Hershey's Ups Ad Spend, Doesn't Sweeten Bottom Line

Given what it called disappointing third-quarter sales, Hershey's plans to boost ad spending some 25% for the coming holiday season compared to the same period a year ago.

A year ago, the chocolate marketer spent $8 million in the quarter, according to TNS Media Intelligence, despite the Halloween and December holiday seasons. Somewhat surprisingly, that was its lowest-spending quarter in 2006; its total measured media spend was $99 million.

Increased ad spending, however, doesn't appear to be leading to healthier sales. The company said on a conference call with investors Thursday that its third-quarter spending was up 8% compared to a year ago. Net sales were down slightly to $1.4 billion.

"Q3 results were not up to our expectations," said David West, the soon-to-be CEO after Richard Lenny vacates the post at the end of the year. Hershey's also said an increase in ad spending--although an undisclosed amount--is on tap for 2008. "This spending will have a positive impact on market share and we expect ... improvement throughout the year," said CFO Humberto Alfonso.

The company plans to focus on a new co-branded product with Starbucks in the higher-growth premium chocolate area. Still, support for core products, such as Kisses and Reese's, will be increased.

Also next year, the company has a tie-in promotion with the new "Batman" movie, and a link with the U.S. Olympic team heading to Beijing.



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