Hershey (HSY) reported solid results on account of considerable growth in its business, which was seen globally. As a result, it has caught investors' attention and has been in the news for quite some time. In fact, with various strategic moves under its sleeve, the company can get better. The company is also investing in new innovative products. Consequently, it has entered into a partnership with 3D Systems to make 3D printed chocolate candy. This is a big leap for the company as it experiments with innovative products, which could fuel its growth in the long run.
The 3D Systems deal
This is a multi-year agreement, under which both companies will work to develop new ways of making 3D-printed food. 3D Systems has an expertise in 3D printing and this partnership will enable Hershey to give a new dimension to chocolate confectionery. 3D Systems has already displayed some of its new 3D-printed candies at the Consumer Electronics Show earlier this year, which indeed had a great taste. Thus, we can expect this partnership to yield profitable results for both companies in the days ahead.
A diversified product mix
Hershey has also decided to offer a wide array of products, which will provide customers with various options to choose from. With this in mind, Hershey has acquired its Chinese rival, Shanghai Golden Monkey Food for $584 million, which will further enhance its position in the Chinese market. With manufacturing facilities in five cities in China, Golden Monkey sells its products throughout the country.
The Chinese chocolate confectionery market is estimated at around $12 billion, with Mars and Nestle leading the way. Currently, Mars has 40% market share in China, which is followed by Nestle. Apart from chocolates, Mars is also focusing on producing coffee and diary. As a result, it had opened a couple of factories in China to enhance its coffee and diary production.
On the other hand, Nestle is not far behind and is growing its presence in China at a fast pace. It has 40 facilities in China, which is sufficient to satisfy its growing demand for chocolates in this region. And with these two giants in place, Hershey has to cover a lot of ground to make an impact in the Chinese market. Hershey received a positive response in this region last year and expects to continue the same trend this year as well.
In other regions such as Canada, Hershey is a market leader in candy and mint and it expects solid sales in the future as well. It also saw positive sales trend in Mexico, and is positive about its prospects in that region. In the U.S., Hershey is performing well with considerable share gains in its core brands such as Reese's, Kit Kat, ROLO, and Brookside.
As already mentioned, Hershey is expanding its product line, with the addition of new products such as Hershey's Spreads, Lancaster Soft Crèmes Caramels, Graham Crackers Sticks, etc. It is already doing good business in the candy, mint, and gum category. In fact, it has outperformed other snack alternatives such as salty snacks, cookies, snack nuts, and crackers. Going forward, the company anticipates its gum and mint category to perform well and expects to gain market share just like in the previous quarter.
Hershey pays a good dividend, and has a decent projected annual earnings growth rate of around 11% for the next five years. Considering these factors, Hershey seems to be a good investment option.