US: Hershey makes M&A priority

By Michelle Russell | 26 June 2012

Hershey said that internationally, China and Mexico will be Hersheys primary focus

Hershey said that internationally, China and Mexico will be Hershey's primary focus

US confectionery giant Hershey has said acquisitions will be a priority for the company as it looks to expand in North America and developing economies.

Hershey, which yesterday (25 June) outlined a five-year plan to expand its five core brands, said bolt-on acquisitions in emerging markets are an "attractive" proposition for the company.

"Our focus is on developing markets where the conditions are ripe for strong category growth," Hershey's chief growth officer Michele Buck told attendees at the firm's investor conference. "Some of the most highly attractive markets to us are China, India, Asia and Indonesia, the Middle East and Brazil.

"As we approach these markets we have priority countries, based both on market attractiveness factors like size, growth and infrastructure, as well as the timing of Hershey's ability to win in the market place."

Buck, however, said that internationally China and Mexico will be Hershey's primary focus over the next five years.

"We already have a significant position in Mexico. Our success to date in China makes me confident that it will be an important market for us in the coming years."

Buck described China as a "win market" for the firm. It expects the country to become Hershey's number two market behind the US over the coming five years.

To support this growth, the company said it will open its first R&D innovation centre in Shanghai in October this year.

"This will allow us to leverage deeper insight into the local consumer and establish strong relationships with local universities and vendors, creating new capabilities, innovation opportunities in Asia and well as reverse innovation back to our other geographies," Buck said.

President and CEO John Bilbrey said sales gains in Mexico, Brazil and China are all up "solid double digits", adding that lower sales consumption of confectionery in these markets compared to developed markets, offers "significant opportunities" for capturing growth.

He added: "This landscape leaves room to capture growth because confectionery is growing rapidly in each of these markets. Confectionery growth is robust in China, India Eastern Europe and Latin America.

"The global confectionery market remains fragmented, it is the least consolidated of any category around the globe. There is room for us to capture growth organically or via M&A. What makes these geographies attractive are the estimated growth rates. Double digits in Brazil, Latin America and in India and China 9%," he told analysts.

Hershey yesterday reaffirmed its growth targets and said it has the strategies in place to support long-term net-sales growth of 7% to 9% and adjusted EPS growth of 8% to 10%.

Sectors: Confectionery, Emerging markets, Financials, Mergers & acquisitions

Companies: Hershey

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