Milk chocolate bars. Reese’s Peanut Butter Cups. Kisses chocolates. Payday bars. Milk Duds. Jolly Ranchers. The only thing sweeter than these goods is the stock of the company that produces them: Hershey Co (NYSE:HSY)’s is up 18.3% year-t-date and still has significant upside potential.
One of the main reasons Hershey’s stands out from its competition is the extent to which it is determined to aggressively expand. Although many blue chip companies are satisfied with steady growth and consolidating existing revenue streams, Hershey’s has a sky high goal to reach $10 billion in revenue by 2017. To put this context, Hershey’s 2012 revenue was $6.6 billion and the 50% revenue increase by 2017 will require, as noted by its Chief Growth Officer (yes, it has a Chief Growth Officer), a very aggressive top-line growth rate. Moreover, Hershey’s expects to achieve net sales of $1 billion in markets outside of Canada and the U.S. by the end of 2014.
The hallmark of Hershey Co (NYSE:HSY)’s growth strategy is based on a proven socioeconomic trend: as people become richer, they have more disposable income, which leads them to spend more on nonessential items, such as confectionaries and sweets. That’s why Hershey’s is targeting countries across the world that have high populations and strong GDP growth. For example, Hershey’s has put China at the top of its priority list and is seeing huge opportunity in tapping into one of the largest middle-class transitions in history. Hershey’s current product pipeline in China, which includes Hershey’s Kisses and solid chocolate globes, is doing extremely well. In 2013, Hershey’s plans to expand its footprint in China with new products such as premium Kisses Deluxe products and Hershey’s Drops.
By 2017, Hershey Co (NYSE:HSY)’s wants to expand international sales to 25% of total sales from the current 16%. This goal is buoyed by the fact that China isn’t the only international market where Hershey’s products are well-received. Hershey’s net sales in Brazil and Mexico (as well as China) were all above plan, with local currency sales in these markets up double digits year-over-year. Additionally, Hershey’s recently became the #2 player in the Mexico off of its strong sales, and in Brazil its chocolate business grew at a pace more than double the category growth. In Canada, Hershey’s is gaining significant market share (1.4 percent increase in the fourth quarter of 2012 alone) in the sweets and refreshment category and its Reese’s brand is the #1 chocolate brand in the country.