How Sweet It Is
Diane is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Chocolate has a very sweet history. It’s been called the nectar of the gods and poor man’s champagne. Plus, it's the go-to, anytime remedy for ailments and adversities. Leave some chocolate around today, and chances are very good it will be gone today. Chocolate rarely hangs around anywhere for very long.
Ah! But such is not the case for Hershey’s (NYSE: HSY), the heavyweight of chocolate companies. Founded by Milton S. Hershey in 1894, the company of the iconic chocolate bar with the same name is the oldest chocolate company in the United States. Its taste, aroma, and name are well-known worldwide. The company is so revered that the town in Pennsylvania where it is headquartered is proudly named for Hershey.
The candy maker is the parent company of such coveted and cult-like treats including Mr. Goodbar, Kit Kat Bars, Whoppers, Reece’s, Hershey Kisses, and Symphony Bars. It also markets a hugely successful line of baking products and syrups.
Fourth-quarter profit jumped a savory 5.4% on higher revenue, thanks to strength in all of its categories. Profit in Q4 totaled a tasty $149.9 million, up from a year ago profit of $142.1 million, or 62 cents a share.
The company raised its full year 2013 per-share earnings outlook to an increase between 10% and 12%, up from a previous target of 8% to 10%.
Hershey’s is set to enter its most robust season with Valentine’s Day and Easter approaching. Mother’s Day, another popular holiday for gifting chocolate, follows. While there is a seasonal lull until Halloween, millions and millions and millions of chocolate lovers never need an occasion to buy, give or eat the stuff.
Some 3 billion pounds of chocolate are consumed worldwide annually. Americans' love affair with the treat continues to grow. We currently down 11.7 pounds per person every year.
Hershey competes with Cadbury, the British confectionery company owned by Mondelez International (NASDAQ: MDLZ).
Mondelez was spun off from Kraft Foods in October 2012. Its brands include Oreo, Chips Ahoy and Cadbury candies. It also has a prominent position in the gum and coffee markets. Mondelez has a heavy focus in emerging markets where the “grazing” (I’m not hungry I’ll just pick) phenomenon is just beginning to take hold.
However, the company is facing some headwinds as its deals with increasing commodities prices and how it will pass these mounting costs on to consumers in less affluent markets.
Others in the industry include Godiva, a private company, and Rocky Mountain Chocolate Factory (NASDAQ: RMCF).
Durango, Colorado based Rocky Mountain Chocolate factory sells a cache of chocolate, ice cream, coffee and yogurt products in conjunction with its franchisees in 373 stores in 41 states, as well as Canada, Japan and the United Arab Emirates. RMCF reported a loss in its latest quarter, and as far as sales and revenue go, it is dwarfed by Hershey’s saccharine presence.
That’s the thing. Hershey has a huge presence and staunch following.
In my observation, and I come from a rather large family of chocolate lovers with a rather large extended family of chocolate lovers, and so-on and so-on, offer a discerning crowd of chocolate aficionados a choice of chocolates, and chances are high they will go with Hershey’s over more expensive and boutique brands.
Investing in stocks is kind of like a box of chocolates… you never know exactly what you’re gonna get. But with Hershey’s you have a pretty good idea, and it’s sweet.
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