Analyzing Hershey’s Emphasis on Product Innovation

Food manufacturers constantly look for innovations to adapt to changes in trends. Globally, chocolate innovations grew by 18% between 2013 and 2014, and in 2015, consumer health awareness has continued to drive innovations in the confectionery industry (XLP) (IYK).

It has accordingly become a growing challenge for chocolate companies to come up with healthier options among their chocolate products. To deal with this, chocolate companies have begun adding new flavors and new fillings made up of natural ingredients like nuts and berries. According to the NCA (National Confectioners Association), fruit infusions in chocolates increased by more than 50% in 2014.

In addition to fillings and infusions, the perceived benefits of dark chocolate for consumer blood pressure and cholesterol levels have increased the volume of chocolatiers’ product launches by 93%. According to KPMG, dark chocolates accounted for 20% of the US chocolate market in 2014.

The Hershey Company (HSY) plans to position dark chocolate as a lifestyle choice in the US. The company has thus begun promoting its many dark chocolate brands for specific lifestyles and consumption—for example, Scharffen Berger for wine-tasting parties, Brookside as a fruit-flavored workday treat, and Bliss for ritual evening relaxation.

But Hershey also targets health-conscious consumers specifically. Here are a few examples that reflect the company’s aim to compete in this growing market:

• To attract the health-conscious chocolate lovers, Hershey launched premium product Brookside Fruit and Nut Bar, a delicious treat with a high-protein content that is free of gluten and artificial flavors.
• To cater the demand for low-fat and low-calorie chocolates, Hershey replaced sugar with Maltitol in some of its products. Maltitol has 20% fewer calories than the sugar-based chocolates.
• Meanwhile, Hershey’s peer Nestle (NSRGY) has also begun focused on health-based innovations.

Many companies in the confectionery industry are introducing flavors aimed at transforming chocolate’s functionality. Here are just a few examples:

• Mondelez International’s (MDLZ) Ritz biscuits have Cadbury Dairy Milk sandwiched inside them and are intended to be appetizers.
• Mondelez is launching a melt-resistant chocolate that doesn’t melt in sun.
• Natra and Carré Chocolate have combined wine and beer as supplements in their chocolates.
• Barry Callebaut (BYCBY) has appointed a wine expert to produce bars to accompany wine tastings.

Continue to the next part of this series for an assessment of Hershey’s plans to focus on its snacking portfolio in 2015.