Hershey (HSY) Benefiting From Acquisitions & Saving Efforts

The Hershey Company HSY appears well placed, courtesy of its focus on boosting the snacks business, constant innovation and saving efforts. Notably, Hershey has been undertaking buyouts to augment portfolio strength and drive revenues. In fact, net impact from buyouts and divestitures boosted sales growth by 0.9 points during the first quarter of 2019.

Hershey’s top line is steadily gaining from the Amplify Snack Brands, which was acquired in January 2018 to expand in the snacking category.  With several plans rolled up its sleeve to further strengthen the Amplify brands, the company expects greater yields from this buyout in the forthcoming periods. 

Again, in September 2018, the company acquired Pirate Brands from B&G Foods BGS, which is aimed at augmenting this business. This apart, the acquisition of barkTHINS has been aiding the company’s better-for-you snacks portfolio. Notably, Hershey’s buyouts and divestitures are expected to positively impact net sales by roughly 0.5 point in 2019. In fact, many other companies like Smucker SJM and General Mills GIS are benefiting from acquisitions.

Coming back to Hershey, we commend its constant focus on innovation. In this respect, Hershey's Gold and Reese's Outrageous, launched in 2018, have been doing well. Further, the launch of Reese's Thins is drawing customers’ attention. The Kisses brand’s launch in India is also reaping benefits. An important strategy of the company is to create a unique and holistic portfolio for every season, which can address consumers’ seasonal shopping needs.

These factors along with Hershey’s saving efforts are working well for the company. Incidentally, Hershey focuses on optimizing portfolio to deliver increased profitability. In this respect, the company’s SKU rationalizing efforts have been progressing well. Additionally, the company is on track with its Margin for Growth program, per which it will reduce its global workforce outside the United States by 15%.

This is also intended to improve the overall operating margin through supply-chain optimization, a streamlined operating model and reduced administrative expenses, with savings achieved in 2018 and 2019. Management earlier stated that it expects overall savings of approximately $150-$175 million from the Margin for Growth initiative.

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