Hershey Foods has announced plans to raise prices in order to boost revenues. The US candy maker has been experiencing slow growth lately. Hershey hopes that consumers will remain loyal despite this hike in chocolate prices – and it may well be right. However, more innovative measures, such as the launch of its new Jolly Rancher Fruit Chews product, will be needed to keep consumers interested in the long term.
In a bid to outpace the projected 3-4% growth of the US candy market, Hershey Foods Corporation has announced plans to raise its prices and expand its product portfolio. The US number one candy maker plans to increase the price of its bagged chocolate candies by 7% towards the end of this year, whilst simultaneously launching Jolly Rancher Fruit Chews and another yet undisclosed new product.
The move comes just months after Hershey’s acquisition of Nabisco’s breath-mint and chewing-gum business, bought for $135 million last year. Following poor sales of non-chocolate items in 2000, Hershey is desperate to improve profits. While the Nabisco acquisition is expected to boost overall sales this year, Hershey is clearly looking for other avenues to exploit and the price increase on chocolate candy is an effective and easy path to follow. CEO Ken Wolfe appears to be relying on consumer support given the fact that the last increase occurred six years ago.
Part two of Hershey’s strategy to increase profit margins is already under way. Jolly Rancher fruit chews, due for launch in June, will go head to head with Mars’ Starburst brand. The new candy will be sold in packs of nine individually wrapped square chews and marketed under the slogan ‘The Chew Is New’. Backed by a large TV and print campaign and free product sampling, Hershey is banking on the chew becoming a huge hit. In addition to the new chew, the candy maker has also revealed plans to launch a second new candy, which it claims will “fill a very significant gap in our new product offering”.
Whether these new products will be a success, only time and consume taste buds will tell. What remains certain however, is the overriding need for new product innovation within the candy market. Price increases alone are unlikely to drive growth if consumers are getting bored with the product.
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