US candy marketplace rocks Hershey Q3 earnings
The firm revised its full-year net sales guidance from +3-4% to +1.5-2% mainly due to the weak US candy mint and gum marketplace and a slowdown in China's chocolate market.
However, it expects its candy, gum in mint sales in its home market will pick up in the fourth quarter.
US candy, mint and gum retail takeaway hit
Hershey president, chairman and CEO John P. Bilbrey said the firm’s candy, mint and gum (CMG) retail takeaway was lower than expected as consumers made 4% fewer retail compared to June year-to-date trends and big retailers took a 'clean floor' policy, reducing in-store merchandizing.
“This softness also impacted broader mainstream snacks, where consumption trends during the quarter were less than the June year-to-date increase,” he said.
Hershey grew 0.3% in the US CMG segment, below category growth, and lost 0.4 points market share. Around 88% of Hershey’s Q3 net sales came in North America.
Bilbrey said the US candy, mint and gum market would pick up in Q4 as the US chocolate leader upped marketing spend and benefitted from Reese’s NCAA College Game Day promotion and launches such as Brookside dark chocolate fruit and nut bars and Hershey’s Kisses Deluxe chocolates.
Hershey’s consolidated Q3 net sales were up 0.04% to $1.96bn compared to the same period last year and it registered 1.5% organic growth in net sales.
However the group's Q3 reported net income plummeted 31% to $154.8m.
China chocolate sales fall
Hershey also experienced slowed growth in the Chinese chocolate market that drove net sales in its international and other segment to decline 15.2% to $226.9m.
Its international arm reported an operating loss of $13.5 million compared to segment income of $16.1m in Q3 2014.
Hershey said in a release: “In the third quarter, China chocolate category retail sales increased about 4%. This was less than our expectation... Hershey third-quarter chocolate retail takeaway in China was off about 14%, resulting in a market share decline of 1.7 points.”
