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Hershey records growth as international markets shine

By Oliver Nieburg , 02-Feb-2012

The Hershey Company has announced improved sales and gross profit in its fourth quarter (Q4) and end of year results as sales in emerging markets soared.

The company said that while its focus remained on its core US market, strong growth in Mexico, China, Brazil and India meant it would also try to leverage its position in these countries.

Results summary

Q4 and full year 2011 net sales were up 5.7% and 7.2% respectively.

Fourth quarter net sales rose from $1,482,809,000 in 2010 to $1,567,145,000 this quarter.

Adjusted gross profit in Q4 and the full year were up marginally on last year by 4.3% and 6%.

Q4 adjusted profit stood at $652,956, while profit for the full year was up to $2,428,852.

International growth

International markets, those outside the US and Canada, account for around 8% of Hershey’s operations, according to market analyst Eric Katzman from Deutsche Bank.

The company said its main focus would continue to be its domestic market, but Hershey CEO John Bilbrey said the firm was also committed to growth in emerging markets.

“Our solid position in the US marketplace continues to give us flexibility to invest in key international markets where we gaining momentum,” he said.

Q4 sales in in Brazil increased over 40%, around 30% in China and 15% in Mexico. India was also identified as a growing market.

The company said it had increased advertising outside the US by 5% on the previous year.

International plans

Bilbrey said that if international organic growth continues in the same manner, Hershey will record $1bn in sales outside the US and Canada by the end of 2014, a year earlier than its 2015 year-end objective.

“We have a solid plan that will enable us to maintain our momentum in China,” he said.

The company plans to introduce selected sugar confectionery products to China and expects its Shanghai R&D facility to be fully operational by in the fourth quarter of 2012.

In Mexico, Bilbery said the company would continue its traditional approach to achieve growth, while Brazilian expansion would be led by the company’s partner Bauducco.

He added that the company’s solid balance sheet enabled it to pursue potential acquisition targets.

US focus

In the US, the company enjoyed strong seasonal sales in 2011, as its candy, mint and gum category outpaced growth in previous years.

In 2012, the company plans new product launches in its domestic market, including chocolate with almond pieces, Rolo Minis and Rainforest Certified Hershey’s Bliss.

The company continues to invest heavily in its Project Next Century scheme, which intends to optimise supply chain efficiency.

Its expansion of the West Hershey plant is continuing and multiple production lines will be added throughout 2012. This $160m expenditure is expected to produce annual savings of $80m when complete.

Brookside expansion plans

Following its acquisition of Brookside Foods last month, Hershey plans to boost its latest business’ position in the US and Canada by expanding manufacturing capabilities for the chocolate-covered fruit pieces it produces by the end of the year.

Hershey expects Brookside to generate $90m net sales in 2012.