Sunday, June 22, 2008

Hershey to increase ad spending

Hershey has been criticized for a failure to promote sufficiently (resulting in the Hershey bar losing its long-held top spot in candy to Mars' M&Ms).

Now they are pledging to increase advertising spending by 20% in each of the next two years. This is unlikely to mean decreased trade spending, however -- here's what they said in their call with investment analysts last week:
What you would see around trade spend is if you were to go back several years, you would have seen trade spend be more important than where we were in terms of our advertising and consumer spend. What we think is the right thing to do is not let the pendulum go back the other way but necessarily bring them into balance.

So we would see trade spend as a percent of net sale continuing to be relatively constant going forward because we think we’ve got that about right, and then the thing that we’ve remodeled is how do you get the consumer spend with the working media back to the right levels. That’s what we think is the right thing to do there.
It's also good to see that they credit trade promotion (and trade promotion management) as a major driver in past success:
Let me now take a quick look back at our historical performance. From 2001 to 2005, the company enjoyed a period of strong, top-line growth, behind closed-in news on new chocolate items as well as unlimited editions.

This closed-in pipeline was executed by a redesigned selling organization. Hershey led the category in innovative customer marketing programs and a redesigned trade promotion architecture. This was complemented by enhanced retail capability.

In addition to strong revenue, gross margin improved during this time ...
In another note, the head of the Hershey Trust says, "Simply put: We will not sell the Hershey Co." There has been much M&A talk around Hershey ever says the Mars/Wrigley merger was announced.

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