Last month, a long-awaited verdict came in: The Hershey Co. was not for sale.
So declared the chairman of the Hershey Trust, former Pennsylvania Attorney General LeRoy S. Zimmerman, in an opinion column in the Harrisburg, Pa., Patriot-News.
“Simply put: We will not sell the Hershey Co.,” he wrote.
There had been some speculation that Cadbury Plc might buy the company, but Zimmerman’s statement put that idea to rest. The trust controls nearly 80% of Hershey’s stock, which lost almost 12% of its value the week after the column appeared.
The drop reportedly put the chocolate maker’s stock at the lowest point it had experienced since April, when rival Mars Inc. announced it would buy Wm. Wrigley Jr. Co. for $23 billion, creating the world’s largest confectionery company.
The deal marked the latest in a long line of challenges that David J. West, Hershey’s new president, chief executive officer and director, has had to contend with since assuming his position last year.
West moved into the hot cocoa seat in October after his predecessor, Richard Lenny, abruptly announced his retirement.
Since then, Hershey reported a 61.7% drop in profits in 2007 as compared with the previous year, due in part to charges resulting from a supply chain overhaul and flat sales.
Still, West’s determination to compete aggressively in the U.S. market — where Hershey’s is No. 1 in chocolate, with a 43% market share — has not been daunted.
The candy maker plans to wield a $155 million to $160 million advertising budget — which is up about 20% from last year’s and is set to rise another 20% or more during 2009, West told SN. The increased support will be focused on core brands that currently generate approximately 60% of total U.S. sales. They include the Reese’s brand and Hershey’s newly introduced Bliss and Starbuck’s chocolate lines.
West noted that Hershey’s “feet on the street” retail sales force coverage has also increased by about 30%, and he’s optimistic about the strong in-store merchandising support Hershey’s has placed around NASCAR, the new Batman movie, the Olympics and the Hershey’s S’mores brand.
“We see some great opportunities as we invest in our core brands and continue to grow our international business,” West told SN. “We are confident in our long-term growth goals of 3% to 5% in sales and 6% to 8% in earnings per share.”
Hershey’s is hopeful that supply chain efficiencies will bring it closer to its goal.
The chocolatier is preparing to better utilize production capacity by developing short-run, custom production capabilities by 2010. Custom production enables consumers to personalize Hershey’s products for special events.
— GEORGE ELLIS