Milling & Baking News Corporate Profiles - 2017 - 92

Company Overview

The Hershey Co.
Investing to keep pace with the evolving consumer

he Hershey Co. is investing heavily to keep
pace with the rapid changes occurring at
retail. The Hershey, Pa.-based chocolate
maker is "doubling down" on e-commerce, said
Michele Buck, who became president and chief
executive officer at the beginning of the year.
"What we now want to do is expand our portfolio so that we can participate in even more
snack occasions and ensure that we have the
right portfolio and channel development to
maximize those opportunities," Ms. Buck said
during an earnings call in July. "You will see us
both doing snacking innovation and also continuing to evaluate and consider M.&A. as a lever in that growth agenda as well."
An ideal acquisition candidate for Hershey
is a brand or company that complements its
core confectionery portfolio and go-to-market
capabilities, said Patricia Little, chief financial officer. In recent years, the company has
acquired businesses such as Krave beef jerky
and barkThins snacking chocolate, and "by
learning from each of them we have improved
our M.&A. due diligence and integration capabilities," Ms. Little said during an investor
conference in March.
Recent innovation from the Hershey Co. blurs
the lines between snack and confection. Following last year's launch of Hershey's Cookie

Chief executive officer -
Michele Buck

92 \ October 2017

Layer Crunch candy bars, the company is introducing more "snackfection" products such as
Hershey's Cookies 'n' Crème Popped Snack Mix,
with crunchy chocolate cookies, mini pretzels
and chocolate-drizzled popcorn.
The company also has set a goal to provide
easy-to-read nutrition information on front-ofpack for all standard and king-size confectionery products by the end of 2018. In addition, the
company said 50% of its total portfolio of standard and king-size confectionery products will
have 200 calories or fewer by the year 2022.
Also under way at Hershey is a multi-year
restructuring plan announced in March to improve operating margin. The program includes
a reduction in global workforce, supply chain
optimization, a streamlined operating model
and reduced administrative expenses.
The company anticipates the program will
result in total cumulative pre-tax charges of
$375 million to $425 million, including onetime employee separation benefits of $80
million to $100 million, with the portion of
non-cash program costs expected to be between $200 million to $225 million. Hershey
expects cash savings to reach an annual runrate of between $150 million and $175 million by the end of 2019.
The company also will pare back its investment in international markets, where it generates only a small portion of its revenues.
"While we still believe strongly that our targeted emerging markets will provide long-term
growth, the uncertain macroeconomic environment in many of these markets is expected to
continue," Ms. Buck said during the March investor conference.
Through these efforts, Hershey executives
hope to achieve an adjusted operating profit
margin of 22% to 23% by the end of 2019, versus 20.4% in 2016, Ms. Buck said.
"We expect to grow our top line in the range
of 2% to 4% annually," she added. "This is less
than our previous target of 3% to 5% and reflects key learnings and the realities of today's
uncertain U.S. consumer environment and macroeconomic challenges in emerging markets." CP

The Hershey Co.
net income
in millions

2016

2015

2014

$720.0

$513.0

$846.9

The Hershey Co.
net sales
in millions
2016

$7,440.2

2015

$7,386.6

2014

$7,421.8

The Hershey Co.
share price
per share
$117

$107

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