As Kristen Riggs makes her way to her office at Hershey each day, she is reminded of the company’s storied roots in sweets: The street lamps have giant Hershey Kisses covering the light bulbs and the roads are adorned with names, such as Chocolate Avenue and Cocoa Avenue. Her office is in the original factory that founder Milton Hershey completed in 1905.
But as the president of the 129-year-old company’s fast-growing salty snacks division, Riggs focuses her attention toward pretzels, puffs and popcorn as she tries to replicate the success Hershey has achieved with its iconic sweet brands, such as Reese’s and chocolate bars.
“This is really a catalyst moment for the company. This is the moment where we’re establishing Hershey as both a sweets and salty company,” Riggs said in an interview ahead of an event this week at its headquarters in Pennsylvania to outline its salty snacks strategy to Wall Street analysts. “It’s a new time for Hershey. It’s an exciting moment where we’re going back to our roots as makers and builders and innovators.”
For much of its history, Hershey has been known for its portfolio of confections that generated $8.5 billion in sales in 2022. But under the leadership of Michele Buck, the company’s CEO since 2017, Hershey has transformed itself into a “snacking powerhouse” by going all in through a series of acquisitions to establish a commanding presence in the $36 billion salty snack category.
Hershey purchased Amplify, the parent company of popcorn brand SkinnyPop, for $1.6 billion in 2017, the largest deal in the company’s history. It also acquired Pirate’s Booty cheese puffs a year later, and in 2021 doled out $1.2 billion for fast-growing Dot’s Homestyle Pretzels and its Midwest co-manufacturer Pretzels Inc.
The acquisitions have rapidly given Hershey “one of the strongest snacking portfolios” in the salty category, Riggs said, and turned the division into a major revenue generator, contributing about 10% of the company’s more than $10 billion in annual sales. Hershey is aiming to grow its salty snacks division to about 20% of the company’s sales, about $3 billion, within a decade, she said.
“It is amazing how quickly we've gone from zero to 10% of sales and getting to the point of scale,” Riggs said. “We really have hit our stride.”
Aiming for the market leaders
The size of the salty division, which last year posted nearly $1.2 billion in sales, places Hershey in a position where it can justify spending money to build out manufacturing capacity, increase supply chain capabilities and tap into additional synergies that come with having a bigger portfolio operating in the same category.
In addition to increasing sales through wider distribution and ramping-up of production, Hershey plans to address consumer needs by rolling out smaller individual packaging for lunches and on-the-go snacking to complement the large-size bags of pretzels and popcorn commonly used at parties and other gatherings. It also is targeting new varieties of Dot’s, which is known for its bold flavors, including Southwest and Honey Mustard.
Brittany Quatrochi, an analyst at Edward Jones, said the move into salty snacks has been “a good avenue of growth for [Hershey] ... [that] complements the portfolio they have on the confectionery side.”
The advancement also has provided Hershey with more opportunity to “leverage” its salty brands by combining them with products on the sweets side of its business. Hershey, for example, has debuted Reese’s Popcorn drizzled with peanut butter and milk chocolate as well as Dot’s Cinnamon Sugar Pretzels.
“There are a lot of occasions where having the scale of both is complementary and beneficial,” Riggs said.
In the fourth quarter alone, retail sales of SkinnyPop increased 19.7%, boosting Hershey’s market share in the ready-to-eat popcorn category by 1.3%. Dot’s retail sales were even stronger, growing 32.3% as the brand continued to gain distribution and acquire new buyers.
The lone challenge came with Pirate’s Booty, which declined 3% due to lower promotional levels as Hershey worked to reduce supply chain complexity and improve profitability.
Both the pretzel and popcorn categories are valued at about $2 billion each, according to Hershey, compared with $7 billion to $10 billion for other salty categories like chips. The belief that permissible salty snacking segments, such as pretzels and popcorn, can grab share away from other products is a big reason why Dot’s and SkinnyPop are bright spots for growth at Hershey.
“This is really a catalyst moment for the company. This is the moment where we’re establishing Hershey as both a sweets and salty company.”
President of salty snacks, Hershey
SkinnyPop, with $500 million in annual sales, is in only 15% of households, while Dot’s, at $300 million, is in 9% of homes, Hershey estimated. SkinnyPop has grown to become the second-best-selling brand by retail sales in ready-to-eat popcorn, and Dot’s, founded more than a decade ago, is third in pretzels.
“When we think about the salty business right now, both the popcorn and pretzel category has a lot of untapped potential,” Riggs said. “There’s an opportunity ... to have leading brands” in these areas.”
Analysts praised Hershey’s careful expansion into salty. The food giant, they said, has smartly acquired brands that immediately benefited from its marketing expertise, close relationship with retailers to boost distribution and ability to innovate.
Erin Lash, a director of equity research in the consumer sector for Morningstar, said Hershey is avoiding markets that have large, well-established brands, such as the chips and crackers, and instead focusing its attention on more fragmented categories. She said the company has been “very strategic” building up its salty portfolio through acquisitions.
“These are very much plug-and-play type of deals to the extent that these aren’t turnaround brands,” Lash said of the brands Hershey has purchased. “These are strong brands that can operate independently on their own and Hershey’s just providing that muscle.”
Riggs said Hershey remains on the lookout for other salty-snacking brands to buy. The Pennsylvania company is prioritizing well-established businesses with $100 million or more in sales, that have promising, sustainable growth prospects and that could benefit from the CPG manufacturer’s ability to innovate the product and expand distribution.
“If there were categories, and there were brands, we definitely would be interested in those opportunities for growth,” said Riggs, who noted Hershey is closely watching several innovative brands in salty snacks. “I wouldn't have told you in 2017, when we bought SkinnyPop, that we would be in pretzels. I don’t know what the future holds, but we’re always evaluating and thinking about that opportunity.”