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Hershey: Tentative on innovation?

By Kacey Culliney , 30-Jul-2012

Hershey carefully bites into innovation efforts...
Hershey carefully bites into innovation efforts...

Hershey’s CEO has said that pacing is important in innovation and while efforts have been “far more disciplined” than in the past, it is still committed to new product development (NPD).

The confectionery giant posted a 7% sales rise last week for its second quarter (Q2) with profits up to $136m.

During Q2, Hershey launched a new chocolate brand Simple Pleasures in the US; a reduced calorie, indulgent product. This launch market the first brand launch since 2007. In January 2012 it also launched a ‘Crunch ‘N Chew’ version of its Jolly Rancher candy brand and last year Reeses Minis.

While expanding its portfolio forms part of its growth strategy, expanding geographical footprint has been invested in heavily. Last month it announced plans for a new Asian manufacturing facility to push its core brands and a new R&D centre is set to open soon in China.

John P. Bilbrey, president and CEO of Hershey, said that amid surging efforts in innovation from other plays, Hershey’s has “probably been far more disciplined” in innovation, compared to work in the past.

Innovation across the chocolate and confectionery sector has increased and “we want to participate in that but importantly we want to ensure we have sustainable innovation,” Bilbrey said in the Q2 earnings call.

“We believe innovation is important to the category, there’s no doubt about that… But it’s really about pacing. We believe in the right level of innovation,” he said.

Innovation life-cycle is extremely important, he said, and it is about driving new products and developments through two or three years successfully. “We don’t want to create so much churn that it is unprofitable.”

“If innovation adds to our core business over time, that is a good thing,” he added.

Innovating amid competitors

“We have tough competitors and they’re doing well,” he said, but this environment is healthy for all players.

The CEO hinted that innovations were “in the pipeline” for its chocolate business.

“We expect to continue to introduce things at the right pace and hopefully that resonates well with consumers,” he said.

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