Hershey Plans 20% Ad-Spending Boost

Amid Media-Agency Review, Confectioner Hikes Budget in Part to Support Brookside Brand

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The agency that wins Hershey Co.'s ongoing global media review will take home a big -- and growing -- prize: The candy giant said today it would hike ad spending by a hefty 20% this year, as it continues to pour marketing into its venerable brands while betting big on a newly acquired lineup of premium chocolate.

The company has already been on an advertising tear, hiking spending by 16% last year, including a 27% boost in the last quarter, as it pours growing revenues into brand building, executives said today on a fourth-quarter earnings call.

New marketing spending will support Hershey's line of Brookside-branded premium chocolate-covered fruit-juice pieces.
New marketing spending will support Hershey's line of Brookside-branded premium chocolate-covered fruit-juice pieces.

Some of the new marketing spending this year will support its line of Brookside-branded premium chocolate-covered fruit-juice pieces. Hershey agreed to acquire Canada-based Brookside Foods in late 2011. The brand, which includes dark-chocolate-covered fruit-juice pieces in exotic flavors such as acai with blueberry and goji with raspberry, had primarily been sold in Costco in the states. Hershey began national distribution earlier this month that will be supported by a year-round TV campaign beginning in February, executives said. The marketer has assigned the brand to incumbent agency Havas-owned Arnold, a spokeswoman told Ad Age.

Likely to benefit from that and other new media investments will be a new media agency the marketer is expected to select this summer to handle global planning and buying. At present, Hershey uses multiple media agencies across the globe. U.S. incumbent media shop Omnicom Group's OMD is expected to participate in the invitation-only review, which kicked off in December.

In the U.S., Hershey spent $463 million on advertising in 2011, making it the nation's 85th-largest advertiser, according to the Ad Age DataCenter. The company's total ad-spending hike of 27% in the fourth quarter of last year was more than the planned 20% jump "as we took advantage of media-buying opportunities to support our core brands," Humberto Alfonso, senior VP-chief financial officer, said on the earnings call.

For the quarter, the company reported a net sales increase of 11.7% to $1.75 billion, while net income jumped 5.4% to $149.8 million.

The planned 20% ad-spending hike represents an exceedingly high number for a mature consumer packaged-goods company such as Hershey. "We just don't see numbers this large for large-cap food companies almost ever," one analyst said on the call.

Hershey President-CEO John Bilbrey responded that "a lot of the increases that you're seeing is because Brookside is a big brand and it's now going to be advertised." Across its portfolio, the company projected an ad-to-sales ratio of 8% for the year.

Plans also include a "broader advertising campaign" of the Hershey's brand in China. New line extensions will also be supported, including Kit Kat Minis, Twizzlers Bites, Jolly Rancher Bites, and "yet-to-be-announced new products that we're very excited about," Mr. Bilbrey said.

He added: "We feel very fortunate that our company's performance right now enables us to be very focused across a few markets that we believe are the most-attractive markets. And we're getting very encouraging growth where we're executing against a really complete business approach that surrounds brand building."

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