Hershey Hones In on Sugar Reduction in Its Better-for-You Confection Strategy

HERSHEY, Pa. — The Hershey Co. has doubled down on its better-for-you (BFY) confection strategy, whose market has strong demand but is underdeveloped, the company stated. According to Hershey, more than half of adults are looking for BFY options within the confection category, but only 10 percent of confection category sales come from BFY products.

With this in mind, Hershey has developed a strategy it expects to lead the BFY category for the next decade. This strategy, which was first announced in February 2021, continues to activate across four growth levers: core brand innovation, partnerships and licensing, research and development, and mergers and acquisitions.

"With more than 70 percent of consumers looking to reduce their sugar intake, sugar reduction has become the primary focus for our BFY candy growth. In fact, within the past year we activated across each of our BFY strategic pillars to accelerate growth by addressing consumers' desire for less sugar," said Dan Mohnshine, vice president of innovation and research and development for Hershey.

The following is more about each of the four pillars:

• Core Brand Innovation: Last year, Hershey relaunched its Zero Sugar line and expanded pack types of many brands, including Hershey's and Reese's, with sales doubling, growing by $30 million. It is currently conducting in-market tests to refine packaging, merchandising and retail channels on 25-percent-less-sugar options, including Reese's and Hershey's. These tests help it evaluate the incremental value a new product offering brings to its broader portfolio.
• Partnerships: Hershey is continually evaluating partnerships with well-known BFY brands to co-develop new offerings. For example, it is currently running an in-market test with Honest Beverages, through which it used Honest organic juice to make gummies. Hershey's goal is to understand how consumers react to the Honest brand and organic fruit juice as a sweetener within confection.
• Research and Development: Last year, in partnership ASR Group, Hershey made an equity investment in Bonumose, a startup focused on plant-based food ingredients, including rare sugar alternatives. In parallel, its team continues to use a range of sugar substitutes that deliver great taste while reducing sugar, the company noted.
• Mergers and Acquisitions: In June 2021, Hershey acquired Lily's, which specializes in low-sugar, BFY confectionary products. This acquisition was an excellent strategic fit for Hershey's BFY portfolio and anchored its growth in the category, Hershey said. In fact, in 2021, the brand experienced growth of 27 percent versus the previous year.

Beyond the four growth levers, Hershey is focusing on understanding its consumers in terms of what, when, where and why they engage with each of its products. The company is identifying opportunities across its portfolio of brands to extend its reach into new occasions.

Consumers' decisions about eating aren't black and white; they're different for everyone and throughout the day, with some limit serving sizes while others make trade-offs between BFY and indulgent for different occasions, stated the company. Hershey sees growth at both ends of this continuum, from indulgent to permissible snacks, creating a "bow tie" effect.

• Hershey's zero-sugar and reduced-sugar offerings invite consumers to engage with its products across a variety of occasions, from a lunchtime treat to a post-work indulgence.
• Hershey's expansion into permissible salty snacks like Dot's Pretzels and SkinnyPop have enabled it to experiment with sweet and salty twists on its brands, such as Reese's Drizzled Popcorn and Hershey's Dipped Pretzels, bringing new growth beyond the confectionary aisle.

"At its core, the success to date of our BFY strategy is grounded in what we do best, staying close to our consumers, proactively identifying market opportunities and leveraging key partnerships and acquisitions to create more moments of goodness by offering more options for more occasions," Hershey concluded.

Headquartered in Pennsylvania, The Hershey Co. has more than 80 brands around the world that drive more than $8 billion in annual revenues, including such iconic brand names as Hershey's, Reese's, Kit Kat, Jolly Rancher, Ice Breakers, SkinnyPop and Pirate's Booty.