Filed under: Products and services, Marketing and advertising, Hershey Co (HSY), Wrigley, (Wm) Jr (WWY)
Hershey (NYSE: HSY) is having growth problems. Not only is it tough just navigating this high-inflationary period, but it’s difficult keeping up with the competition. Consumers have a lot of candy choices, and although Hershey is a huge brand name in confections, it thinks it can do better in the marketing department. According to this Wall Street Journal (subscription required) piece, Hershey intends on implementing a 20% increase in spending for promotions.
This double-digit jump in marketing is a smart move, but it won’t be simple to digest. With the aforementioned inflationary pressures on the rise, Hershey is going to be sufficiently challenged to push growth while balancing the upward trends in input costs. But is there really a choice here? When you have a super brand like Hershey running into trouble, the thing you need to do is get out there and prop up the inherent equity of the product portfolio.
Yet, there’s a bit of a conundrum here, I think. Hershey needs to get people to buy its delicious candies (I’m certainly a fan of the awesome Reese’s Peanut Butter Cup). Which demographic adores sweets? Younger kids. They would have represented a great group for growth opportunities, but Hershey has to be careful about marketing too much to this demo since the country has, rightly so, been focusing on healthy alternatives to fatty foods. Although Hershey has been trying to make some of its portfolio healthier, the flagship brands will always be, one assumes, sugary and full of empty calories. In fact, Hershey is more than aware of this issue, as this corporate link demonstrates.
Hershey’s management will have to be as creative as possible to produce innovative advertising campaigns that are both fun and aware of who is being targeted. If it were up to me, I’d go after the college-age demo via a crafty, humorous TV campaign, something really funny, like those messing-with-Sasquatch ads. Differentiating its brand is more important than ever considering the current marriage between competitors Mars and Wrigley (NYSE: WWY).
As for the stock, it isn’t far from a 52-week low, and even though I believe very long-term investors will do well with it considering its yield, I think the shares will be stuck in the basement for a lengthy period of time. Once Hershey gets its act together, things will obviously improve for shareholders, but for now, Hershey is hitting a difficult rough spot.
Disclosure: I don’t own any company mentioned; positions can change at any time.
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