HERSHEY, PA. – The Hershey Co. will focus on innovations in its core brands in 2019. A “Reese’s Lovers” promotion should increase in intensity in the second quarter of the fiscal year. A new Kit Kat flavor will launch later in the year.
“So I feel really good about our innovation this year, and I will say, if I look historically, I think frequently the best and more sustainable innovation we've had is when we are really focused on either improving our core or staying close to the core with a key, purposeful benefit,” said Michele G. Buck, president and chief executive officer, in an April 25 earnings call.
A “Reese’s Lovers” campaign involves a Reese’s Chocolate Lovers cup with more milk chocolate and a Reese’s Peanut Butter Lovers cup with more peanut butter. The program will ship primarily in the second quarter, Ms. Buck said. Earlier this year, Hershey launched Reese’s Thins.
“And as we think about our portfolio, one of the interesting things about Reese's is we have all different kinds of cups and different shapes and different ratios of chocolate to peanut butter, and everybody has their favorite, and Thins offers a benefit of permissibility and a totally different eating experience on our biggest core brand,” Ms. Buck said. “So that proximity to the core tends to lead to a more sustainable approach.”
Kit Kat Duos Mint + Dark Chocolate in December will become the first permanent Kit Kat flavor in the United States in almost a decade, Ms. Buck said.
“This item will feature a mashup of two iconic flavors, with mint cream on top and dark chocolate on the bottom surrounding the light and crispy wafer,” she said.
The Hershey Co. in the first quarter ended March 31 posted net income of $304.4 million, or $1.49 per share on the common stock, which was down 13% from $350.2 million, or $1.71 per share, in the previous year’s first quarter. Net sales rose 2.3% to $2,016.5 million from $1,972 million. Hershey’s stock on the New York Stock Exchange closed at $122.44 per share on April 25, which compared to a close of $117.07 per share on April 24.
In North America, segment income was $564.8 million, up 5.7% from $534.4 million in the previous year’s first quarter. Net sales rose 3.2% to $1,807 million from $1,751.7 million.
Acquisitions and divestitures had a positive net impact of 1.6 percentage points in North America. Both Amplify and Pirate Brands are delivering solid growth and are on track to achieve financial targets, Ms. Buck said, adding data from Information Resources, Inc., a Chicago-based market research firm, show Skinny Pop ready-to-eat popcorn growing 11% year to date through April 14.
North America advertising and related consumer marketing increased 1.1% when compared to the previous year’s first quarter. Media and production efficiency gains enabled by new capabilities drove double-digit consumer impression growth through modest dollar spend increases, according to the company.
Digital makes up about 40% of the company’s total media investment, Ms. Buck said. Mainstream media, given Hershey’s broad household penetration, will continue to be an important part of the media investment mix, she added.
Within International and Other in the first quarter, segment income increased 15% to $20.2 million from $17.7 million, driven by gains from volume growth, gross margin expansion, and selling, marketing and administrative expense reductions. Sales slipped 4.9% to $209.5 million from $220.3 million. Divestitures were a headwind of 4.6 percentage points. Foreign currency exchange rates were a headwind of 3.5 percentage points.
Hershey’s Kisses launched in India, and the Kisses brand is showing strength in Mexico, Ms. Buck said.
Hershey reaffirmed its 2019 outlook of a net sales increase in a range of 1% to 3% and diluted earnings per share in a range of $5.50 to $5.66.