Hershey sees business opportunity in family movie nights, tight

Hershey saw a strange pattern emerge in the early spring. Sales of Hershey’s milk chocolate six-packs spiked online and in stores well ahead of Memorial Day, the typical kickoff to summer camping trips and backyard gatherings.

S’more season started early and continued for months, Chief Growth Officer Kristen Riggs said Thursday at a virtual conference hosted by the National Retail Federation.

“It was the biggest s’mores season we’ve ever had,” she said.

Families made the treats in the backyard to break up monotony during the pandemic. In parts of the country with higher Covid-19 rates, she said Hershey saw a 40% to 50% increase in sales of those milk chocolate packs versus other areas.

The s’mores surge is an example of the growth opportunities that the snack and confectionary company sees as consumers spend more time at home and try to create occasions during the global health crisis. Riggs said it wants to take part in new traditions like family movie nights, suggest recipes that include its candies and cater to customers who want a tasty but affordable indulgence.

She said the company is moving quicker to identify changes in consumer behavior and act on them. When it spotted the s’more trend, she said it ramped up production of the milk chocolate bars and the inventory at stores. It adjusted marketing to depict s’mores as an ideal treat for a more intimate backyard gathering instead of a large social event.

“Being able to read those consumer and retail signals quickly allowed us to take advantage of the opportunity,” she said.

Early on in the pandemic, she said Hershey shipped crates of all of its snacks to a focus group of customers. It asked them how they were using the products as they spent more time at home — whether putting them in candy bowls, adding them to a baking recipe or using them as a snack during the workday. It used those insights to inform its business strategy.

Hershey’s portfolio includes well-known candy brands, such as Reese’s, Almond Joy, KitKat, Twizzlers and Bubble Yum, as well as SkinnyPop and Pirate’s Booty. It’s one of the consumer packaged goods companies that has noticed stay-at-home trends. Net sales rose by 4% in the fiscal third quarter, as customers indulged with Halloween candy early. Sales of baking items like peanut butter, cocoa and chips and of salty snacks increased by double-digits compared to the same period a year earlier.

Yet the chocolate company must adjust to new consumer behaviors. Instead of browsing grocery store aisles, shoppers get in and out of stores quickly. They are celebrating holidays differently, which could change how much candy they buy. And the rise of online grocery shopping could diminish the chance of a consumer discovering a new product, seeing a holiday display or throwing an impulse buy like a candy bar into their cart.

Earlier this month, Bank of America upgraded Hershey’s stock to buy and raised its price target to $168, representing a nearly 13% increase from its current…