Challenges at the checkstand hurting Hershey

HERSHEY, Pa. — The evolution of how Americans shop the local grocery store is negatively impacting companies like Hershey Co., which rely on a steady stream of impulse purchasing to thrive. The increased prevalence of self-checkout aisles and curbside-pickup shopping is cutting into those impulse purchase opportunities at the checkstand, while higher-income households have lost their sweet tooth in favor of healthier snacking alternatives. The influx of both salty and savory snacking options and contemporary niche manufacturers have cluttered the landscape for Hershey Co. The chocolatier told analysts last week that net sales and operating profit were "below expectations" across its non-seasonal sector as a result. 

 

"Throughout the year, retail store traffic and consumer trips were irregular. Additionally, increased levels of distribution and in-store activity of items such as salty, bakery and meat snacks, by both mainstream and newer contemporary niche manufacturers, were prevalent throughout the year and drove broader snacking category growth in 2014. This adversely impacted purchases of non-seasonal candy products resulting in net sales and operating profit that were below our expectations," explained John Bilbrey, president and CEO, The Hershey Company.

 

"In 2014 we believe lower retail store traffic, changes in consumer spending patterns as a result of the SNAP program and a more competitive snacking environment [are] contributing factors that impacted how consumers participated in the snack segment," Bilbrey told analysts. "This resulted in fourth quarter and full year sales and earnings that were below our expectations," he said. "Specifically, growth in snacking alternatives and an evolving retail landscape are impacting what consumers buy and where and how they make purchases. Higher income consumers continue to ask for simple ingredients, health and wellness, and millennials view brands and brand attributes beyond traditional transparency to include social responsibility. They are also interacting with media differently."

 

“Impulse, in an indulgent business, is really important," Hershey senior director of retail evolution Frank Jimenez told The Washington Post for a report published last week.  "But shopping is changing, and impulse is under threat,” he said. “What happens if and when the checkout goes away?”

 

The report outlined some ideas Hershey is testing that would re-establish that impulse opportunity at the point of sale, such as kiosks or menu boards for curbside grocery trips, or placing a vending machine with Hershey products in unconventional places like at the as pump. 

 

Hershey is also looking to add to its recent product additions Brookside Crunchy Clusters and Reese's Spreads with Kit Kat White Minis Hershey’s Caramels, Ice Breakers Cool Blasts Chews, Reese’s Spreads Snacksters Graham Dippers and some other "yet to be announced" new products.

 

Hershey's fourth quarter net sales of $2 billion increased 2.7% versus last year, generating adjusted earnings per share diluted of $1.04, an increase of 20.9%.