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The Hershey Co HSY
Q2 2010 Earnings Call Transcript

Transcript Call Date 07/22/2010

Now, for some further details. In the food class of trade, confection category was 5.4% in the second quarter. Hershey retail takeaway in this channel exceeded the category, driven by chocolate up 7.7% and non-chocolate up 5.9%, resulting in a total market share gain of 0.5 points in the food channel.

In the convenience store class of trade, the CMG category growth rate accelerated in the second quarter, as the category grew 3.3% versus 2.3% in the first quarter. In the second quarter, Hershey c-store takeaway increased for the ninth consecutive quarter and was up 5.4% resulting in a market share gain of 0.5 points.

In the second quarter, Hershey's c-store chocolate and non-chocolate takeaway was up 8% and 4.5% respectively, driven by volume and mix as both standard, loose and king-size pack types performed nicely.

Strong in-store merchandizing and programming driven by the Iron Man movie tie-in and the Coca-Cola and Reese's joint promotion drove balanced growth across core brands. We believe the category will continue to grow in c-stores. Category dynamics as well as investments by CMG category participants continues to drive variety news and excitement and thus category growth.

As we had exited the second quarter, the targeted number of c-store associates were onboard to deliver the overall 8% increase in in-store hours that we planned for 2010. As a result, we expect our c-store business to maintain its momentum in the second half of the year.

Looking at the overall category, CMG continues to grow within its historical range, that's 3% to 4%, and FDMxC, here excluding Wal-Mart, the CMG category grew 3% and 3.9% respectively in the second quarter and year-to-date. We are gaining share with our roughly 4% takeaway.

Hershey marketplace performance is tracking nicely and selling and merchandising initiatives are in place for the second half of the year. In (PIECES) category, new product introductions in the marketplace is picking up in 2010. It's a mix of in and out products as well as permanent items. We have concentrated on the latter, permanent items, and feel very good about our base business, current new product performance and our upcoming December launches.

As we look to the remainder of the year, we'll continue to focus on the strategic pull model initiatives that are driving the business. These include in-store focus to sell and gain display activity, new innovation on our Reese's and Hershey's franchises, increases and greater frequency of quality merchandising and programming and further core brand advertising investments.

I'm pleased with the merchandising and programming in place for the third quarter including to name just a few, The Reese's Loves You Back promotion where we will be giving away up to $2 million in cash prizes. Consumers win instantly if they open a specially-marked Reese's product that include the game piece worth $10, $25 or $100.

We've the TWIZZLERS or Irresistible Summer promotion to win money towards the summer vacation, and we have a combined ALMOND JOY and MOUNDS contest to win grand prize trip to the Caribbean and we will continue our summertime S'mores programming as well as the launch of our Halloween programs.

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