Elvis Returns to Boost Hershey's Outlook for 2007

Whether or not you believe that Elvis is still "in the building," his aura is still being leveraged to maximum advantage whenever possible by marketers.

The latest example is Hershey Co., which will debut a Reese's Elvis Peanut Butter Banana Limited Edition offering in June, with a PR blitz in July, Richard H. Lenny, chairman, president and CEO of the company, said during yesterday's press conference on the company's first quarter 2007 results.

The product lineup will include standard, miniature and -- you guessed it - king-size sizes. Based on retail pre-order requests, the highest in Hershey's history, the company expects merchandising units to be more than twice the typical average and expects sales to be close to 20% greater than all of its 2006 limited editions, yet with 80% fewer items, Lenny reported.

"Elvis will accelerate Hershey's industry-leading, king-size business, which is up 11% year to date, almost double the performance for the category," he added.



Lenny also revealed that Hershey will further capitalize on the Reese's franchise, one of its most successful, but introducing Reese's Whips, a peanut butter/chocolate product with a "light and fluffy texture" and 40% less fat, in this year's fourth quarter.

Those introductions are two of many in Hershey's aggressive new strategy to staunch market share decline and trounce its competitors.

After a grueling 2006, including a fourth quarter that saw Hershey's U.S. market share drop from 43.5% to 42.5% in the 13 weeks ending Dec. 24 - as arch-competitor Mars' share climbed from 24.2% to 25.9% -- Hershey this year implemented a new corporate strategy focused on revitalizing its core products, introducing new products (especially in the lucrative premium and "refreshment" sectors), and branching into strategic international markets. (Operational cost reductions are also a big focus).

A critical element is heavily increased advertising, promotion and in-store support expenditures.

First-quarter results, which were essentially in line with Hershey's expectations, seemed to largely support the wisdom of these moves. Net sales increased 1.2%, even as total costs/expenses rose by 6%, reflecting both a overhauling of Hershey's global supply chain and costs associated with the process of laying off 1,500 employees over the next three years.

Net income declined from $122.5 billion to $93.5 billion, hurt largely by softness in single-server sales. Diluted earnings saw 1.2% growth. Hershey confirmed that it continues to be committed to targets of 3 - 4% net sales growth and a 7- 9% increase in diluted earnings for this year.

Other product and marketing highlights:

  • A new in-store shipper program in support of the release of the Reese's Crispy Crunchy bar and the brand's core products resulted in overall retail growth of more than 5% for the franchise in the first quarter.

  • New products, including dark chocolates and other premium offerings, contributed three growth points during the period.

  • Hershey plans to go ahead with its already announced plans for large jumps in consumer and retail customer merchandising events.

  • Chocolates brands, driven by Reese's and in-store support of Crispy Crunchy, saw a 2.8% revenue increase, but a 1.2% decline in share points. Over a half-million consumers voted on whether Crispy Crunch is crispy or creamy. "After keeping score at home, creamy won," said Lenny.

  • The Reese's brand saw 5% growth in first quarter. Spending for the franchise will leap by 225% in '07. The new Reese's peanut butter and jelly spot, the first to air, had the highest effectiveness index ever seen for the brand.

  • The commissioned stamp to celebrate the brand's 100th anniversary is expected to sell over 300 million units. To date, there have been more than 147 million media impressions relating to the stamp and the anniversary. The "ranking kisses" TV spot was rated as the brand's most memorable ever.

  • Hershey is now offering a mix of special messages on the plumes of silver kisses, such as "good luck" and "congratulations." In the second quarter, Kisses will include special game pieces resemble half of a color kiss. Consumers who can match the halves of a silver kiss can earn $100,000 and have the chance to win $100 million live in November on the TV show "Deal or No Deal."

  • For the 52 weeks ending March 25, Hershey sales of solid dark chocolate products jumped about 60% in its primary retail channels. Hershey had seven of the 10 top dark chocolate brands and seven of the 10 fastest-growing dark chocolate brands.

  • In May, Hershey will Launch Hershey Organic in both dark and milk chocolate varieties, another premium-oriented initiative.

  • In the second half, the company will launch Mini Kiss Cookies, a repositioned product that delivers a 100-calorie benefit.
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