New products show promise for Hershey

by Monica Watrous
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The Hershey’s Spreads line includes chocolate, chocolate with hazelnut, and chocolate with almond varieties packaged in 13-oz jars.

 

HERSHEY, PA. — Hershey’s Spreads and Lancaster caramels are “off to a good start” since their January launches, the Hershey Co. said.

The Hershey’s Spreads line includes chocolate, chocolate with hazelnut, and chocolate with almond varieties packaged in 13-oz jars. To-go portion packs with graham cracker sticks are set for a spring launch.

“Retailer response has been extremely positive, driving spreads category growth of around 10%,” said J.P. Bilbrey, president and chief executive officer, during an April 24 earnings call with financial analysts. “Category growth is being driven by the chocolate spreads sub-segment, which is up about 40%. Most major retailers have accepted all three flavors of Hershey’s Spreads. Advertising and couponing started in February and is driving initial trial and brand awareness, which we’ll leverage when we launch the Hershey’s Spreads instant consumable product in May.”

The Lancaster brand of soft crème caramels are available in three flavors: caramel, caramel and vanilla, and raspberry. Advertising for the brand began in mid-February, and distribution is on track, the company said. Lancaster gains offset declines in Jolly Rancher and Twizzlers Bites to lift Hershey’s non-chocolate candy market share during the quarter.

Lancaster soft crème caramels are available in three flavors: caramel, caramel and vanilla, and raspberry.

 

“While early, Lancaster results are similar to where Brookside was at this stage of the launch,” Mr. Bilbrey said.

Despite the promising performance of the new products, Hershey delivered below-expectations results during its first quarter, reflecting a soft retail environment and a shift in timing of the Easter holiday.

The company gained market share within the U.S. non-chocolate candy, mint and gum categories but faced an unexpected decline in chocolate market share.

For the first quarter ended March 30, net income increased 4.4% to $252,495,000, equal to $1.16 per share on the common stock, which compared with $241,906,000, or $1.11 per share, in the prior-year period.

Net sales advanced to $1,871,813,000, up 2.4% from $1,827,426,000 the year before.

The company expects to achieve net sales growth of 5% to 7% in 2014 and a 9% to 11% lift in adjusted earnings per diluted share.

More innovation and higher levels of advertising are planned for the rest of the year.

“Given the investments we continue to see in the category in the form of innovation and consumer marketing, including the new product news and related activity we have planned over the remainder of the year, we continue to expect the candy and mint category to increase 3.5% to 4.5% in 2014,” Mr. Bilbrey said. “We’re particularly excited about our innovation that ramps up in May with the launch of York Minis and Hershey Spreads instant consumable items and the third-quarter lunches of Ice Breakers Cool Blast chews and Brookside Crunchy Clusters.”
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