“The salty business at Hershey is now $1.2 billion in sales, and it is in a moment of scale,” with ready-to-eat popcorn and pretzels each primed for growth with retail sales over the past three years climbing at a compound annual rate of 11.4% and 11.5% respectively to reach about $2b each, Kristen Riggs, president of Hershey’s salty snacks division, said last week during the company’s investor day.
She noted that SkinnyPop at $495m in retail sales for the calendar year ending Jan. 1 is the leader in dollar growth over the past three years, while Dot’s at $335m in same period is the fastest-growing pretzel brand in the past three years, according to IRI data.
“Having a strong portfolio and really great brands is the first piece of the puzzle for us winning. The second thing in our salty business is we have untapped potential in the categories in which we play,” and “the third thing to know is consumer trends are on our side,” Riggs said.
She explained: “Popcorn and pretzels are the two most permissible categories in all of salty snacking. So, these consumer trends and the untapped potential, as well as the fastest growing brands in each segment, give us lots of opportunities to grow and win.”
Hershey eyes double-digit growth in next three years
To capitalize on this potential and deliver planned double-digit growth in the next three years, Riggs said, Hershey will invest in advertising for both brands, including debuting last week its first campaign for Dot’s and a new campaign for SkinnyPop.
“In addition to advertising, we still have upside and distribution” and channel expansion, Riggs said.
For example, Dot’s has household penetration of only 50% in the Northeast, which Riggs described as “the largest pretzel market.” Likewise, SkinnyPop has only 86% channel penetration compared to its top competitor, which has 98%.
Finally, Hershey plans to boost salty snack sales by incrementally building out the eating occasions for both brands by introducing additional pack sizes – including individual multi-packs and larger packs – and new products in the combined sweet and salty space.
“Now that we’re popcorn makers and pretzel makers and the Dutch pretzel line has been marketed for a few years, we can now make our dipped pretzels … and additionally Reese’s Popcorn, which was in test markets last year, just launched,” Riggs said. “This ability for us to bring sweet and salty and leverage the iconic brand of Reese’s into the salty category provides a lot of incrementality and growth.”
‘We plan to grow margins on our salty business 300 basis points’
While Hershey’s ambitious plan for it salty snack business will require significant investment, Riggs says it will not squeeze its margins – rather it should expand it.
“Over the next three years, we plan to grow margins on our salty business 300 basis points,” by optimizing the company’s supply chain network, implementing an enhanced enterprise resource planning software system, and enhancing the portfolio mix, Rigg said.
She explained that through Hershey’s recent acquisitions it is now able to bring together several businesses that have been running their own platform and systems under one ERP platform.
“This investment allows us to harmonize and bring all of our portfolio together. It’s a key area of focus, and it’s a big investment for us this year, but it will unlock profitability and growth” by reducing waste and allowing more accurate planning, she explained.
In addition, Hershey will bring production of Pirate’s Booty in house under the Pretzels, Inc. acquisition, rather than continuing to outsource production of the brand, which will give it more opportunities to expand margin, Riggs said.