Company News

Hershey Takes Consumer-Centric Approach, Hikes Ad Spending

PayDay, Skor offering Cash 4 Gas; Reese's featuring Dark Knight tie-ins

HERSHEY, Pa. -- The Hershey Co. said it is launching initiatives designed to deliver its long-term goals for net sales and earnings per share growth. After completing an in-depth market structure and category segmentation review, the company is targeting key consumer segments that will drive growth.

The company said it is aligning resources in support of this approach and expects total advertising to increase by at least 20% in both 2008 and 2009. The increased support will be focused on core brands that currently generate approximately 60% of total U.S. net sales. This targeted allocation [image-nocss] and disciplined approach, combined with an increase in U.S. retail coverage, will enable the company to consistently meet its net sales and earnings objectives in the future.

Hershey will focus its increased dollars on brands including Reese's, Hershey's Kisses, Kit-Kat, Twizzlers and York, said an Ad Age report. "To reignite our core, we dramatically increased levels of consumer support behind much-sharper portfolio roles and better brand-positioning," Hershey CEO David West said yesterday in a meeting with investors cited by the publication. "Our spending is now clearly on the core. Results already show the impact of our spending increase."

West said spending will increase 20% to $155 million to $160 million in 2008, and vowed a "20% plus" increase in 2009. He noted this level will represent a 55% compound growth rate over the company's 2006 spending, when he said the company wrongly focused on cookies and new brands such as Take 5.

He had promised increased advertising in January, but did not give specific details. West now said the company has been through months of research, during which time it interviewed "tens of thousands of consumers," and identified six distinct buying groups, such as "loyal indulgers" and "engaged, exploring munchers," the report said.

"Our extensive consumer research validates our strategy of increasing advertising and consumer investment behind the core U.S. brands that offer the greatest potential for growth," West said in a statement. "We will combine this focused approach with consumer-centric innovation and continued international expansion to achieve our long-term net sales growth rate of 3% to 5%. Longer term, as marketplace trends improve and targeted consumer initiatives are executed, the company expects to generate earnings per share growth of 6% to 8%."

Hershey's first priority has been getting behind its biggest brand, Reese's, with the "Perfect" campaign. West said the campaign has resulted in a 4% sales increase in food and convenience stores. The company is also launching Reese's Whips for health-conscious consumers and Reese's Clusters for the indulgers.

The company will next turn its attention to the Hershey's chocolate brand, and target "younger women who look to chocolate as a source of simple happiness and comfort," West added. Hershey has also been targeting women looking for an indulgence, and an upgrade, with its newly launched Bliss brand, said the report.

The company expects full-year 2008 net sales growth of 3% to 4% and earnings per share-diluted from operations of $1.85 to $1.90.

Click hereto view an "Investor Update" presentation (pdf). A listen-only conference call replay is available at (800) 990-8093.

In other Hershey news, the PayDay and Skor candy brands have announced the "Cash 4 Gas" promotion, an on-pack, instant-win game that will give away cash for more than 100,000 gallons of free gasoline this year. From June through December 2008, anyone who purchases specially marked PayDay Bars and Skor Bars can look inside the wrappers to see if they have instantly won one of more than 5,500 cash prizes; 50 grand-prize winners will win free cash for gasoline for one year valued at $2,340, while other winners can score $45 cash towards a tank of gasoline. More than $360,000 in cash prizes will be given away through specially marked packages of PayDay Bars and Skor Bars.

The company kicked off the promotion yesterday morning at a 7-Eleven in Romeoville, Ill., by surprising motorists with a free tank of gasoline. By the end of the giveaway, 12 gasoline pumps dispensed more than 5,000 gallons of free fuel into 380 tanks of customers. The motorists were given PayDay Bars and Skor Bars to enjoy as their tanks were filled.

Specially marked PayDay Bars and Skor Bars will be available wherever candy is sold, while supplies last.

Hershey is supporting the in-store promotion with a two-month radio campaign in 36 major markets. The radio campaign includes radio advertising, on-air announcements and contests to drive awareness.

PayDay Peanut Caramel Bars are a combination of roasted peanuts and caramel. Skor Toffee Bars are buttery bars of crunchy toffee coated in milk chocolate.

Earlier this month, Hershey also introduced products celebrating the release of Warner Bros. Pictures' The Dark Knight with Special Edition Batman-themed products. Special Edition Reese's Milk Chocolate Peanut Butter Bats and Reese's Dark Peanut Butter Bats feature a bat shape to mark the debut of the film, arriving in theaters July 18. Reese's Pieces Candies are masking themselves in a Batman-themed black and blue color scheme, and Kit Kat Dark Knight Bars feature an imprinted Bat-Signal on standard and king-size bars. The Special Edition Batman products hit store shelves this month.

Hershey's The Dark Knight collection also invites consumers to "Find the Bat-Signal & Win" with a new instant-win promotion. One grand-prize winner will receive a customized, Batman-themed, hand-built MV Agusta F4 motorcycle valued at $35,000. Specially marked packages feature instant-win game pieces and the chance to win a variety of The Dark Knight-themed prizes, including 10 official Joker Henchman Masks and five home theater systems, each including a widescreen TV, speakers and audio components.

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