US-based confectioner Hershey has announced plans to open a new factory in Asia as it embarks on a ‘five core brands’ strategy to realise potential in selected emerging markets.
Hershey made the announcement in a webcast today where it said it would focus on five core brands: Hershey’s, Reese’s, Hershey’s Kisses, Jolly Rancher and Ice Breakers.
It said that its future growth would come in its home markets and selected International markets, namely China, Mexico and Brazil.
Details of the new site in Asia, including the location, have yet to be confirmed.
The company highlighted potential in China in its webcast.
China growth engine
Since 2007, Hershey’s business in China has grown faster than any other market with an 88% compound annual growth rate (CAGR).
The company plans to open an R&D centre in Shanghai to develop China and Asia-Pacific products as announced last year
In its webcast, Hershey highlighted seasonal sales potential in China, particularly through Chinese New Year.
The company plans to launch its Hershey brand in China as well as Ice Breakers and Jolly Rancher.
Since 2008, Hershey has held a joint venture with Korean confectioner Lotte to manufacture in Shanghai, which it says has helped to leverage local products.
The company said it had repacked Hershey’s Kisses for the Chinese market and said the packaging innovation has helped Kisses sales grow 97% year-on-year since its launch.
Other developing markets
Mexico and Brazil were identified as Hershey’s two other focus markets for growth outside the US and Canada.
The company recorded an 8% and 16% CAGR in Mexico and Brazil respectively.
In Mexico, the company plans to launch the Reese’s brand, while it hopes to introduce Ice Breakers to Brazil.
Hershey international business currently accounts for around 16% of its sales. However, it plans international markets outside the US and Canada to account for 20% of sales by 2017.
India: a participatory market
The company placed less emphasis on India, among the fastest growing chocolate markets worldwide, amid local media reports that it plans end its joint venture with Godrej.
Hersehy CEO John P Bilbrey said that Cadbury has an entrenched position in the market, making market entry to the chocolate category difficult. He said that India would be a ‘participatory market’ where Hershey would take a new tact by varying its product portfolio.
Hershey reaffirmed its outlook for 2012, projecting a full year net sales increase of 7-9%.
The company recorded $6.1bn sales in 2011.