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Hershey sales rise 7% in Q2 on strong US candy marketplace

By Oliver Nieburg+

26-Jul-2012

The Hershey Company has posted improved sales and profits in its second quarter (Q2) results driven by a robust US candy, mint and gum market.

Hershey’s net sales were up 6.7% on the same period last year to $1.4bn, while profits rose around 4% to $136m.

Solid US CMG category

Hershey president and CEO John P. Bilbrey said: “Through the first half of the year, the U.S. candy, mint and gum (CMG) category and Hershey marketplace performance has outpaced the historical category growth rate.

“Specifically, Hershey U.S. CMG retail takeaway for the 24 weeks ended June 16, 2012, in the expanded All Outlet Combined plus convenience store channels which accounts for approximately 90 percent of our U.S. retail business, was up 6.1 percent, resulting in a market share gain of 0.3 points.”

During the quarter, Hershey launched Simple Pleasures in the US; a reduced calorie product that it claims contains 30% less fat than leading milk chocolates.

Price points up for Halloween

Hershey added that its seasonal prices would rise as a result of pricing action taken last year.

Bilbrey said: “We have good visibility into the orders for the upcoming Halloween and Holiday seasons where consumers will see higher price points. Seasonal specific advertising in the second half of the year will be greater than last year."

Advertising and International

The Hershey chief added that input costs had been higher during the quarter, but this had been expected.

The company plans to up its expenditure on marketing. Advertising spending rose 10% on last year during Q2, and Hershey expects this growth to continue throughout the full financial year as it looks to gain traction in the US and international markets.

The company will also soon open a R&D centre in China as announced last year to develop China and Asia-Pacific products.

It also plans a new manufacturing site in Asia at an as yet unnamed location, as announced in a webcast last month.

Since 2007, Hershey’s business in China has grown faster than any other market with an 88% compound annual growth rate (CAGR).

Input costs and outlook

The company said that it expects $10m higher input costs for its upgrade to its West Hershey plant through its Project Next Century program, taking the total investment to $160m.

Bilbrey added that overall input costs for 2012 would be higher than the previous year.

The company reaffirmed its sales outlook for the full year. It expects net sales to grow between 7 and 9% on last year. 

However, it has increased its adjusted earnings per share-diluted growth from 10-12% to 12-14%.

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