The dynamic Hershey (NYSE: HSY ) has moved to grow its business worldwide and I believe it has now become one of the best investment opportunities in the market today. Let's take a look at what Hershey has been up to and you can decide for yourself if this is a stock you should add to your portfolio.
The chocolate master
Hershey is one of the largest producers of chocolate and confectionery products, candy, and gum in the world. It is home to over 80 brands which include Hershey's, Reese's, Kit Kat, Twizzlers, Jolly Rancher, and Ice Breakers. The company also offers premium and artisan chocolate products under brands such as Scharffen Berger and Dagoba; these premium products are offered through the Artisan Confections Company, one of Hershey's wholly owned subsidiaries.
The United States' new brand
Hershey's new U.S. brand is a line of caramel chews under the name Lancaster Caramel Soft Cremes. The first new brand introduced in the U.S. by Hershey in 30 years, it is named after Milton Hershey's first established company, the Lancaster Caramel Company.
Hershey initially launched Lancaster caramel chews in three Chinese markets in early 2013 as a test run, and the chews became available in the United States in January. Wider distribution for the chews in China also started in January to maximize growth. I believe the new product will quickly gain traction due to the worldwide popularity of caramel, which will allow expansion into other countries and markets.
Over the last several years, Hershey has been increasing its presence in the Chinese market. The Lancaster line of caramel chews was another move in this chase, but December brought the company's largest move yet: On Dec. 19, Hershey announced the largest acquisition in its history when it bought an 80% stake in the Shanghai Golden Monkey Food company for a reported $584 million.
The Golden Monkey brand is one of the most recognizable in China and the acquisition brings a whole new line of products to Hershey's repertoire. This move will also allow Hershey's brands to join Golden Monkey's large distribution channels, quickly making Hershey's operations more efficient and widespread. I believe this was a very strategic and genius move on Hershey's part and that it will pay off immediately.
India gets a sweet new treat
The start of 2014 also marked the debut of the very popular Jolly Rancher brand in India. This is the first international market for the Jolly Rancher brand outside of North America in the brand's 65-year history.
Hershey's Indian headquarters said that Jolly Ranchers are perfect for the "sweets-loving consumers" of India, and the potential is incredible when you consider that the nation is home to the world's second-largest population, with 1.2 billion people. Hershey also stated, "We've tailored our new Jolly Rancher products for India to appeal, specifically, to local palates." I believe that Jolly Ranchers have massive potential in India and this could lead to further expansion for the brand in the coming years.
Spreading the love
The most recent press release from Hershey came on Jan. 15 and it told of the company's entrance into the market of spreads. The Hershey's Spreads line features three varieties: chocolate, chocolate with almond, and chocolate with hazelnut. The products are available nationwide today and will be heavily marketed over the next several months.
With this move, Hershey challenges the largest players in the spreads market, J.M. Smucker (NYSE: SJM ) and Ferrero. Smucker owns the very popular brand Jif and Ferrero is home to Nutella, and these are arguably the most popular of the hazelnut and chocolate spreads. I believe Hershey will immediately become the consumer favorite because its world-renowned chocolate will make the spread flavor much more delicious and desirable. Smucker already has to compete with Hershey for share of the syrup and toppings market, so I believe it will be hit hard by this news.
The Foolish bottom line
Hershey has gone from a mid-growth, U.S- focused dividend payer to a company that aims toward worldwide domination of the chocolate, candy, and spreads industries. This was a much-needed move, and shareholders are loving every bit of it. I fully believe that Hershey's new products and expansion efforts will be successful and the stock will rise to fresh all-time highs for the next several years. Investors should consider initiating a position in Hershey on any weakness in the coming days and holding on to it for the long term.
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