That’s not to say that Hershey’s is neglecting its U.S. market. Hershey’s domestic performance is strong and holds significant potential. For one, it has the largest market share (43.1%) of the U.S. chocolate and its US chocolate retail sales are healthy, with a cumulative average growth rate of 6.1% in the last four years. For 2012, Hershey’s U.S. retail takeaway and market share of candy, mint, and gum was up 5.7%. Recently, Hershey’s acquired Brookside, a privately-held Canadian confectionery company that produces chocolate-covered fruit with unique fruit juice centers. This acquisition can significantly boost Hershey’s earnings in the long-term as Brookside has increased sales at a compound annual growth rate of about 20% over the last several years. Combined with Hershey’s additional manufacturing capacity and plans to expand its U.S. presence, Brookside is poised to easily increase 2013 net sales growth by over 20%.
Moreover, Hershey Co (NYSE:HSY)’s domestic and international performance will be significantly boosted by its marketing and promotion prowess. Many of Hershey’s products have near-universal brand recognition and Hershey’s is a brand often associated with taste and quality. Building on this brand recognition, Hershey’s has also announced plans to increase advertising by 20% in 2013 and already has a huge marketing network, from the Reese’s NCAA basketball program to Twizzler tie-ins with the upcoming Superman movie to various Jolly Rancher and Twizzlers promotions with Gym Class Heroes. Moreover, Hershey’s marketing research is cutting-edge, utilizing such techniques as mind modeling and proprietary research techniques. This marketing research has led to such profitable changes as resealable confectionery bags and currently shows that Brookside products hold significant appeal to not only candy-lovers, but people who don’t have sweet tooths.
So what has this all meant for Hershey’s? It has had four consecutive years of double-digit EPS percentage increases averaging about 13%. It also has a solid three-year sales growth rate of 7% and an extremely healthy annual ROE of 78.1%. In the last quarter, Hershey’s reported a strong 12% increase year-over-year in sales. Hershey’s financial strength has also allowed it to post a quarterly dividend of $0.42 a share, a figure which has only gone up since its introduction.
Few, if any, of Hershey Co (NYSE:HSY)’s competitors have its valuable combination of aggressive international expansion and solid growth. General Mills does not have nearly as aggressive of an international expansion strategy as Hershey’s does and currently only derives 12% of its total sales from international markets. Others, such as Kellogg Company (NYSE:K), have seen international segments decline in performance; in Kellogg’s third quarter of 2012, it noted that its international segment posted a 6% decline in sales and an 11% decline in operating profit. Competitors such as ConAgra Foods don’t even have operations outside of North America. The only major competitor that has more of an international presence than Hershey’s is Mondelez International Inc. (NASDAQ:MDLZ), but its growth has actually been decreasing: the company’s 2012 revenue declined 2.2% and EPS declined a huge 11.34%.
Catalysts such as aggressive international expansion, domestic dominance, marketing strength, and smart acquisitions ensure that Hershey Co (NYSE:HSY)’s is a must-own stock for anyone who wants to make a sweet profit.
The article A Sweet Tooth for Success originally appeared on Fool.com and is written by George Liu.
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