'Significant innovation' to launch from Hershey later this year

by Monica Watrous
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Hershey Cookie Layer Crunch
Hershey’s Cookie Layer Crunch will feature milk chocolate packed with bits of shortbread cookie and caramel.

HERSHEY, PA. — The Hershey Co. is leveraging consumer insights to introduce an “exciting snackfection” item later this year, said John P. Bilbrey, chairman, president and chief executive officer.

J.P. Bilbrey, Hershey
John P. Bilbrey, chairman, president and c.e.o. of Hershey

“The feedback we’ve received from consumers to date is that sweet snacking — think chocolate and textural ingredients as well as other food-value inclusions, such as nuts, seeds, cookie pieces, berries, etc. — are high-value components that are a gateway to permissible indulgence and sweet snacking throughout the day,” Mr. Bilbrey said during a July 28 earnings call with financial analysts.

“Snackfection” is a term coined by Hershey to describe products that blur the lines of traditional confectionery and snack items.

Michele Buck, Hershey
Michele Buck, c.o.o. of Hershey

“Think salty snacks and confection, or other categories, cookies, and confection, etc.,” said Michele Buck, chief operating officer.

Earlier this year, Hershey filed to trademark the term “Hershey’s Cookie Layer Crunch.” According to images leaked on-line, the new candy bar will feature milk chocolate packed with bits of shortbread cookie and caramel. Mr. Bilbrey referred to the fourth-quarter launch as “significant innovation,” and the company expects the product will bring new consumers to the category.

“Our most successful innovations are clearly grounded in deep consumer insights,” Ms. Buck said. “And we’ve certainly leveraged a lot of insights and research as we’ve developed this proposition and feel quite good about it ... If you think about the creamy, crunchy palate, sweet and salty we see in the marketplace has demonstrated a lot of growth. And we are seeing with younger consumers in particular there is strong interest in complex eats that this really delivers upon.

“That will provide incremental usage versus our portfolio, which tends to be more of a kind of straight creamy palate. So if you think about the textural experiences consumers are looking for and the new users that we’re able to bring in, we’re feeling really good about it.”

BarkThins, Hershey
The acquisition of the barkThins brand during the quarter helped Hershey's results.

Innovation contributed to quarterly sales and earnings performance that exceeded the company’s expectations, Mr. Bilbrey said. Net income in the second quarter ended July 3 was $145,956,000, equal to 70c per share on the common stock, which compared with a loss of $99,941,000 in the year-ago period. Net sales increased 3.7% to $1,637,671,000 from $1,578,825,000. Excluding the unfavorable impact of foreign currency exchange, net sales increased 4.5%. The acquisition of the barkThins brand during the quarter helped results.

“Over the last four to five years, we had good confectionery success,” he said. “Some products over-delivered versus our expectations and are still doing well today. And some of the new items from last year have under-delivered with lower volumes than we modeled. While innovation is hard work, our best innovation has been tied to consumer insights coming from our demand landscape work and leveraged across big brands and platforms and driven by our go-to-market capability.”

Recent successes include KitKat BigKat, Reese’s Snack Mix and Hershey’s Snack Bites, he said, adding “and we’re also excited about the Reese’s Pieces Cup, which will only be available as an instant consumable item. Demand from retailers has been double our planning. Product began shipping earlier this month and is available in stores now.”

Hershey innovation
Recent Hershey successes include KitKat BigKat, Reese’s Snack Mix and Hershey’s Snack Bites.

Regarding Hershey’s approach to innovation, Mr. Bilbrey said it’s more about productivity than pace.

“When you look at things like hand-to-mouth that we were very successful with and it continues to be productive for us, it’s what I always call ‘sticky innovation,’” he said. “It’s innovation that lasts, it’s many times a platform, and it allows you then to expand even across brands because you’ve identified a need state that is really important.

“If you look at how we classify innovation, actually our numbers versus our innovation targets are actually pretty good this year. I mean it is not that they are widely different, but what you have to really achieve is that stickiness, and the thing that gets you to the platform innovation. So we have a really good pipeline of things in front of us.

Reese's Pieces Cup
Hershey said it is excited about its Reese's Pieces Cup launch.

“I don’t think it’s about all of the sudden having to start focusing against innovation. It’s really making sure that we’re bringing the right innovation to the market with the right investment and productivity.”

Net income in the six months ended July 3 was $375,788,000, equal to $1.79 per share on the common stock, up from $144,796,000, or 67c per share, in the same period of the prior year. Net sales declined to $3,466,483,000 from $3,516,625,000. 
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