Gone are the days when just being a chocolate company guaranteed you sweet success. Today, the U.S. chocolate business must deal with larger and more diverse competition (U.S. chocolate grew at a rate of only 0.7% this year, according to Nielsen) and market issues like the rising price of cocoa.
"Confectionery companies are realizing they lived in a bubble — a privileged category, isolated from the day's trends. There has been a wake-up call that no category is immune to the challenges facing the food industry," said Nicholas Fereday, executive director of food and consumer trends at Rabobank.
So Hershey has devised a plan: Take its strength as the No. 1 chocolate company in the U.S. and use it to reinvent itself as a snacking company.
To put it another way, Hershey is taking some very familiar advice: "Keep it simple." The company is doing this not only by targeting snacking, but by streamlining its candy business to cut costs.
Hershey will stop production of certain sizes and varieties of candy, and the company may eliminate holiday assortments made for specific retailers and instead focus on selling a smaller number of specialty candies for distribution nationwide, reported MarketWatch (April 26).
The company "leaned into some areas of the business to drive revenue that we think have created complexity," said Hershey's CEO Michele Buck. In the current business plan, Hershey could be obliged to deliver some 500 different display styles to stores, but "with a couple tweaks we could get that number in half and generate massive efficiency," she said.
And as the U.S. becomes a snacking nation, Hershey wants to take a much bigger bite out of the $88 billion snack industry. The company is setting out to make its own classic chocolate products more snackable, and buy new snack brands, some without any chocolate, reported CNBC (April 24).
The company adopted a simple approach to SkinnyPop popcorn maker Amplify Snack Brands, which it bought in early 2018. Hershey is organizing differently than in its past acquisitions by maintaining Amplify's management and headquarters in Austin, TX, which will be the new center of its small brand strategy. SkinnyPop's scale will provide a bigger base as Hershey gets more at home in the snacking aisle through acquisitions and new products like its Hershey's Popped Snack Mix.
"SkinnyPop has continued to lead that market, they just have," said John Foraker, CEO of Once Upon a Time and former CEO of Annie's, who sold the business to General Mills. "[Hershey is] smart to keep it separate. Leave their entrepreneurial team there, provide the resources they need and just stay out of their way."
If Hershey stays the course, I think it will find that not only is simplicity sweet, but so is success.
Sarah writes for the weekly Food Institute Report and the daily news update, Today in Food. She also writes and edits the Food Institute’s annual publication The Food Industry Review and assists with The Demographics of Consumer Food Spending.
Sarah has more than 15 years of experience as a writer and editor, with a well-rounded knowledge of the food industry and business-to-business research content. Her background includes an editorial role at Convenience Store News magazine, and she has worked for Nielsen, the USA Today Network and Bauer Publishing.
Sarah is currently working on her MBA at Rutgers University. She can be reached at email@example.com to talk about anything food-related.
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