CHICAGO (AdAge.com) -- Hershey Co. provided some much-needed sweet news this morning. Among other things, two storied brands, Reese's and Kisses, are regaining market share after increased advertising support.
"Hershey's results for the first quarter were solid and I'm pleased with the progress we continue to make," CEO David J. West said during the call with investors. He added that "market-share performance is tracking nicely with core brands responding to the investments we have made."
The chocolatier reported today that earnings surged 20% to $76 million from $63 million, thanks to price increases, a greater share of the Easter market and a 40% increase in consumer advertising.
While consumers are hunting for value, and holiday-buying windows are shrinking, Mr. West said that "strong brands, strong position at retail, increased advertising spending and excellent seasonal execution should allow us to continue to hold our own in the marketplace." In a nod to the ongoing recession, Hershey said that coupon redemption was up 25% over the year-ago period.
Holding true to promise
The company has been rebounding in recent quarters, consistently crediting its pledge last summer to boost ad spending 20% during 2008 and again in 2009. At the time, Mars had recently agreed to purchase Wm. Wrigley Jr. Co, and Hershey was facing calls to sell to a larger competitor.
Today, however, UBS analyst David Palmer described Hershey's earnings as a "strong start to 2009," a marked "contrast to expectations for many other packaged food and CPG companies."
Mr. West said that during the course of Valentine's Day and other holiday advertising, Hershey learned consumers are not only spending less and looking for value, but are also shopping closer to the actual event. But Hershey began buying TV airtime during the first quarter -- even though Easter wasn't until April 12 -- and the company stole share as a result.
The company's Reese's and Hershey's brands have enjoyed high-single-digit sales gains, and the flagging Kisses franchise has begun to respond to increased advertising. This summer, Hershey will partner with Kraft Honey Maid grahams and Rascal Flatts for a S'mores promotion. The company is also planning a tie-in with "Night at the Museum: Battle of the Smithsonian."
Mr. West said Hershey will continue focusing ad dollars on Reese's, Bliss and Kisses, to "maintain the momentum on these brands." But later this year, Hershey's will take Twizzlers and Kit Kat to TV. "These two brands haven't been meaningfully supported on TV in over five years," he said. "We are pleased with the strength of our advertising copy."
Hershey openly acknowledged the role of price increases in its quarterly gains, warning that volume will be down in 2009, and consumers will continue to bargain shop. Sky-high dairy costs have forced all players to hike prices.
"For the balance of the year, consumers will see higher promoted price points on our seasonal and everyday take-home packaged candy," Chief Financial Officer Humberto Alfonso said. "In some cases, particularly Halloween, the largest of our seasonal businesses, these prices have not increased in several years."
But there's good news for marketers: Hershey is convinced of the importance of boosted ad spending and in-store promotions, especially in light of the higher prices.
"We remain committed to higher levels of advertising and in-store programming to help the adjustments in new retail prices," Mr. West said. "We'll continue to monitor consumer behavior and purchasing patterns, and make the necessary adjustments and investment and brand-building initiatives to drive sales at both the company and retail levels."