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The Marketplace Reader

Hershey’s not melting away yet

Richard Core Jul 23, 2008

A few chocolate snobs in our office turn their noses up at Hershey bars, but — at the risk of sounding like a pitch man — there’s still something special for me in sliding off that dark brown paper, unwrapping the foil and breaking off a piece — plain or with almonds. (I also had the fun as a kid of visiting Hershey, Pa. and touring the factory — so, more sentimental value.) As a result I’ve been interested in following the company’s challenges as it’s seen its costs rise and its market share fall in recent years.

Today, Hershey’s 2nd-quarter earnings report showed signs it may be turning things around.

“The Hershey Co. said it earned $41.5 million, or 18 cents a share, for the three months ended June 29, compared with last year’s second-quarter profit of $3.6 million, or a penny per share, as it spent heavily to transform its production lines. Sales rose 5 percent to $1.1 billion, slightly above analyst estimates.” That’s from an Associated Press report you can read on Yahoo.

Company President and Chief Executive David J. West said a new marketing plan, marked by a 30 percent increase in spending, is driving the company’s better performance in the relatively slow-growing, but dominant U.S. candy market.

“We’re not satisfied with where we are, but we’re pleased that we’re starting to get some traction,” West told analysts on a conference call.

The story quotes an analyst who expresses concern that the “increased spending on sales and marketing will hurt margins, that competitive pressure could curtail sales and the rising price of its premium products could dissuade repeat customers.”

The increased marketing must be behind what we’ve been seeing in grocery stores here in L.A. At the Ralphs chain, Hershey displays are everywhere with big boxes of bars standing near most of the check-out lines.

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