- Hershey is looking to divest its Krave jerky brand along with its artisan chocolates Scharffen Berger and Dagoba lines, Hershey CEO Michele Buck told analysts during the company's first-quarter earnings call.
- Buck said a sale would allow the manufacturer of confections and snacks to more effectively prioritize its spending toward salty snacks and nutrition bars that Hershey has acquired in recent years.
- "These are great brands that continue to resonate with consumers, but they require a different go to market model that we believe is better supported by other owners," Buck told analysts in a Seeking Alpha transcript.
For most of its 126-year history, Hershey was known for its iconic candy bars, Kisses and Reese's cups. but as consumer eating habits change, the company has worked aggressively to expand its reach into other snacking occasions. While the company continues to innovate in sweets — including the rollout of Kit Kat Duos coated in mint and dark chocolate or York Peppermint Pattie Thins to cater to the calorie-conscious crowed — Buck has made no secret about her desire to turn Hershey into a snacking powerhouse.
A key part of Buck's shift into other snacking categories has been through acquisitions. In 2017, it purchased Amplify, the parent company of popcorn maker SkinnyPop, for $1.6 billion, the largest deal in the company's storied history. Its also acquired the manufacturer of Pirate's Booty cheese puffs and protein bar maker One Brands.
At the same time, Buck has been outspoken about the challenges facing Krave, a jerky brand that has struggled as consumers drifted toward mainstream options where growth is more robust and a proliferation of competitors in the premium segment squeezed profit margins. Hershey wrote down the Krave brand, which it acquired for $220 million in 2015, by $108 million earlier this year.
As for the artisan chocolates, Hershey is best known for its mainstream brands that resonate with a broader segment of consumers in aisles, checkouts or for Halloween and other holidays — Scharffen Berger and Dagoba are far more niche with much smaller market shares. It makes sense for Hershey to focus its attention in areas where it has far more expertise and can promote and innovate the brands to ensure they resonate with a broader-range of consumers.
As Hershey looks to join other CPGs in adapting to changing consumer tastes and trends, it has to be careful not to get distracted by the challenges facing Krave or the smaller chocolate brands that bring in small amounts of revenue compared to its other popular brands. The revenue Hershey generates from the sales, as Buck noted, will help it prioritize its newer salty snacks and bar operations.
While Buck wasn't CEO at Hershey when the company acquired Krave, she reportedly advocated for the deal. Hershey appears to have learned from the misstep in buying Krave to sharpen its acquisition prowess when it comes to other deals. Its recent acquisitions center on more mainstream brands that could benefit from Hershey's market and distribution expertise. As consumer eating habits and preferences continue to change, Hershey will need to change and evolve like it has for more than a century. While not all acquisitions will work, Hershey has no choice but to broaden its reach into new snacking categories.
"Our largest focus for M&A is snacking and really on filling out the places that we don’t currently meet demand,” like better for you and or savory, Buck told Food Dive in 2019. "We’re not there yet, but we’re on our journey (to becoming a snacking powerhouse). And I don’t think I would ever declare that we’re there."