In a bid to expand its presence in China,
The Hershey Company
) recently announced its plans to launch a new milk candy brand
called Lancaster in the country.
The new candy brand will be initially launched in three
Chinese cities by the next month followed by much wider
distribution in 2014. Lancaster Nai Bei candy will be available
in three flavors, Original Pure Nai Bei, Pure Nai Bei filled with
Rich Nai Bei, and Pure Nai Bei filled with Strawberry. Milk
candies are extremely popular in China and account for one
quarter of the total candy market in China. Lancaster Nai Bei
candy, made from imported milk and involving slow cooking, has
been specially crafted to suit the taste of the Chinese
This is the first time that Hershey, which generates around
80% of its business in the U.S., has launched a completely new
brand outside the U.S. Markets outside the U.S. have accounted
for only 14%-16% of the company's net sales between 2010 and
2012. Hershey is thus accelerating investments in overseas
markets, particularly in Mexico, Brazil, India and China, where
consumer spending growth is positive. Demand for confectionery
items is growing in these countries as middle-class consumers
there are shifting to urban living. The rising pool of
middle-class consumers in emerging markets thus represents a huge
opportunity for branded consumer companies. Hershey intends to
expand its five core brands of Hershey's, Reese's, Hershey's
Kisses, Jolly Rancher and Ice Breakers in these markets.
Among the emerging countries, Hershey's special focus is on
China as it has one of the largest numbers of consumers given its
growing number of middle class and affluent households. The
company plans to add additional manufacturing capacity and
resources to boost growth in China. The company expects China to
become the fifth largest global confectionary market by 2016.
In 2012, the company did well in China, Brazil, and Mexico,
with constant currency revenues growing in double-digit
percentages. The company believes that net sales outside the U.S.
and Canada will increase 15% to 20% in 2013, higher than the 12%
growth in 2012, driven largely by innovation and increased
advertising investments for both core brands as well as new
products. By the end of 2014, the company intends to achieve $1
billion in net sales in markets outside the U.S. and Canada. In
2012, Hershey derived approximately 16.1% of net sales from
markets outside the U.S., which is expected to grow to 25% over
the long term.
Hershey carries a Zacks Rank #3 (Hold). Other consumer staples
companies that are currently doing well include
Flower Foods, Inc.
), carrying a Zacks Rank #1 (Strong Buy), and
The Coca Cola Company
General Mills, Inc.
), both carrying a Zacks Rank #2 (Buy).
FLOWERS FOODS (FLO): Free Stock Analysis
GENL MILLS (GIS): Free Stock Analysis Report
HERSHEY CO/THE (HSY): Free Stock Analysis
COCA COLA CO (KO): Free Stock Analysis Report
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