China will be the number two market behind the US for Hershey within five years, predicted senior executives at the Consumer Analyst Group of New York (CAGNY) conference yesterday.
International sales will increase from 10% of revenue to a quarter of group sales in the next five years, with China leading the way, chief growth officer Michele Buck told delegates.
“Our brands have resonated strongly with the Chinese consumer… We’re placing a big bet in China, and anticipate it will be Hershey's number two market, behind only the US, in the coming five years.”
Hershey on track to become a $10bn company by 2017: 'We’re placing a big bet in China'
Growth in the region will also be critical if Hershey is to succeed in its mission of becoming a $10bn company by 2017, she added: “China has performed as a growth engine, with an 84% top line compound annual growth rate over the last six years.
“We've applied our advantaged and transferable business model in China, it starts with an insights-based approach that allows us to leverage common consumer needs around the globe, as well as customize for local unique preferences.”
“For example, we evolved our Kisses packaging to better suit the expectations and needs of the China consumer. We’ve expanded our gifting offerings, especially for the Chinese New Year. And we’ve created a new chocolate opportunity, leveraging the special attributes of Kisses, to participate in the wedding channel business that is highly unique to this market.”
The mint category is growing faster than chocolate in China
Meanwhile, the mint category, while small, is growing faster than chocolate in China, she said, noting that Hershey entered this category last April with the launch of Ice Breakers mints in Shanghai and Chengdu.
“With flavors to suit the Chinese palette and in-store activation we are seeing solid performance, with half of the line performing in the top 25% of the mint segment, in terms of velocity.
“Our plans are to build on this foundation, expanding Ice Breakers to more cities over the next few years.”
Additional products will also be introduced in 2013, she said: “We will be broadening our line and refreshments, gifting with a new Kisses deluxe item, and bringing our successful hand-to-mouth platform to China, all in 2013.
“We're building distribution, deepening store penetration and expanding to surrounding cities, we have appropriately invested to build a sales team to enable strong distribution and merchandising.
“As we further expand our portfolio and build scale, we'll begin to leverage on this investment. We are advancing our insights, go-to-market, category management and other capabilities on a systematic basis, transferring knowledge from the core US [business] to move each of our capabilities in China up the maturity curve, to work toward the leadership levels we enjoy in the US.”
Given the strong growth in the region, local sourcing efforts will also be stepped up this year, she said.
“We will complement our existing manufacturing joint venture arrangement, in China, with additional manufacturing capability in the region, allowing for more dedicated support behind our priority market."
Hershey, which opened its first overseas innovation center in Shanghai in October, is also committed to recruiting local R&D talent, she said.
"This will allow us to gain deeper insights into the local consumer and establish strong partnerships with local universities and vendors, creating new capabilities and innovation opportunities, both in Asia, as well as reverse innovation across the rest of our markets."