Hershey to Meet Mars Challenge with Marketing

June 17, 2008 9:26:03 AM PDT
Faced with competing against a combined Mars-Wrigley, candymaker Hershey Co. said Tuesday it will pour money into marketing its biggest brands to invigorate stagnant sales in the slow-growing U.S. market. However, the president and CEO of the company behind Hershey's Kisses and Reese's would not give any hint at an investor meeting in New York as to whether the nation's largest candymaker is looking into a deal with Cadbury PLC. Some analysts expect Hershey to seek such a move to keep pace with Mars Inc., its closest competitor in the chocolate sector.

Hershey will consider the right acquisition if it comes along, CEO David J. West said, and is actively looking at entering more fast-growing foreign markets, such as Russia.

For the time being, Hershey will boost advertising by at least 20 percent in both 2008 and 2009, focusing the money on core brands that generate about 60 percent of the company's domestic sales.

"We are more confident than ever that our core U.S. business can grow," West said.

He also said the Hershey, Pa.-based company's extensive customer research showed that 25 percent of customers leave candy aisles without buying, which he said represents a huge opportunity for Hershey to add sales if it can help customers find what they're looking for faster.

In April, the privately held Mars, which makes owns Snickers and M&Ms, said it is buying mint and gum company Wm. Wrigley Jr. Co.

Hershey sales stagnated in 2006 after it slashed its marketing budget, and Mars began taking away market share. Hershey's efforts to right itself have been complicated by spiraling commodity costs, which West said will be the company's biggest challenge in 2009.

Hershey reaffirmed its 2008 earnings outlook, expecting earnings of $1.85 to $1.90 per share and sales to rise 3 to 4 percent during the year.

Over the long term, Hershey said it has a long-term sales growth of 3 to 5 percent and earnings per share growth of 6 to 8 percent.

Its shares fell 50 cents, or 1.4 percent, to $35.37 in midday trading.


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