasize, it’s not how many things we do, as much as it is, how successful are the things that we do?”

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