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Hershey's Overall Sales Increase, Despite Plunge in China

| Feb 09, 2017 09:16 AM EST

Hershey Co. is one of the most popular snack brands in the world.

Though the overall fourth quarter sales of Hershey Co. increased 3.2 percent, reaching $1.97 billion, its performance in China plunged, The Wall Street Journal reported.

Following a struggle in reaping the benefits the company is expecting from acquiring a local brand, chocolate sales in China dropped by 11 percent in the country's local currency, renminbi.

According to Hershey's chief operating officer Michele Buck, consumer spending in the country is generally "not where we thought it would be."

"As a result, many categories were sluggish, including chocolate," Buck, who is set to become the firm's chief executive officer in March, added, noting that Hershey is eyeing to diversify its products. In 2015, it bought Krave jerky, and purchased the maker of barkTHINS last year.

To cope up with their performance in China, she noted that the snack company will boost profit margins by cutting corporate costs including overhead expenses.

The Pennsylvania-based company has been experiencing difficulty since it acquired Shanghai Golden Monkey, a local brand company, in 2014, spending $498 million in cash and around $86 million in debt.

At the time of acquisition, the firm noted that China is its "number one priority international market for growth," as it sales in the country increased 40 percent. The story took a different turn when China faced an economic turmoil.

Nonetheless, Hershey is hopeful that it would obtain improved performance, especially during the recently held New Year holiday period.

In America, Hershey also faces another battle: a growing competition with yogurt, fruit-and-nut bars, and other products that appear healthier.

North American sales grew 3.8 percent in the last quarter of 2016, thanks to the new product, Hershey Cookie Layer Crunch. Sales in the said region reached $1.69 billion.

Hershey expects that this year, it will post an adjusted earnings of $4.72 to $4.81 per share. Meanwhile, analysts forecast a profit of $4.64 per share.

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