Hershey to Launch Lower-Fat Chocolate Candy

Simple Pleasures Seeks Position as Indulgent Lighter Option

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Are people finally ready for lower-calorie chocolate? Hershey Co.thinks so. The candy giant today said it would soon launch Hershey's Simple Pleasures, cream-filled chocolates that the marketer says have 30% less fat than other milk chocolates.

Unlike soda and gum brands, chocolate has had trouble breaking through with low-calorie versions, mostly because taste still trumps all in the category. But marketers are slowly making inroads. Last year, for instance, Nestle USA extended its Skinny Cow ice cream brand to candy, with chocolate crisps and clusters. At 110 to 120 calories, the offerings are positioned to hit the "sweet spot between indulgent treats and better-for-you snacking," the marketer told Ad Age last year.

Hershey seems to be making a similar play with Simple Pleasures, which will launch June 1. The candies are a little bit larger than a quarter and will be sold in a stand-up pouch. Flavors include dark chocolate with chocolate creme, milk chocolate with vanilla creme and milk chocolate with chocolate creme. Hershey described them as "smooth and creamy" with "30% less fat than the average leading milk chocolates." On an earnings call today, executives said the candies would be positioned as more of "an indulgent chocolate that has fewer calories" rather than as a health and wellness product.

Each serving size, which includes six pieces, has 180 calories with 22 grams of sugar. (Vanilla creme has 23 sugar grams.) For comparison, a Hershey bar has 210 calories and 24 grams of sugar.

Phil Lempert, a food industry analyst who runs supermarketguru.com, said Simple Pleasures "sounds like a combination of both less fat and more air. It's in target for the lower-sugar trend but when it comes to the category, it's all about taste."

Simple Pleasures will be supported by a dedicated ad campaign, including TV spots, a spokeswoman told Ad Age . Hershey is also planning a new campaign this summer for Rolo, marking the brand's return to TV, where it has not advertised since the late 1980s. Ads will tout regular Rolo as well as new Rolo Minis. Arnold Worldwide handles TV advertising for Rolo and Hershey brands, including the new line and Jolly Rancher. The latter recently went on air in a new campaign for Jolly Rancher Crunch 'N Chew, launched in late 2011.

Overall, Hershey expects to boost total ad spending by "low double digits" on a percentage basis compared with last year, executives said on the earnings call, noting that ad expenses jumped 14% in the first quarter. The new investment in Rolo continues Hershey's strategy of putting new money behind older brands, following recent pushes on PayDay and Hershey's Syrup, for instance.

The company beat Wall Street expectations for the first quarter, with net sales up 10.7% to $1.7 billion and net income growing to $198.6 million, compared with $160.1 million in the same quarter a year ago.

With Simple Pleasures, Hershey seems to be making a bet that lower-calorie chocolate will emerge as a bigger player than it has been. Brands have struggled to break through because "a lot of people figure, 'I'll be good in other places, but I'll enjoy my candy bar [as] one of my guilty little pleasures,' " said Randy Hofberger, a Wisconsin-based candy consultant and former Nestle employee. But there is room for growth in the category as aging baby boomers seek healthier options and new attention is paid to obesity prevention, he said. At the same time, technological advances have improved taste, he added.

Hershey has in recent years actually migrated to higher -- not lower -- calorie offerings by selling more larger-sized bars, according to a report earlier this year by financial analyst firm Bernstein Research. King-sized formats grew from 3.1% of Hershey's U.S. volume in 2008 to 5.9% in 2011, according to the report, which noted that a king-sized Hershey bar has 370 calories and 41 grams of sugar compared with the 210 calories and 24 grams in a regular size. The growth came even as the Obama administration began putting a new emphasis on fighting obesity, which has become an epidemic in America.

Hershey is a member of an industry group called the Healthy Weight Commitment Foundation, an industry organization that in 2010 pledged to reduce annual calories consumed in the U.S. by 1.5 trillion by the end of 2015, mostly by reducing calorie contents or portion sizes, Bernstein noted in its report. "We cannot help but think that with the Center for Disease Control suggesting that one in three adults in the U.S. could have Type 2 diabetes by 2050, up from one in 10 today (with an estimated cost of $174 billion), the time may be ripe for favoring portion control over upsizing," the report stated.

Indeed, Hershey last year launched Reese's Minis, which are about the size of a dime. (Of course, there's nothing stopping you from shoving an entire bag into your mouth.) Hershey executives today described the Mini's launch as a "home run."

Meanwhile, competitor Mars has pledged that by the end of 2013, no single chocolate product it sells will exceed 250 calories per portion. (Mars does not count formats such as "2toGo" "4toGo" and "Sharing Size," saying these "generally represent more than a single portion and are clearly labeled as such.")

Hershey and Mars are locked in a battle for U.S. chocolate dominance, with each controlling a little more than 33% of the market. They are ahead of No. 3 Nestle, which has 4%, according to 2010 data from Euromonitor International, the latest available. Hershey ranks as the nation's 78th-largest advertiser, spending $440.6 million in 2010, according to the latest data available from the Ad Age Data Center. Mars is No. 59, at $630.2 million.

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