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Hershey Co (HSY) is concentrating on delivering value to all stakeholders via expansion of product

portfolio through acquisitions and enhancing operational efficiency to increase profit margins in longrun. The proactive approach assist companys management to grasp the health conscious trends in U.S.
market and focus on shifting towards more consumer-centric approach to fulfill market demands.
Hershey Co has the largest market share in U.S. confectionery and chocolate markets which manifest
companys success over the years irrespective of cost inflation and restructuring costs.

Source: Company fact book , Statista.com


Expanding product portfolio to steer growth
The company is focusing to grab each emerging opportunity in international market via merger and
acquisition. Hershey Co incurred $28 million for recent acquisition of Canadian candy maker Allan
Candy to expand its foothold in Canadian market. On 25th September, Hershey Co concluded initial
acquisition of 80 % stake in private Chinese confectionery business for $384 million. Hershey Co
planning to acquire the outstanding 20 % shares in succeeding year subject to approvals by government
regulatory authorities. The companys earnings for FY14 will not be effected by acquisitions, though
their positive impact will certainly reflect in top-line from next year onwards.
The outcomes of these acquisitions holds immense significance for the company. The prime benefits
include boost in production and efficient cost management later increasing companys operating
margins. The company intends to leverage Allan Candy confectionery brands success to further
strengthen prevailing strong demand for its products in Canada. The primary objective of Chinese
company acquisition is to reap strategic benefits via particular agreement; Hershey Co focusing on
Shanghai Golden Monkeys brand name to complement existing efforts in exchange of transferring
global marketing and logistic experience to the Chinese partner. China will become the second biggest
market for Hershey Co products after U.S. with an estimated sales of $500 million by the end of FY15.
Bottom-line and Margins estimates
The Pennsylvanian Hershey Co cost of goods sold as percentage of revenues increased 230bps hence
declining operating margins by 1.23 % compared to similar period of preceding year. The increase in cost
of sales can be attributed to inflated dairy products prices and pennants shortages. In advent of current
scenario, Hershey Co reduced its diluted earnings per share estimate by $.04-$.10 for FY14, while

confident for FY15 achieving growth estimates of $4.27-$4.47 earnings per share and 7-8 % growth in
revenues.
Cost-inflation and counter-measures to boost margins
According to U.S Economic department, bakery and confectionary items prices can increase from 1.5-3.0
% hence lowering estimated demand for consumables and companys sales growth has been impacted
due to inflation in present fiscal year. The primary drivers of growth in consumer products sales are
consumer purchasing power and inflation.

Source: ERS U.S.


The inflation does not only affect consumers but also confectionary and chocolate manufacturers.
Although companies transfer the cost-inflation to the consumers through price increase but I think it is
not a viable solution in long-run as demand for companys products can decline. U.S. consumers are now
more conscious than ever in ages for corn-syrup based products owing to obesity and heart diseases
Hershey Co is planning to switch from fructose corn-syrup to sugar in manufacturing of chocolates and
bakery. The company can