Hershey plumps up pipeline

by Monica Watrous
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HERSHEY, PA. — Forthcoming launches from The Hershey Co., including York Minis, Hershey’s Spreads and Lancaster Soft Crèmes caramels, are expected to help sustain strong sales momentum for the company in 2014.

“We expect innovation to contribute meaningfully to our net sales growth in 2014,” said J.P. Bilbrey, president and chief executive officer, during an Oct. 24 earnings call with analysts. “As a result, we expect 2014 net sales growth to be within our 5% to 7% long-term target, including the impact of foreign currency exchange rates.”

Slated for a December debut are Hershey’s Spreads, a product line Mr. Bilbrey said he is “personally excited about.” Packaged in 13-oz jars, the sweet, creamy spreads will be available in chocolate, chocolate with hazelnut and chocolate with almond varieties. To-go portion packs are planned for a 2014 launch.

In January, Hershey will introduce Lancaster, a line of soft caramel crèmes based on a line of candies Milton Hershey made 120 years ago, according to the company. In caramel, caramel and vanilla, and raspberry flavors, the candies represent Hershey’s first brand introduction in the United States in 30 years that is not associated with a line extension or an acquisition.

York Minis bite-size peppermint patties will be the latest in Hershey’s hand-to-mouth platform, joining other miniature, unwrapped candies such as Twizzlers and Jolly Rancher Bites, Kit Kat Minis, Reese’s Minis Hershey’s Drops and the Brookside brand of dark chocolate-covered fruit, which Hershey acquired at the end of 2011.

“And then, there’s a whole group of other 2014 products that I haven’t included,” Mr. Bilbrey said. “But I think we’ve got a really full plate of things that we can do, and I continue to believe our consumer-centric approach to the business makes all of these things, as we like to say, stickier than we’re been able to experience in the past.”

Hershey’s competitors are innovating, too. Nestle is set to roll out a peanut butter cup product under its Butterfinger brand. The product resembles Hershey’s Reese’s peanut butter cup, with peanut butter filling in a chocolate shell.

“This wouldn’t be the first time that a product similar to what’s being introduced has been introduced to the market,” Mr. Bilbrey said. “But as I said before, competition is a good thing. News within the category is a good thing, and we’ll all have to show up and do the best we can, and I know that’s what we’re going to do.”

For the quarter ended Sept. 29, Hershey posted net income of $232,985,000, equal to $1.07 per share on the common stock, up from $176,716,000, or 80c per share, during the same period of the previous year. Net sales increased 6% to $1,853,886,000 from $1,746,709,000 last year on the strength of core brands, including Kit Kat, Reese’s and Brookside, offsetting weakness in gum.

“As we look to 2014 and beyond, we will continue to focus on U.S. core brands and leverage Hershey's scale at retail,” Mr. Bilbrey said. “Our international business continues to progress and we are optimistic about the potential to accelerate our international presence behind our disciplined approach to organic investments and acquisitions or joint ventures. We believe the investments we’ve made, and will continue to make, have resulted in an advantaged business model, enabling us to deliver predictable and sustainable results.”
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