Hershey CompanyHSY

Morningstar Rating

Stock Research and Analysis

by Erin Swanson, CFA

Hershey's leading position in the U.S. chocolate market (42% market share) generates economies of scale and robust profit margins, providing the firm with a wide economic moat, in our opinion. However, shortsighted strategies and elevated commodity Read more

Bulls Say

Hershey is the leading player in the domestic chocolate segment, with 42% share of the market--far in excess of any of its competitors.

Assuming the Milton Hershey Trust is willing to relinquish control, Hershey could be viewed as an attractive acquisition target.

Hershey's supply-chain transformation project is expected to provide about $180 million in funds that will enable the company to be more flexible with product development and spend more heavily behind its brands and salesforce, which should prove to be wise investments, in our opinion. Read more

Bears Say

Because of previous missteps, including reduced advertising spend and weak innovation, Hershey finds itself at a crossroads. Profits will be constrained in the near term, as the firm invests in brand support, while at the same time battling elevated commodity costs.

More than 85% of Hershey's sales are in a mature domestic market. The company has recently looked to joint ventures in India and China to build its brands globally, but worldwide competitors already have beachheads in those markets.

Mars' acquisition of Wrigley could place even greater competitive pressures on Hershey. Read more

Strategy

From a strategic perspective, Hershey has a lot on its plate. The firm is currently in the middle of a massive global supply chain restructuring, in an effort to increase its manufacturing capacity utilization Read more

Management

Minority shareholders have little power at Hershey because the firm is controlled by the Milton Hershey Trust. We dislike Hershey's dual-class voting structure, whereby class B shares retain 10-to-1 voting control, because this setup gives the trust Read more

Profile

The Hershey Company is the largest confectionary manufacturer in North America. Over the past 80 years, the firm has developed a product portfolio that consists of more Read more

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