Hershey is expecting the chocolate category to increase advertising spend in the next year to promote a growing number of innovations, which will leverage category growth.
Hershey already expects its own 2013 advertising to grow 22% to 23% compared to last year, it said in its third quarter (Q3) conference call yesterday.
Chocolate category advertising to grow, says Bilbrey
Hershey CEO John P. Bilbrey said during the call that increased advertising spend across the chocolate industry would “underpin the overall health of the category”.
“We hear in the marketplace, there will be other people who are looking at innovation. I think news in the category is good. And I also wouldn't be surprised if we don't continue to see the overall advertising spend grow in the category. And in an expandable consumption category, that's good for everybody."
The Hershey chief added this could mean increased investments in digital marketing. Speaking at the National Confectioners Association’s (NCA) State of the Industry Conference in February, Seth Mattison, ‘change agent’ for Bridgeworks, said that confectioners should connect on social media and allow criticism to tap the influential Millennials generation aged 13-31.
Mondelez has been particularly active in digital advertising. It recently partnered with Twitter to explore ways to up engagement with its core brands on the social network. It also signed a deal with Google to boost its presence on mobile platforms such as cell phones and tablets.
Butterfinger Peanut Butter Cups backed by Super Bowl ad
Net sales - $1.85bn (+6.1%)
Reported net income - $233m (+32%)
Adjusted earnings per share - $1.04
2014 net sales forecast - +5%-7%
Others are pumping advertising behind new launches. Nestlé USA for example recently unveiled Butterfinger Peanut Butter Cups , which will be backed by a Super Bowl commercial to challenge category leader Reese’s, made by Hershey.
Hershey’s CEO said: “This wouldn't be the first time that a product similar to what's being introduced has been introduced in the market. But as I said before, competition is a good thing.”
Ads help Hershey grow C-store and China sales
Hershey’s ad spend was up 22% in Q3 compared to the same period last year.
The firm said the increased outlay had helped it grow convenience-store chocolate and mint sales, 7.9% and 5%, respectively in Q3. Advertising in China is also helping the company expand into new cities.
The firm’s chief financial officer David W. Tacka said: “We continue to believe that the advertising activities are a key factor in our sales growth and in our momentum in our focused international markets.”
Hershey grew net sales 14% in in international markets in Q3 compared to the same period last year, driven by China, Mexico and Brazil.