Reservations About Reserve Haunt Hershey

Sales Disappoint for Upscale Line; Giant Turns to Price Cuts, Advertising

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NEW YORK (AdAge.com) -- Hershey by any other name is still mass market.

That's what the confectioner is learning the hard way following its push into premium with Cacao Reserve by Hershey's. Less than six months after the launch, the company is resorting to price discounts it had hoped the upscale category wouldn't demand and shifting strategy to advertise the product it once presumed would sell itself.
Hershey's gourmet offering hasn't sold well since its launch six months ago.
Hershey's gourmet offering hasn't sold well since its launch six months ago. Credit: John Dziekan

One East Coast retail executive grumbled that Hershey "just put [Cacao Reserve] on the shelf and thought it would sell because it's a gourmet bar." But it didn't, and now the retail executive has discontinued the line.

Growing category
Though sales figures were not available, a slew of other grocery executives said the line has been slow-selling at best, even though the overall premium-chocolate segment dominated by Lindt & Sprungli and Ghirardelli Chocolate Co. is growing at a healthy clip.

Prudential Securities analyst John McMillin noted that Hershey's battle to best the upscale leaders is akin to Anheuser-Busch's similar efforts in beer:"Their own name doesn't travel that well in premium."

Hershey, however, won't give up without a fight. According to an executive close to the company, "instead of walking away from Cacao Reserve because it hasn't been doing well, [Hershey] is doing the exact opposite: really promoting it."

The executive acknowledged that Hershey should have been reducing the regular $2.49 retail price and price-promoting it from day one (the way other premium chocolate bars do), but higher-ups felt the premium end of the segment wouldn't be as price sensitive. It turns out even gourmets don't want to be gouged.

Two bars for $4
Hershey is now promoting the bars at two for $4 and will run high-value coupons in a big, national, free-standing newspaper insert next month along with a large-scale TV and print campaign from Arnold, New York. Although Hershey did spend $1.5 million in media on the line during December of last year, according to TNS Media Intelligence, all of that was focused on print, including Wine Spectator and Cigar Aficionado.

The ads dovetailed with sampling at similarly sophisticated foodie events and a "House Party" promotion that included party packs sent to 1,000 consumers to host chocolate tastings for 20 guests.

But clearly, Hershey -- which did not return calls for comment by press time -- has determined it needs to cast a wider net with a more mass medium. It will also aim to draw in a broader audience with new packaging: Four Cacao Reserve pouch varieties will feature a variety of chocolate tasting squares, including dark chocolate and single-origin chocolates.
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