WSJ Profiles Hershey

Today’s Wall Street Journal profiled Hershey (HSY). This company has been a big winner and the article helps explain why.

Here’s a sample:

There are many companies that will find themselves dealing with crises during this market downturn. Some will double down on existing strategies. Some will diversify. Hershey did both and discovered an unlikely new identity.

“They’re not just a confectionery company anymore,” said Morningstar analyst Erin Lash.

That sounds a bit like Willy Wonka going keto. But this is a company based in a town built on chocolate and controlled by a powerful trust designed by founder Milton Hershey in 1905 to support his school for underprivileged children. Hershey has always been different from most corporations. Otherwise it might not be around.

Almost every one of its rivals has salivated at the idea of buying Hershey. The company’s last battle for independence took place in 2016, when its stock was trading below $100, and Mondelez offered to pay $107 and then $115 a share in a deal that would have created the world’s largest candy maker. Hershey’s board rebuffed the approach from Mondelez, the parent company of Oreo, Cadbury and Sour Patch Kids, but the takeover bid lasted for months.

Today its stock price is above $230 because of what happened next. A management shake-up weeks later elevated Michele Buck to CEO, and she laid out her vision for a long-term strategy on her first day on the job. She told investors to expect changes. “We’ll have less growth in the international markets than perhaps we’ve seen in the past,” Ms. Buck said in March 2017. “We’re clearly seeing that North America is going to be the biggest driver.”

It was counterintuitive, but she was right: North American sales went from 88% of Hershey’s total sales in 2017 to 92% in 2021. Instead of competing against varied tastes and established brands, Hershey pulled back internationally and shifted the playing field to where it already had the advantage.

We added Hershey to our Buy List in 2019. It’s been a nice winner since then.

Posted by on October 27th, 2022 at 2:44 pm


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