How Hershey Benefits from the barkTHINS Acquisition
In April 2016, Hershey (HSY) purchased barkTHINS snacking chocolate brand. It was owned by Ripple Brand Collective, a privately held company based in Congers, New York. This acquisition was part of the company’s snacks portfolio expansion strategy, which complements its strong core confectionery portfolio.
The barkTHINS brand was launched in 2013 and has become a favorite snack brand because of its simple ingredients, fair trade cocoa, and non-GMO certification. The company feels that this brand adds strength and diversification to its product portfolio and will thus allow it to satisfy more consumer needs.
Expectations from the acquisition
The company expects that the acquisition will be dilutive in 2016 and 2017 before turning accretive in 2018. The company feels that the barkTHINS acquisition will give it a chocolate stacking platform. Hershey’s focus has always been on organic innovation and growth along with acquisitions that meet the needs of CMG (candy, mint, and gum) consumers that seek variety.
Currently, the $25 billion CMG category is the largest segment of the $85 billion US snacks market. Thus, the company is focusing on extensive R&D and consumer market research in the CMG category. Hershey expects to come up with a new product launch by the end of the year.
Management’s view on the acquisition
Michele G. Buck, Hershey’s North America president, stated, “This acquisition is a great addition to our Hershey chocolate portfolio and enables us to expand our mass premium offerings into this growing and on-trend category. Made with high-quality dark chocolate, nuts, and other ingredients, barkTHINS addresses key consumer trends, such as premium, high-quality ingredients and snacking. We look forward to building barkTHINS by leveraging Hershey’s scale at retail.”
Hershey’s peers ConAgra Foods (CAG) and Campbell Soup (CPB) have gained 12.5% and 23%, respectively, so far in 2016. Hershey is a part of the Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) and the Consumer Staples Select Sector SPDR Fund (XLP), which holds ~4% in HSY.