Moskow: Changes afoot at Hershey?

by Eric Schroeder
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The Hershey Co. has pulled out of the 2016 CAGNY conference.

NEW YORK — The Hershey Co. has pulled out of the 2016 Consumer Analyst Group of New York conference and instead will conduct its own analyst day later in 2016. The announcement prompted Robert Moskow of Credit Suisse to speculate in a Dec. 11 report that bigger changes may be afoot at the Hershey, Pa.-based chocolate maker.

Robert Moskow, Credit Suisse
Robert Moskow, Credit Suisse analyst

“This decision will lead to a fair degree of speculation on the fate of c.e.o. J.P. Bilbrey and whether the company will participate in the growing industry trend toward consolidation,” Mr. Moskow wrote. “We find it highly unlikely that the Hershey Trust (which controls 80% of the stock) would ever consider selling the company or entering a merger that would give up its control. It is possible that the Trust would consider diluting itself to enter a merger or a joint venture with a strong international player (perhaps with Ferraro?), but this is just speculation on our part.”

In October, Hershey opted not to give 2016 guidance at its normal time. That decision, along with the announcement the company has pulled out of CAGNY — one of the premier informative events presented by top-tier beverage, food, household/personal products, and tobacco companies, led Mr. Moskow to maintain its “below consensus” estimates for 2016.

“After two years of badly missing its lofty forecasts, the company needs to get back on track with a realistic earnings base,” he said.

Mr. Moskow noted that the bad news may lead to bigger news later. He said the company has been spending aggressively on marketing, infrastructure, overhead and selling tools to achieve a pace of sales growth that the research analyst said is no longer achievable. He mentioned the possibility of Hershey bringing in an outsider to “cull back the company’s cost structure and the flailing investment in China.”

“Most companies decide to bring in an outside c.e.o. when they know they have to make the painful decision to cut costs and reverse strategy,” he said. “In an environment where Kraft, Heinz and others keep raising the benchmark for operational efficiency in the consumer staples space, the board certainly must recognize that Hershey needs to make bigger adjustments.”

Mr. Bilbrey has been c.e.o. of Hershey since May 17, 2011. Prior to joining Hershey in 2003, Mr. Bilbrey held executive positions at Mission Foods and Danone Waters of North America, Inc., a division of Groupe Danone, Paris. Additionally, he spent 22 years at The Procter & Gamble Co., where he served in positions of increasing responsibility in both the U.S. domestic business as well as numerous international assignments.

Hershey’s stock price increased as much as 2% in trading on Dec. 11 before closing at $87.43, still well off from its 52-week high of $111.35 set back in mid-January.
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