Dive Brief:
- New chocolate products, a successful Easter holiday and cost-cutting measures brought Hershey's net sales to $1.88 billion in Q1, an increase of 2.8% over the same period last year, according to the company's earnings report. The company beat profit expectations for the eighth straight quarter.
- Sales in the North American market, which represent the bulk of the company's business, increased 2.7% to a total of nearly $1.68 billion. Hershey's U.S. market share in the candy, mints and gum segment inched upwards by 0.4 percentage points, giving the company an industry-leading 31.5% share of the category.
- "In 2017, we remain focused on driving our North America core brands forward and achieving trial and repeat targets related to the launches of Hershey's Cookie Layer Crunch bars, Reese's and Hershey's Crunchers candy and Reese's Crunchy Cookie Cups," CEO Michele Buck said in the earnings report. "Additionally, the branded snack mix and snack bites products that launched last year continue to do well, enabling us to expand our breadth across the snack wheel and capture new usage occasions. We anticipate that our innovation, as well as our consumer marketing plans, will enable us to build on our first-quarter U.S. CMG [candy, mints and gum] market share gains."
Dive Insight:
In her first earnings report as CEO, Buck is starting to find success with the things she wanted to focus Hershey on — innovation and cost savings.
Buck, who took the helm of the chocolate giant on March 1, has long touted new ideas as the key to future growth. The new products that have buoyed the company's growth — Cookie Layer Crunch Bars, Crunchers candy and Reese's Crunchy Cookie Cups — all bring subtle changes to the company's tried-and-true favorites in the confectionery realm. Innovations like these are key for making Hershey's offerings seem fresh and new without alienating longtime consumers.
But Hershey isn't just relying on new candy products alone. Buck has also said that she wants the company to become more of an all-purpose snacking powerhouse. Brands like Krave, barkTHINS and SoFit have helped broaden what consumers think of when they hear the company's name. Buck has said she wants to use mergers and acquisitions to continue expanding into the snacking segment. It's still unclear how Hershey will make moves on that front.
Hershey has also added several consumer-friendly initiatives that could help foster strong relationships with shoppers. Responding to demands for more transparency, the company has implemented online maps that give consumers detailed information about the origins of ingredients in their Hershey's Milk Chocolate with Almonds and Reese's Peanut Butter Cups. Additionally, the company just announced more front-of-package information and calorie reduction efforts on some of its standard and king-size candy products that could help ease health concerns.
All is not sweet for Hershey, however. In March, the company announced it was going to slash 15% of its global workforce in the next two years — a total of about 2,700 jobs. The new earnings report doesn't detail where and how these jobs will be eliminated, though analysts believe they will focus on Hershey's struggling confectionery business in China. According to the earnings report, chocolate retail sales in China were flat in Q1 while net sales increased about 4%.
Despite growth, Hershey's revenues were slightly behind where analysts predicted. In early trading, the company's share price was down about 1%.