Hershey CEO Dave West today (23 July) acknowledged the US confectioner’s past mistakes in the premium chocolate category but insisted the business was ready for when demand for upmarket lines returns.
Premium chocolate sales in the US have slid during the recession but West said Hershey is preparing for an expected recovery in consumer confidence and would focus on brands like Hershey’s Bliss and Scharffen Berger.
Speaking to analysts, West admitted Hershey had erred with upmarket brand Cacao Reserve and had not “differentiated” the product from lines already launched in the segment.
West, meanwhile, claimed that its premium chocolate venture with Starbucks had suffered for being launched just as consumer confidence in the US slumped.
“We do think the premium segment will gain and grow again,” Hershey said. “There was a lot of me-too items but the segment is now more appropriately-sized. [In recovery], there will be a much slower build. Consumers will be more selective as they trade up.”
Earlier today, Hershey upped its full-year sales and earnings forecasts after seeing second-quarter revenues climb almost 6%.
Net turnover rose 5.9% to US$1.17bn for the three months to 5 July as a hike in advertising spending and price increases boosted sales.
West said Hershey’s advertising expenditure would rise by up to 45% in 2009. The investment is one of the confectioner’s tactics, along side selected promotions and coupon offers, to shore up sales ahead of price increases this Hallowe’en.
The Hershey chief admitted the price increases would be the highest seen over Hallowe’en for at least three years but he insisted the hikes would benefit the company, retailers and even consumers.
“As long as we can continue to grow the category in this way, then everyone wins. We’re still at acceptable pricing points with great brands,” he said.