Hershey Co (HSY)

History and Background

The Hershey Company, founded by Milton S. Hershey in 1894, began as a confectionery business in Lancaster, Pennsylvania. It has since grown into a global leader in chocolate and snack products. Key milestones include the introduction of the iconic Hershey's Milk Chocolate Bar in 1900, the establishment of the model town of Hershey, Pennsylvania, and significant expansions into international markets and snack categories.

Core Business Areas

• Confectionery: This segment encompasses the production and sale of chocolate and non-chocolate confectionery products, including iconic brands like Hershey's, Reese's, Kit Kat (in the U.S.), and Kisses.
• Snacking: This segment focuses on a broader range of snack products, including fruit-based snacks, snack bars, and savory snacks, often acquired to diversify the company's portfolio and reach new consumer occasions.

Leadership and Structure

The Hershey Company is led by a Board of Directors and a senior executive team. The current CEO is Michele Buck. The company operates through various business units and geographical regions, reporting on its performance through segments like 'North America' and 'International'.

Key Offerings

• Hershey's Milk Chocolate Bar: The flagship product, a classic milk chocolate bar. Competitors include Mars Wrigley (Snickers, M&M's), Nestlu00e9 (Butterfinger), and various private label brands. Market share data is proprietary, but it's a dominant force in the US chocolate bar market.
• Reese's Peanut Butter Cups: A highly popular peanut butter and chocolate candy. Competitors include Mars Wrigley (combining chocolate and peanut butter offerings) and smaller specialty candy makers. Reese's holds a significant share in its category.
• Hershey's Kisses: Individually wrapped bite-sized chocolates available in various flavors. Competitors include Mars Wrigley and Nestlu00e9. Kisses are a staple in many households and for gifting.
• Kit Kat (US License): The wafer-based chocolate bar is licensed by Hershey in the U.S. Competitors include other wafer-based snacks and confectionery brands. Its market performance in the US is strong due to brand recognition.

Industry Overview

The confectionery and snack industry is characterized by strong brand loyalty, evolving consumer preferences towards healthier options, and a focus on impulse purchases. The industry is also influenced by raw material costs (cocoa, sugar), global supply chain dynamics, and marketing effectiveness. The rise of e-commerce and direct-to-consumer models is also shaping market access.

Positioning

Hershey is a dominant player in the North American confectionery market with strong brand recognition and a vast distribution network. Its competitive advantages include its iconic brands, efficient manufacturing, and a well-established supply chain. The company is actively working to expand its snacking portfolio and international presence to diversify and capture broader market opportunities.

Total Addressable Market (TAM)

The global confectionery market is estimated to be over $100 billion, with the snack market being even larger. Hershey is a significant player in the North American segment of this TAM, with ongoing efforts to increase its share in international markets and the broader snacking category.

Key Competitors

• Mars Wrigley (U.S. Stock Symbol: Not publicly traded)
• Nestlu00e9 S.A. (U.S. Stock Symbol: NSRGY)
• Mondelez International, Inc. (U.S. Stock Symbol: MDLZ)

Competitive Landscape

Hershey enjoys strong brand loyalty and a dominant position in the US confectionery market, particularly with its iconic chocolate brands. Its key advantage lies in its extensive distribution network and brand recognition. However, it faces stiff competition from Mars Wrigley, a privately held giant with a broad portfolio, and Mondelez, which has a strong global presence in snacks and confectionery. Nestlu00e9, while a global food giant, has a less dominant position in the US confectionery space compared to its other offerings.

Dot's Pretzels

• Year: 2021
• Acquisition Price (USD millions): 250
• Strategic Rationale: To expand Hershey's savory snack portfolio and capitalize on the growing pretzel market, complementing its existing confectionery offerings and reaching new consumer occasions.

Lily's Sweets

• Year: 2021
• Acquisition Price (USD millions): 425
• Strategic Rationale: To gain a leading position in the rapidly growing sugar-free and better-for-you confectionery segment, appealing to health-conscious consumers.

Historical Growth: Hershey has demonstrated consistent historical growth, driven by organic sales increases, strategic pricing, and successful product innovations. Acquisitions have also played a role in expanding its portfolio and market reach. The company has navigated market shifts by adapting its product mix and marketing strategies.

Future Projections: Analyst projections for Hershey's future growth generally anticipate continued modest single-digit percentage growth in net sales, supported by its core confectionery business and expansion in snacking. Investments in international markets and new product development are expected to be key drivers. EPS growth is also projected to be steady.

Recent Initiatives: Recent initiatives include the acquisition of Dot's Pretzels to bolster its savory snack portfolio, investments in digital capabilities and direct-to-consumer channels, and efforts to expand its presence in international markets. The company is also focusing on portfolio optimization and driving efficiencies.

Hershey Co is a financially robust company with a dominant position in the North American confectionery market, driven by iconic brands like Reese's and Hershey's. Its consistent dividend history and strategic acquisitions, such as Dot's Pretzels, demonstrate a commitment to growth and diversification into snacking. However, the company must remain vigilant against evolving consumer preferences for healthier options and manage raw material cost volatility. Expanding its international footprint remains a key area for future development.

Data Sources:

• Hershey Company Investor Relations Reports (Annual Reports, Quarterly Earnings)
• Financial news outlets (e.g., Wall Street Journal, Bloomberg, Reuters)
• Market research reports (e.g., Statista, Euromonitor)
• Financial data providers (e.g., Refinitiv, S&P Capital IQ)

Disclaimers:

This analysis is based on publicly available information and is intended for informational purposes only. It does not constitute financial advice. Market share data and financial projections are estimates and subject to change. Investors should conduct their own due diligence before making any investment decisions.