Hershey is embracing the fact that Americans are snacking more.
“As a snacking company, this creates tremendous opportunity for us,” said President and CEO Michele Buck at the company’s investor presentation in New York City on Wednesday.
The candy maker is the second largest U.S. snacking company after PepsiCo (PEP), tackling a $103 billion market that is growing, countering the view that only healthy foods are seeing growth.
Buck says that isn’t the case. While consumers are spending more on better-for-you snacks like produce, nuts, and snack bars—indulgent snacks like ice cream, candy, and salty snacks are also posting increases. What’s struggling is the so-called center of plate foods that are mainstays for breakfast, lunch and dinner. Data from research firms like NPD Group back what Buck is saying: Americans are still eating three meals a day, but the size of those meals are decreasing to make room for snacking.
“We all know we are in a period of consumer preferences changes,” Buck acknowledged, adding Hershey must evolve the company’s portfolio via innovation and targeted acquisitions to better address changing snacking needs. Disruptive food startups are often leading on innovation, putting pressure on Big Food players to launch more new products. Buck said her vision is to ensure the maker of the namesake chocolate bar, Twizzlers, and Reese’s is an “innovative snacking powerhouse.”
Buck officially took the reins at Hershey (HSY) on Wednesday morning after being named to those positions late last year after her predecessor John P. Bilbrey announced his intention to retire in 2017. At the presentation, Buck touted the strong sales growth for some of Hershey’s massive brands like Reese’s and Kit Kat, sees distribution gains for recently acquired brands like Krave and barkTHINS, and wants to expand core candy brands into other snacking occasions beyond the core candy experience.
Hershey is aiming to sell investors on Buck’s vision just about six months after snacking giant Mondelez (MDLZ) walked away from a $23 billion takeover offer. Hershey has predicated sales would increase by 2% to 3% this year, better than some Big Food rivals like General Mills (GIS), Kellogg (K) and Campbell Soup (CPB), which are all projecting roughly flat or declining sales. But Hershey on Tuesday announced it would trim thousands of jobs in a cost-cutting move meant to boost operating profit margins and also lowered its long-term sales growth target.
One area for work for Buck and her team is improving candy presentation on retail shelves. Buck pointed out that one out of every four customers leaves the candy aisle without a purchase because they can’t find what they are looking for, blaming bags of candy that are stacked in an undesirable manner. Hershey is going to start selling stand-up boxes of candy to make it easier.
Buck seems keen on pursuing bolt-on deals to give the portfolio a continued makeover. “We believe M&A will play an important role in diversifying our portfolio going forward,” she said. Buck helped steer the recent acquisitions of beef jerky maker Krave in early 2015 and healthier snacking brand barkTHINS. Both are poised to grow, but Buck admitted that the company was being cautious about how much shelf space it wants to add for those brands. That is a strategy to avoid adding too much shelf space to the point where it can dilute the brand cachet for a once-hot startup.
