Hershey hit by higher dairy costs

In a trading statement released yesterday, Hershey reiterated its 3-4 per cent growth estimate in net sales but said diluted EPS from operations were now expected at 4-6 per cent. The chocolate manufacturer, which owns the Reese's and Hershey's Kiss brands, pointed to higher dairy prices as the main factor in dampening its forecast. Last month, the US Department of Agriculture raised the cost of dairy products in a move expected to affect many confectioners adversely. Hershey also cited higher internal spending as a contributing factor. The company has been busy over the past year, as supply chain and processing collaborations with Barry Callebaut have increased its global influence and new product launches - particularly in the niche sectors of dark and single origin chocolates. This increased investment in product development and overseas operations is expected to dent profits when they are announced later this year. Chairman Richard H Lenny said: "During 2007, the focus has been on restoring momentum within Hershey's US business. The key drivers are accelerating core brand growth, introducing innovative new products, and improving retail effectiveness. To deliver upon these goals, we've significantly increased the consumer and customer investment profile." ​​The company has been turning its attention to the Chinese and Indian markets in particular, teaming up with processors in the regions. Earlier this year, Hershey said it expected results from its 'Global Supply Chain Transformation' project to benefit the company long-term, with predicted savings of $170 million (€129.7m) - $190 million (€144.9m) by 2010.