• The Wall Street Journal (subscription required), Thursday, September 7, 2006 12:15 PM

Although Hershey told financial analysts a few weeks ago that it expected a strong second half, preliminary data from checkout-counter scanners suggest that its sales may be weakening. It is facing stiff competition, particularly from perennial rival Mars Inc., as it pushes to expand sales into new channels. It struck a deal to put its candies in 1,700 Home Depot Inc. stores around the country. One concern involves Hershey's abilities to improve sales through convenience stores, where the brand only gets about 16 percent of its sales. Convenience stores are a growing source of candy sales and are a hot spot for a big group of candy-bar buyers: young men. In recent years, Hershey says, the number of trips to traditional grocers is down 12 percent, while trips to value and convenience stores are up 13 percent. Grocery stores are Hershey's leading source of sales, accounting for 28 percent of revenue. Hershey's is also seeking to tap into America's growing taste for high-margin dark chocolate. This month, it rolls out a new line called Cacao Reserve, which includes both milk- and dark-chocolate offerings.

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