By Annie Gasparro | WSJ.COM
Hershey Co. said new candy and packaging will lift sales and profit this year even as it faces tougher competition from a wider range of snack makers. The chocolatier has been facing record-high costs to ship its Kisses and Reese’s peanut butter cups to stores and more snack options that have threatened its market share in the U.S.
“There’s a lot of growth in snacking,” Chief Executive Michele Buck said in an interview. “At the same time, there’s a lot of people trying to capture that growth.”
Hershey said it expects sales to increase by 1% to 3% this year, with earnings per share rising by 5% to 7%—in line with analyst estimates, according to FactSet.
In the fourth quarter, though, Hershey’s comparable sales were essentially flat, excluding acquisitions and currency fluctuations. In North America, where it generates most of its income, comparable sales fell 0.3% as prices averaged 1.1% lower.
Hershey’s shares fell 2.5% on Thursday. Ms. Buck said that Hershey’s price increases are starting to take effect now, and that she doesn’t expect people to cut back on candy purchases as a result.
Like other consumer-product companies, Hershey began discussing the pricing plan with retailers last summer. Hershey said new, stand-up pouches for its bags of candy that will be introduced this spring will have a higher profit margin and boost sales because they look more appealing on shelves.
Hershey is also introducing a thinner Reese’s peanut butter cup in May that it hopes will appeal to calorie-conscious Americans. Mondelez International Inc. made a similar move with Oreo Thins in 2015, a skinnier cookie that looked and tasted like a regular Oreo.
Hershey has said the candy aisle is getting more crowded. Competition from other snacks is putting pressure on the company to expand beyond its core chocolate business.
Last year, Hershey bought the owner of SkinnyPop popcorn and snacks, Amplify Snack Brands Inc., for $1.6 billion including debt, and it acquired the snack brand that includes Pirate’s Booty cheese puffs for $420 million.
The company said SkinnyPop and Pirate’s Booty are gaining more ground in the snack aisle with its help, as Hershey convinces retailers to give them more shelf space.
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Hershey’s total sales increased 2.5% to $1.99 billion in the fourth quarter. Its adjusted profit for the quarter rose 24% to $1.26 per share. The results narrowly missed analyst estimates, according to FactSet.