Hershey still bulking up chocolate with barkTHINS acquisition, more meat snacks coming
- Hershey announced Tuesday its acquisition of Ripple Brand Collective, LLC, owner of premium chocolate snacking brand barkTHINS.
- The company also reported on Tuesday a 5.6% decrease in first-quarter net sales to $1.83 billion, with 1.2 percentage points stemming from currency headwinds. This was the company's third consecutive quarter of sales declines. Net income fell to $229.8 million, or $1.06 per share, from $244.7 million or $1.10 per share last year.
- Hershey also recently said it would take its next step into the world of non-chocolate, better-for-you snacking with the launch of a new line of protein bars sold under the Krave brand, which it acquired last year. This new Krave line expands Hershey's "healthier" snack offerings, which also includes the SoFit brand of protein-based products.
The market numbers shed light on Hershey's better-for-you snack strategy. Since 2010, U.S. chocolate sales growth has seen steady annual declines, averaging at about 4.2% growth through 2015, according to IRI. In that same period, meat snacks sales in the U.S. have increased at about 10.4% a year on average. Hershey, in turn, is positioning its portfolio where the consumers are buying.
The company's North America net sales took a 4.3% dip, and at 85% of total sales, shortcomings in that market hit quarterly totals. The North America market is crucial for Hershey, but the company is facing challenges on two fronts here. U.S. consumers are obviously more health-conscious, and when they do indulge, they are veering toward premium chocolate varieties.
Hershey has made efforts in the premium chocolate market, including the release of Hershey's Kisses Deluxe just before the 2015 holiday season. However, this hasn't been enough of a catalyst for growth to impress investors, and Credit Suisse recently downgraded the company due to declines in sales growth and increases in commodity costs. Both could negatively impact profit margins.
Enter: Ramped-up acquisition strategy. Hershey remains positive about 2016 and expects constant currency sales growth to be around 2.5% for the year, which will include a net benefit from acquisitions. barkTHINS alone is anticipated to make up about 0.5 percentage points of that sales growth. BarkTHINS, a fast-growing company in the premium chocolate sector, could be a boost to shareholders' confidence. But it may not be enough, and Hershey could return to the deal table for more acquisitions.