Hershey Plans to Triple Digital Ad Spending

The Spending Increase Will Target Mobile

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Hershey Co. is the latest food marketer to jump on the digital ad bandwagon, with plans to triple spending on the medium. Plans include dedicating 40% of the digital spending to mobile, Michelle Buck, the company's president for North America, said during a presentation Wednesday at the Consumer Analyst Group of New York meeting in Florida.

The boost would put the marketer's digital spend at about 20% of all media spending, according to the presentation. That amount is roughly in line with what a lot of other consumer packaged goods companies are spending on the channel, according to recent comments on earnings calls.

But the change is significant because Hershey plans to boost total ad spend in 2015 with an eye toward increasing Gross Rating Points by 7%, Ms. Buck said. "Given the responsiveness of our category and our portfolio of iconic brands, advertising is one of our most powerful growth levers," she said.

She added: "We will benefit from the exceptional reach of traditional TV in conjunction with the incremental reach that digital provides and its ability to tightly deliver demographic and behavioral targeting."

Hershey, whose brands include Hershey, Reese's and Jolly Rancher, spent $668 million on advertising in the U.S. in 2013, according to the latest full-year figures from the Ad Age DataCenter. The company had been boosting ad spending at high rates in recent years before pulling back some last year. In the fourth quarter of 2014, spending was flat, executives said on a recent earnings call.

Ms. Buck on Wednesday noted that the company last year saw "heightened competitive activity in advertising and merchandising." As a result, the company's "share of voice" fell in 2014, which is prompting the 2015 increase, according to the CAGNY presentation.

CEO J.P. Bilbrey estimated that Hershey's total advertising and consumer marketing spending is about 10% of net sales and "over the long term we continue to think advertising will increase at a rate of one to two times our organic net sales."

The spending increase comes as Hershey is in the midst of a creative agency review. The company wants to expand its roster of agencies beyond Arnold Worldwide and Havas Worldwide, both owned by the Havas holding company. The two shops will remain on the company's roster, but Hershey wants to get ideas from a broader range of agencies, a spokeswoman recently told Ad Age.

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