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    Hershey Profit Drops in Fourth Quarter

    Focus on brand-building and premium chocolates expected to boost U.S. sales.

    The Hershey Co. reported its fourth-quarter profit plunged 65 percent and forecast an unexpected drop in 2008 earnings.

    The Hershey, Pa.-based candy maker saw net income fall to $54.3 million from $153.6 million for the quarter, which ended Dec. 31, 2007. Consolidated net sales were $1.342 billion, compared with $1.336 billion for the fourth quarter of 2006.

    "Hershey's results for the fourth quarter were in line with our expectations," said David J. West, president and CEO. "The U.S. business is operating in a challenging environment that includes higher input and operating costs, as well as heightened levels of competitive activity. These factors did not subside in the fourth quarter.

    "U.S. retail takeaway in the fourth quarter and full year, in channels that account for over 80 percent of our retail business, was up 0.9 percent and 1.3 percent, respectively. Retail takeaway was not as strong in the channels measured by syndicated data, thus market share declined by about 1.3 points in both the fourth quarter and full year in these channels."

    As anticipated by the company, inventory levels at key distributors declined in the fourth quarter. "This should lead to shipments and retail takeaway patterns that are more closely aligned in 2008," West said.

    The company's primary goal this year is to stabilize U.S. marketplace performance. "Markedly higher brand-building support, including advertising, quality merchandising, enhanced retail coverage and new chocolate products within the premium and trade-up segments will enable us to achieve this goal," West said.

    Hershey will launch the Starbucks and Hershey's Bliss product lines in March. "These additions enhance our premium and trade-up portfolio and will broaden Hershey's participation in faster-growing segments of the category," he said.

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