Financial Results

Hershey reports Q2 growth, continuing to target ‘snackfection’ trend

Hershey's net sales rise for the first time this year ©iStock/tupungato

Hershey has posted 3.7% net sales growth in its second quarter results as it gears up to launch a 'snackfection' item later this year.

Hershey reported yesterday its Q2 net sales increased 3.7%, reaching $1.64bn compared to $1.58bn for the same period of time last year. 

The results surpassed Hershey’s expectations as North America and international sales each improved, said its president and CEO, John Bilbrey.

“Performance partially benefited from the timing of select merchandising and program net sales that occurred in the second quarter that were initially expected to ship in the third quarter,” Bilbrey said.

Candy, mint and gum category expected to be strong

Hershey said the non-seasonal candy, mint and gum (CMG) category grew in the second quarter. However, the category growth below the company's expectations given the amount of activity in the marketplace.

For the year-to-date up to July 9, 2016, CMG, category growth was 0.8%, according to Hershey. For the 12 weeks ending July 9, 2016, CMG category growth was over 1.2%. Hershey’s US CMG market share in the second quarter was 30.8%, off 0.7 percentage points compared to the same period last year.

“Over the remainder of 2016, our CMG in-store merchandising, new products and consumer investment will be strong and should result in a sequential improvement in retail takeaway performance,” Bilbrey said in a statement.

Launching ‘snackfection’ items

As the snack category continues to grow, many confectionery companies have started tapping the category to boost their core confectionery businesses.

According to a recent webinar hosted by National Confectioners Association, market research firm, Spins, said the snack segment is worth around $72bn, having grown 2.5% last year.

The combined segment of jerky and meat snacks has the highest growth rate with 26.4% year-on-year growth, compared to energy bars with a 13% year-on-year growth; refrigerated salsa and dips with 9.5%; and nuts seeds dried fruits and vegetables, 8.3%, said Spins.

Hershey acquired snacking chocolate brand barkTHINS earlier this year, according to this site. The company reported the acquisition was a 0.6 percentage point benefit for its second quarter this year.

“We’re particularly excited about the upcoming launch of Reeses Pieces Peanut Butter Cups, Krave Meat Bars and a yet to be announced snackfection item in the fourth quarter,” Bilbrey added. “We’ll also continue to rollout the Kit Kat Big Kat, Reese’s Snack Mix and Hershey’s Snack Bites products.” 

Outlook: 1% net sales increase

Hershey has downgraded its full-year guidance. It now estimates 2016 net sales will increase around 1%. It had forecast 1.5% growth when announcing its Q1 results in April.

“We’ll also have greater levels of in-store merchandising and displays as we leverage large promotional events such as the [2016] Summer Olympics and Reese’sNCAA Football College Game Day,” Bilbrey said.

Hershey recently rejected Mondelēz’s $23bn acquisition bid, and decided to open a new flagship store (triple the size of the current one) in New York City’s Times Square next year. 

What is a 'snackfection'?

According to Hershey's spokesperson, Jennifer Sniderman, Snackfection is a term the company coined to describe the intersection of snacking and confection. "barkTHINS is a terrific example of this as are our Snack mixes and Snack bites products. The feedback we’ve received from consumers to date is that sweet snacking - think chocolate and textural ingredients as well as other food value inclusions such as nuts, seeds, cookie pieces, berries, etc.,-are high value components that are the gateway to permissible indulgence throughout the day," she said.

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