Hershey outlines plan to reignite confections category and expand in snacking
Speaking at an analyst day on Wednesday last week, Michele Buck, who began her job as Hershey CEO on the day, said:“We expect to participate more broadly across snacking via both innovation and M&A."
Four core confections brands
Hershey believes it can grow share in the fragmented US snacking market.
It led the US confectionery market with a 31.2% share in 2016, with a 1.9-point lead on its nearest competitor Mars-Wrigley. But it says it is number two in US snacking with a 7.5% market share, behind market leader PepsiCo (14.6%) and ahead of third-placed Mars (7.3%).
The company will focus on core confectionery brands that represent $5bn in annual sales: Hershey’s, Reese’s’, KitKat, Kisses and Icebreakers.
Its other brands, such as Twizzlers, Brookside and PayDay, will help Hershey cater to multiple usage occasions such as on-the go, sharing and gifting, said Buck.
Hershey plans to trim its product portfolio and be more disciplined in future launches.
“Some of the innovation we’ve launched over the past several years hasn’t been as sustainable as we would have liked,” said Buck.
The company will explore new snack categories for its brands as it has already begun to do with Reese’s and Hershey’s Snack Mix.
The company will introduce a ‘lighter eat’ snackfection later in Q2 with Hershey’s and Reese’s Crunchers and also plans a Hershey’s and Reese’s Popped Snack Mix.
Buck added: “We believe M&A will provide a valuable role in diversifying our portfolio going forward.”
She said the company would continue to acquire smaller trending brands – as it did with meat snacks firm Krave and chocolate snacking company BarkThins - and may also look to larger firms to expand Hershey’s capabilities.
'Appreciations line' to expand seasonal offer
Hershey is also hoping to capture seasonal opportunities beyond Valentine’s, Easter, Halloween and Christmas and has reported early success with Kisses birthday-themed products.
“In 2017, we’ll expand into yet more occasions with an ‘Appreciations’ line under Hershey’s Reese’s and some of our other brands,” said Buck.
The CEO said Hershey would continue to outspend its competitors in advertising support for its brands. Last year, the firm spent 7% of net sales on advertising, compared to a 4.8% average across the US food category.
Simple ingredients, QR codes and origin project
Buck said future innovation would follow the firm’s simple familiar ingredients strategy.
The company will also add portion-controlled items and equip its entire 2,200 product portfolio with Smart Label QR codes for consumers to access detailed information online, said Buck.
The company is also planning a project named ‘Source Map’, allowing consumers to locate the geographic origin of each ingredient.
Hershey claims it will reinvent the shopping experience in candy aisles with standup packaging displays.
“The current shopping experience for candy continues to be challenging with 25% of consumers walking away without buying because they can’t find what they are looking for,” said Buck
Hershey has renovated some of its brands with standup packaging, which Buck claimed could increase branding and lead to sales lifts. “Shopper insights show that the current lay down candy section is frustrating to shop and can deter purchases,” she said.
The CEO added: “We’re focused on winning with Amazon and other key omni-channel partners [such as Walmart.com, Staples,com and Grocery.com].”
The company estimates it has around a 45% market share in candy, mint and gum (CMG) e-commerce market in the US with these four online retailers.
Buck said the company would leverage its partnership with online meal kit company Chef’d and try to capture sales for wedding occasions to grow online sales.
Confectionery ‘remains relevant’
Buck said the US confectionery category had recorded a +2.2% compound annual growth rate (CAGR) in the last five years, but slowed to just +0.4% in 2016 due to the macroeconomic environment, a shorter Easter and key retailers reducing confectionery displays.
“The category faced headwinds in 2016, however, the growth of indulgent snacks…gives us confidence that this category remains relevant,” she said.