Dive Brief:
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Hershey said sales during the fourth quarter fell 1.6% to about $1.94 billion, versus $1.97 billion for the year-ago period. Net income for the quarter rose to $181.1 million, or 85 cents per diluted share, compared with $116.9 million, or 55 cents per diluted share.
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The chocolate maker blamed the timing of shipments and its fourth-quarter 2016 debut of Cookie Layer Crunch for disproportionately boosting sales, leading to an expected decline in sales during the most recent period. It also posted a drop in international sales, which fell 5.4% to $265 million.
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The Pennsylvania-based company said it expected full-year net sales to jump between 5% to 7% and organic net sales for 2018 to be up about 2% from 2017.
Dive Insight:
Hershey expects great things from its purchase of Amplify Snack Brands, the maker of SkinnyPop popcorn, Tyrrells potato chips, Oatmega protein bars and Paqui tortilla chips. CEO Michele Buck said she was "very excited" about the acquisition since it gives Hershey a meaningful presence in the fast-growing warehouse salty snack aisle.
"We intend to bring scale and category management capabilities to this key sub-segment allowing us to capture more consumer snacking occasions with a broader portfolio of brands," she said.
When the $1.6-billion Amplify deal was announced in December, Hershey said it was expected to produce $20 million in annual synergies during the next two years due to cost savings and portfolio optimizing. It was just the latest move by the company to bulk up its presence in the snack space. The company also bought meat snacks maker Krave Pure Foods in 2015 and acquired Ripple Brand in 2016, the parent company of better-for-you chocolate snack maker barkTHINS.
"We will continue to invest in our core brands and build on our capabilities and strategies to drive growth as we work towards our vision of being an innovative snacking powerhouse," Buck said in a statement. "We believe these initiatives will benefit the company over the long term and enable us to achieve our goals."
Hershey reported that its snack innovations — Cookie Layer Crunch Bar and Hershey's and Reese's Popped Snack Mix and Dipped Pretzels — continue to do well. Sales of its core chocolate brands such as Reese's and Kit Kat were up 2% in the fourth quarter and 5% during 2017.
Innovations such as last year's introduction of Hershey's Gold, the company's first new candy bar in 22 years, appear to be successfully driving growth, even though U.S. sales in all product categories were down nearly 1% to $1.7 billion in the fourth quarter.
While that was blamed on the timing of shipments and the disproportionate sales boost from the 2016 fourth-quarter Cookie Layer Crunch debut, the company needs to continue shoring up its sales both here and abroad.
Still, Hershey knows that while snacking consumers may turn to its popular candies to indulge, they increasingly want healthier items with ingredients they recognize. The Amplify purchase, the largest for the 124-year-old company, was a major step to diversify the business while keeping it focused in its area of expertise. It would not be a surprise to see Hershey continue with its recent strategy of purchasing more brands and introducing new versions of its iconic sweets.