The Hershey Company has recorded growth in its first quarter (Q1) results driven by pricing, solid Easter performance and growth in international markets.
The firm’s net sales were up 10.7% on the same period last year to $1.74bn, while profits rose 24% to $199m.
Hershey president and CEO John P. Bilbrey said: “Hershey’s strong start to the year is the result of our continued strategy of disciplined investment in core brands in both the U.S. and key international markets.”
In the company’s earnings webcast, Bilbrey said international sales were up 20%, with China and Brazil growing at even faster rates.
He said Hershey was committed to these markets to drive repeat purchases and hinted at sugar confectionery launches in China through the Jolly Ranchers brand.
The company will also soon open a R&D centre in China as announced last year to develop China and Asia-Pacific products.
Bilbrey added that sales in India grew during the quarter after speculation that Hershey was looking to end its joint venture with Godrej in India surfaced last week.
Bilbrey would not comment on the future of the joint venture, but said Hershey wanted to stay in India.
The CEO said the short window between Valentine’s and Easter helped seasonal sales during the period, with Easter sales slightly stronger than last year.
The early Easter helped US retail sales rise 6.4%.
“Preliminary data indicate a solid Easter sell through at retail and we expect this will result in a market share gain for the season,” said Bilbrey.
New product development
Hershey announced that in the second quarter of 2012 it would launch Hershey’s Simple Pleasures; a reduced calorie product that it claims contains 30% less fat than leading milk chocolates.
It will come in three flavours: milk chocolate, dark chocolate and vanilla crème.
The company will also continue to continue rollout of Jolly Rancher Crunch ‘N’ Chew, Rolo Minis and Ice Breakers Duos.
Input costs and outlook
“As expected, input costs were higher in the first quarter,” said Bilbrey.
“We continue to expect that input costs in 2012 will be higher than last year,” he continued.
The company’s $250m upgrade to its West Hershey plant through its Project Next Century program is expected to be up and running in the next quarter.
This $160m expenditure is expected to produce annual savings of $80m when complete.
Hershey expects gross margin to rise by 90 to 100 basis points in 2012, higher than previously expected due to the strong performance in Q1.