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Catherine Colbert

Hershey chases after China to reach $10 billion in revenue by 2017

by Catherine Colbert | Dun & Bradstreet Editor

March 6, 2013 | No Comments »

99479738BIZMOLOGY — Armed with an aspiration to reach $10 billion in revenue by 2017, global confectioner The Hershey Company is banking on China’s impressive population numbers, expanding middle class, and the country’s strong GDP growth to fuel its ascent.

The lofty goal represents a generous 50% bump to the $6.6 billion Hershey posted in 2012 and demands an aggressive top-line growth rate.

While the US and Western Europe rank as the largest confectionery markets across the estimated $150 billion global candy manufacturing industry, emerging markets such as Latin America, the Asia/Pacific region, and Eastern Europe are fueling growth, according to insight provided by industry experts at D&B’s First Research.

Hershey, which today generates 16% of its revenue internationally, is busy working to create a global footprint that will allow the candy company to log 25% of its sales outside the US within five years.

As part of its plan, the maker of sweets under the Kisses, Reese’s, and Kit Kat brands is chasing after China as its #1 market on the heels of a successful Chinese New Year selling season and the country’s blossoming wedding industry. (There’s a correlation between a growing middle class and confectionery consumption.) Growth in China, however, requires Hershey to build a bigger infrastructure and regularly expand its supporting staff.

In North America, Hershey is planning to more aggressively market its products through in-store impulse efforts and seasonal buying. To this end, the company has upped its ad sales spend from 2% of net sales to some 8%.

The Pennsylvania darling also has its eye on mergers and acquisitions — the quickest and often least expensive way to enter a new market — to reach its aggressive growth target. Look for Hershey to ink more deals like that of its $172 million purchase of Canadian confectioner Brookside Foods, which produces fruit pieces, nuts, and dark chocolate-covered exotic dried fruits.

As it focuses on aggressive growth here and abroad, Hershey will still sit in the shadows of some of its rivals, such as Mars ($30 billion), Nestlé (confectionery accounts for 11% of $89 billion), and Cadbury owner Mondelez (27% of $35 billion comes from chocolate). But Hershey believes that its future is brighter by transitioning from a supply-driven business model to one that is more consumer-centric and insights-driven.

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