Feature Article 842

A Sweet Treat

Mmmm! I don’t often get to write about something that tastes good—like the products of our Spotlight Stock, The Hershey Company (HSY). So, I’m going to enjoy this opportunity!

The company’s founder, Milton Hershey, apprenticed for four years with a confectioner before starting his first candy company. His first two efforts as an entrepreneur failed, but his third try in 1894 became Hershey. And, as they say, “the rest is history.”

Today, Hershey is one of the world’s leading confectioners, in a global market of $210.3 billion. According to Alllied Market Research, that market is forecast to reach $270.5 billion by 2027. Chocolate—of course—claims the largest market share—about 35.2%.

In the U.S., we chocolate lovers have pushed sales of confectionaries to $295.9 million.

Globally, we each consume about $185 of sweets annually, according to Statista.com. I don’t know about you, but I’m doing my part to keep those numbers rising!

COVID-19 hurt candy makers, who saw event cancellations, as well as production interruptions due to new coronavirus protocols. Mitigating the impact of the pandemic, however, was the fact that more people were at home, and home baking and consumption of snacks increased. And like many other businesses, confectioners also saw a rise in e-commerce sales. Hershey certainly did; the company noted that digital sales in March 2020 were 80% of the company’s entire yearly projection for e-commerce!

Hershey's US Share Positions

Source: IRI ending 2020 YTD through 12/31/2020, Category market share positions and share; Pirate’s Booty reflects share of better-for-you puffs

Now, Hershey is tackling the post-COVID world, seeking to grow its company and product lines, both internally and by acquisition. The company just announced that it will buy the better-for-you (BFY) confectionery brand Lily’s, a maker of low-sugar chocolate products.

The deal confirms Hershey’s strategy to offer more reduced-sugar, organic-based alternatives. And, best of all, the transaction is estimated to actually be accretive to Hershey’s earnings in the first full year post the closing of the deal.

The brand is strong, momentum is increasing, especially in North America, and that enabled Hershey to beat analysts’ estimates on both the top and bottom lines in the first quarter. Hersheys continues to invest in advertising, in-store merchandising and programming and innovations, such as Kit Kat Thins and Zero Sugar products.

All in all, it looks like it’s a good time to be “sweet” on Hershey.

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