Hershey Sweetens Ad Spending, Boosts Network TV Budget
After a 10% drop in net income during the holiday-heavy fourth quarter, executives said the company will double spending this year behind those products and with the flagship Hershey brand.
CEO Richard Lenny said Hershey believes in the effectiveness of the Wal-Mart in-store network, which is in some 3,000 stores and operated by Premier Retail Networks (PRI). A campaign last year for Hershey's Kisses produced a greater ROI than network TV, Lenny said.
"When Wal-Mart runs in-store TV on your brand, I can assure you you're growing to get in-store merchandising support," Lenny said on a conference call with investors.
Still, Wal-Mart TV is presumably a small part of Hershey's ad spend, and Lenny said the company will increase its network TV outlays as part of its spending boost.
For 2007, executives said the greater marketing outlay is part of their plan to increase net sales by 3% to 4%.
"Admittedly, 2006 was a difficult year--we've learned from this and are moving aggressively to get the business back on track," Lenny said.
He said the company's focus will be on its three "iconic" brands: Kisses, Reese's and Hershey's.
Much of the spending jump will be behind Kisses, which turns 100 this year. Regarding Kisses, Lenny said it is Hershey's "most responsive brand in terms of advertising." On the promotional front, the company will make specific flavors available at certain retailers this year.
Lenny said new campaigns for the Reese's brand, the company's largest and most profitable brand, are coming this quarter--part of a more than doubling of that brand's media budget. Promotions-wise, a partnership with Coca-Cola in stores is on tap.
The flagship Hershey's brand will also receive a heightened marketing focus, particularly behind its dark chocolate skews. Overall, the dark chocolate category--or premium chocolate segment--is expected to see sales double in 2007. Hershey, through brands such as Cacao Reserve by Hershey's and Hershey's Special Dark, is looking to reach the more upscale consumer buying in the segment, and will employ tie-ins with Wine Spectator and Cigar Aficionado.
Lenny called consumers increasingly embracing the premium brands a "trading up experience." In that vein, a Hershey's Organic bar is coming later this year.