Hershey's barkTHINS buy an 'excellent move' as Q1 sales decline: Analyst

BarkTHINS acquisition will help Hershey restore full-year sales growth, says CEO. Photo: BarkTHINS

Hershey has posted a 5.6% net sales decline in its first quarter (Q1), but one analyst believes its acquisition of chocolate business barkTHINS offers hope in a troubled US confectionery market.

The group's net sales reached $1.93bn in Q1, compared to $1.94bn in the same period last year. Its Q1 were net sales in North America fell 4.3% to $1.3bn,

barkTHINS a smart move, says analyst

Mintel analyst Marcia Mogelonsky said Hershey’s net sales decline highlighted the weakness of the US confectionery category amid an accelerating trend towards healthy eating. However, seasonal confectionery continues to prosper, she said.

“The purchase of barkTHINS was an excellent move, at a time when better-for-you brands are growing,” she said. “Moving into healthier snacks is strategically the right move for Hershey as its core brands are likely to see further declines.”

CEO John Bilbrey said Hershey's results were in line with expectations. He said successful Easter candy sales and the barkTHINS buy would help Hershey restore growth. Hershey expects full-year net sales will increase around 1.5%.

Growing barkTHINS

Hershey has snapped up 100% of barkTHINS and plans to leverage its scale at retail, according to Hershey’s director of strategic communications, Jennifer Sniderman.

“Adding this snacking adjacency with a popular and fast-growing product and taking advantage of Hershey’s scale and distribution capabilities will allow for broaden the distribution of this popular product and make it easier for fans to find the product in a greater variety of retail outlets,” she said.

Sniderman told ConfectioneryNews barkTHINS also appeals to several consumer preferences, such as Fair Trade and non-GMO certification, and simple ingredients.

The brand is expected to record $65-75m full-year 2016 sales. Hershey did not disclose the purchase price.

Outlook for Hershey and US confectionery

Bilbrey said Hershey’s future non-seasonal candy, mint and gum sales are expected to increase driven by increased marketing support. For example, he said: Reese's market share is up 0.4 points in 2016 driven by new and refreshed television and digital marketing campaigns.”

Mogelonsky said there will be very little positive motion in the US confectionery category over the year, and companies will be looking for new ways to secure market share in a flat category.

She said products like "thin bars" and barkTHINS are likely to provide an opening for non-seasonal snacking and gifting.

“It is worth looking at Green & Blacks in the UK, owned by Mondelēz. G&B introduced a line of thin bars last year, and it would not be unreasonable to expect to see other thin products coming to market in the next year," she said.

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