The chocolate giant last week said it was discontinuing production of Ice Breakers Pacs, white-powder mints that come in thumb-size blue pouches that dissolve when placed on the tongue. "Consumers who tested and purchased Ice Breakers are very satisfied with the product," Hershey CEO David West told investors during a conference call. "However, some community and law-enforcement leaders have expressed concern about the shape of the pouch and Xylitol form and the possibility that it could be mistaken for illicit items."
Hershey declined to comment further, but branding experts said its dilemma is unusual, at best. "If you're a food company or a drug company, the most serious issues have to do with food poisoning or lead paint," said Daniel Diermeier, a professor at the Kellogg School of Management. "This is an unfortunate connection with a bigger social problem."
Sally Stewart, author of "Media Training 101," commended the company on admitting the mistake and agreeing to rectify the matter. But since Hershey did not remove the product from the shelves and will let stock languish through the remainder of the first quarter, she noted that Hershey had deprived itself of a galvanizing "turnaround moment."
Hard to swallow
And Hershey is a company sorely in need of a turnaround. During that same call, Mr. West was in the unenviable position of explaining why fourth-quarter net income fell 65%, and promised to raise the company's marketing game in an effort to halt continuing share loss to rival Mars.
"Our primary goal in 2008 is to stabilize U.S.-business-marketplace performance," said Mr. West, who succeeded Richard Lenny, who retired suddenly in October. "Markedly higher brand-building support, including advertising, quality merchandising, enhanced retail coverage and new chocolate products within the premium and trade-up segments will enable us to achieve this goal."
But many analysts weren't buying it. "Why should we believe management now has regained its marketing touch and can revitalize its innovation pipeline beyond just cannibalistic line extensions?" asked Robert Moskow, analyst at Credit Suisse. "Competitor Mars is doing a better job of meeting retailer and consumer needs."
In a research note, JPMorgan analyst Pablo Zuanic was skeptical of Hershey's comeback plan. "While the increase in marketing spending is something we have called for," he wrote, "we believe more is needed."