Hershey Plans TV Push for Syrup, PayDay Brands

Candy Marketer Also Plans to Roll Out New Offerings in December

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CHICAGO (AdAge.com) -- Hershey Co. is planning new TV advertising for PayDay and Hershey's Syrup -- the first time the company has boosted the decades-old brands on air since 2001, executives said today.

The candy maker will also spend money to promote two new offerings set to hit stores in December called Hershey's Drops and Reese's Mini's, the company said on an earnings call.

Hershey roster agency Arnold Worldwide, New York, is handling the PayDay and Syrup spots as well as the new product rollouts, which will also include TV ads.

The investments accelerate a strategy Hershey first announced in 2008, when it pledged to increase ad spending by 20% for two years in an effort to lift the company from a multiyear slump.

Overall, Hershey expects to increase ad spending by 50% to 60% for 2010 -- more than an earlier projection of 45% to 50% -- although spending will grow at a slower rate next year, officials said.

"The advertising is working on the brands we're putting [it] on," said CEO David J. West.

The company reported third-quarter net sales growth of 4.2% to $1.5 billion, lower than the 5.3% expected by analysts. Net income jumped 11% to $180.2 million. Adjusted earnings were 79 cents a share, which met expectations, according to Goldman Sachs.

Still, Hershey warned of higher ingredient costs for 2011, and its stock price fell by $1.78 to $49.32 at market close.

The new marketing strategy initially focused on core brands Hershey's, Kisses and Reese's and was later extended to Twizzlers and Kit Kat. Measured media spending for all brands totaled $426.4 million for the year and a half period ending in June, with Kisses leading the way at $76.2 million, according to Kantar Media.

The spending has been a success, as earnings have mostly topped expectations. Hershey is now applying those lessons to PayDay and Hershey's Syrup, said Erin Swanson, a Morningstar analyst.

"They have been investing behind some of these stronger core brands, and they are realizing results. And now, as a result of that, they are going beyond that," she said.

Hershey's Syrup launched in 1928. PayDay has been sold since 1932 and was acquired by Hershey in 1996. Hershey did not discuss details on the new ads, and the company did not return calls for further comment.

The introduction of Drops and Mini's is an attempt to seize on the popularity of the "hand-to-mouth" category, which makes up 16% of all chocolate sales, according to a recent Hershey presentation cited by a financial analyst.

Drops are bite-size and come in chocolate or cookies 'n cream flavor. Mini's are mini peanut-butter cups. The introductions continue the trend of candy makers pushing product line extensions instead of completely new offerings, analysts said. Hershey competitor Mars, for instance, earlier this year introduced an M&M pretzel variety. Last year Hershey's rolled out new varieties of its Pieces family, with York, Almond Joy and Special Dark.

"By doing brand extensions and not coming out with a completely new brand, it minimizes the risk," Ms. Swanson said.

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