2/17/2021

Hershey's 'big bet' on better-for-you confections | Food Dive

Hershey's 'big bet' on betterfor-you confections
Producing more low- or no-sugar, organic and bite-sizeo erings could generate up to $1 billion in additional
revenue for the iconic maker of Kisses and Reese's, a top
executive said.
By Christopher Doering
Published Feb. 17, 2021
Hershey, the largest U.S. confections company, is famous forchurning out billions of its indulgent Kisses, Reese's Peanut ButterCups, Milk Duds and other sweet treats each year. But as consumer
tastes have changed, the 127-year-old company is focusing more
attention on innovating these core brands through low- or nosugar, organic and bite-size offerings in an effort to grab a larger
share of the better-for-you snacking category.
Only 6% of candy, mint and gum sales come from products defined
as better for you, or about $1.3 billion per year, according to IRI
data cited by Hershey. The food company estimated if that sharerose to as high as 20%, putting it closer to the average found inother snacking categories, sales of better-for-you confections could
surge to more than $4 billion, said Kristen Riggs, Hershey's chief
growth officer.
For Hershey, which posted $8.1 billion in sales in 2020, it could
provide an opportunity to boost its annual revenue anywhere
between $500 million and $1 billion, she said.
"We are really putting a big bet in growth in the better-for-you
area," Riggs said in an interview. "If we want to participate in thathttps://www.fooddive.com/news/hersheys-big-bet-on-better-for-you-confections/595135/

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2/17/2021Hershey's 'big bet' on better-for-you confections | Food Divegrowth then we need to have more solutions."

Courtesy of Hershey

Hershey this week said it is using a multiprong approach toincrease sales in the better-for-you candy segment in an effort tocapture more consumers across a larger number of snacking
occasions.
Much of Hershey's prior efforts have focused on portion-controlled
sizes — a successful initiative that recently included the debut ofKit Kat Thins. Now the company plans to expand its portfolio todeliver more reduced sugar, organic and plant-based alternatives,a strategy that provides the Pennsylvania company with "multiple
levers for growth," Riggs said.
"People are still going to eat a Reese's Cup — we know that. People
are still going to choose Reese's Eggs at Easter — we know that,"
Riggs said. "But if we have solutions like Zero Sugar Reese's, Thin
Reese's, Organic Reese's — then all of a sudden we start to meet abroader set of needs."
Innovation will not only come from within Hershey, but also byteaming up with better-for-you brand partners to co-develop andlaunch new offerings, Riggs said. Hershey also will look at

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2/17/2021

Hershey's 'big bet' on better-for-you confections | Food Diveacquisitions that enable it to access new consumers or occasions
that its core brands don’t reach today.
At the same time, Hershey plans to uncover ways to reduce sugar
used in many of its products, both internally and by investing incompanies working on similar breakthroughs. This week, thecandy maker partnered with ASR Group — one of the world's
largest sweetener companies — to co-lead an equity investment inBonumose, a startup working on innovations in plant-based foodingredients, including rare and natural sugars. The investment willallow Hershey to advance the taste and texture of zero- andreduced-sugar chocolate, and apply that knowledge to its othersnack offerings.

"We are really putting a big bet in growth in the
better-for-you area. ... If we want to participate in thatgrowth then we need to have more solutions."
Kristen Riggs
Chief growth officer, Hershey

Riggs said while some niche and smaller brands have carved out astrong presence in the better-for-you snacking space, much of thecategory is controlled by large CPG brands like Hershey that canuse their scale and innovation prowess to have a far-reaching
impact. In ice cream, for example, 37% of sales are from better-foryou brands, which are low in sugar or use techniques such as
churning to reduce their fat content. Of that segment, 85% iscontrolled by mainstream brands, she noted.
Under the watch of CEO Michele Buck, Hershey has created a"snacking powerhouse" by accelerating growth in the company's
hugely profitable confectionary business and expanding its
portfolio into new snack offerings. Since Buck took over inhttps://www.fooddive.com/news/hersheys-big-bet-on-better-for-you-confections/595135/

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Hershey's 'big bet' on better-for-you confections | Food Dive

2017, Hershey purchased fast-growing SkinnyPop popcorn — thelargest deal in the company's history — and protein-bar maker OneBrands. Recently, Hershey invested an undisclosed amount inQuinn, a natural foods snack manufacturer.
With better for you infiltrating all facets of the snacking category,Riggs acknowledged Hershey needed to do even more in candy,
mints and gum, and had an untapped opportunity in front of it.
Hershey, for example, launched a sugar-free line in 2008 but thecompany "didn't really put its weight and support of the businessbehind it," Riggs said. The products were traditionally viewed as anoption for individuals with diabetes rather than one formainstream consumers. Still, Hershey's sugar-free line grew andhas posted double-digit sales increases during the last few years
with little involvement from the company.
Today, Hershey is rebranding the line as "no sugar" instead of"sugar-free" and overhauling the packaging. "That is kind of a hint
for us that, 'Wait a second — this is happening organically in thebusiness. How would we think about really making it a strategic
priority?' " Riggs said.
Buck told analysts this month the relaunch was similar to what isbeing done in beverages and other categories when it comes to zerosugar. "Those products are just positioned entirely differently, in amuch more contemporary way, and that's really our goal," she said.
As Hershey bulked up its portfolio through acquisitions in trendy
snacks and entered into marketing partnerships to promote its
brands, executives started believing they could bring what theylearned in these areas to other parts of its business.
SkinnyPop, which has grown at a compound annual growth rate of
9.1% since Hershey added it to the fold in 2018 — compared to
5.6% for the ready-to-eat popcorn category as a whole — has

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Hershey's 'big bet' on better-for-you confections | Food Dive

deepened its insights and understanding of consumer needs inbetter-for-you snacking. And Hershey's marketing deal for Reese'swith the NCAA helped further cement the brand's popularity byreaching beyond confections to connect the product with sports
fans.
"When you think about partnerships from a business perspective
and bringing those in, it's become a bigger part of our strategy,"
Riggs said. "I think it's a smart way to bring in new thinking andbreakthroughs that we need to develop the formulation that reallyunlocks a lot of growth in our mainstream business."

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