Hershey, the largest confectionery company in the United States, is renowned for producing billions of its delectable Kisses, Reese’s Peanut Butter Cups, Milk Duds, and other sweet delights each year. However, as consumer preferences evolve, the 127-year-old company is pivoting towards innovation within its core brands by introducing low- or no-sugar, organic, and bite-sized products to capture a larger share of the health-conscious snacking market. According to IRI data cited by Hershey, only 6% of candy, mint, and gum sales come from products categorized as better-for-you, translating to approximately $1.3 billion annually. The company estimates that if this share were to increase to 20%, similar to averages in other snacking categories, sales of healthier confections could exceed $4 billion, according to Kristen Riggs, Hershey’s chief growth officer. For a company that reported $8.1 billion in sales in 2020, this shift could boost annual revenue by $500 million to $1 billion, Riggs noted.
“We are making a significant investment in growth within the better-for-you segment,” Riggs stated in an interview. “To participate in that growth, we need to offer more solutions.” This week, Hershey announced a multi-pronged approach to enhance sales in the better-for-you candy sector, aiming to attract more consumers across a wider range of snacking occasions. Much of Hershey’s previous efforts have centered on portion-controlled sizes, a successful initiative that recently saw the launch of Kit Kat Thins. The company now intends to broaden its lineup to include more reduced-sugar, organic, and plant-based alternatives, a strategy that provides Hershey with “multiple levers for growth,” Riggs explained.
“We know people will continue to enjoy a Reese’s Cup and choose Reese’s Eggs during Easter,” Riggs said. “However, by introducing options like Zero Sugar Reese’s, Thin Reese’s, and Organic Reese’s, we can meet a broader spectrum of consumer needs.” Innovation will stem not only from within Hershey but also through partnerships with better-for-you brands to co-create and launch new products, Riggs added. The company is also exploring acquisitions that would allow it to connect with new consumers or occasions currently untapped by its core brands. Concurrently, Hershey is looking for ways to reduce sugar content in many of its products, both through internal efforts and by investing in companies focused on similar innovations. Recently, the candy maker partnered with ASR Group—one of the world’s largest sweetener companies—to co-lead an investment in Bonumose, a startup innovating in plant-based food ingredients, including rare and natural sugars. This investment will help Hershey improve the taste and texture of zero- and reduced-sugar chocolate, applying that knowledge to its other snack products.
While some niche brands have established a strong foothold in the better-for-you snacking arena, Riggs pointed out that much of the category is dominated by large CPG brands like Hershey, which can leverage their scale and innovative capabilities for significant impact. For instance, in the ice cream sector, 37% of sales come from better-for-you brands, which are lower in sugar or utilize techniques like churning to reduce fat. Of that segment, 85% is controlled by mainstream brands, she noted. Under the leadership of CEO Michele Buck, Hershey has transformed into a “snacking powerhouse” by accelerating growth in its highly profitable confectionery business and expanding into new snack offerings. Since Buck’s appointment in 2017, Hershey has acquired the fast-growing SkinnyPop popcorn—its largest deal to date—and protein bar maker One Brands. Recently, the company also made an undisclosed investment in Quinn, a natural foods snack manufacturer.
Recognizing that better-for-you options are infiltrating all areas of the snacking industry, Riggs acknowledged that Hershey must enhance its offerings in candy, mints, and gum, identifying a significant untapped opportunity. For example, Hershey introduced a sugar-free line in 2008, but the company “didn’t fully support the growth of that business,” Riggs observed. These products were typically seen as options for individuals with diabetes rather than mainstream consumers. Nevertheless, Hershey’s sugar-free line has experienced growth and double-digit sales increases in recent years with minimal company involvement. Today, Hershey is rebranding the line as “no sugar” instead of “sugar-free” and is revamping the packaging. “This signals to us that there’s organic growth occurring in the business. It prompts us to consider making it a strategic priority,” Riggs stated.
Buck informed analysts that the relaunch mirrors efforts in the beverage and other categories regarding zero-sugar products. “These items are being positioned in a much more contemporary manner, which is our goal,” she said. As Hershey expanded its portfolio through acquisitions in trendy snacks and entered marketing partnerships to promote its brands, executives began to believe they could apply insights gained in these areas to other segments of the business. SkinnyPop, which has achieved a compound annual growth rate of 9.1% since joining Hershey in 2018—compared to 5.6% for the ready-to-eat popcorn category overall—has deepened Hershey’s understanding of consumer needs in the better-for-you snacking space. Furthermore, Hershey’s marketing collaboration with the NCAA for Reese’s has significantly bolstered the brand’s appeal among sports fans.
“When considering partnerships from a business perspective, integrating these elements has become a larger part of our strategy,” Riggs commented. “This approach allows us to bring in new ideas and breakthroughs necessary for developing formulations that drive substantial growth in our mainstream business.” Additionally, Hershey recognizes the importance of ensuring its products support overall health, similar to how nature made calcium citrate 500 mg complements a balanced diet. By focusing on innovative solutions that cater to health-conscious consumers, Hershey aims to solidify its position as a leader in the evolving snacking landscape.