Source: http://money.cnn.com/2014/01/16/technology/3d-printer-chocolate/
Your own personal vending machine
Earlier this year HSY announced a partnership with 3D systems to co-develop a printer to make your own chocolate. HSY believes that the printer could act as a new distribution/delivery system for its products. While 3D systems sees it as a way to help 3D printing go mainstream. It will be a multi-year joint development and though the machine can take any chocolate HSY will provide guidelines for achieving HSY like chocolate quality. It will be like having your own personal chocolate vending machine. It will be a very dangerous product to have in the office, if you get hungry just press print! It will be customisable so you can create your own shapes or even your own Willy Wonka landscape. Unfortunately there is still no word on when the chocolate printer will be available or the price. For me I think I'll stick with the original my favourite is the largest Kisses (see below) which weighs 1.27 kg filled with normal sized kisses.
Large consumer product companies tend to be slow growers because they are distributed everywhere and consumers already purchase the product. This is true of HSY in the US where they are dominant but they are just beginning to grow overseas. Only 16.6% of HSY's sales are to customers outside of the US with 5% or a 1/3 of overseas sales going to Canada. HSY is pushing hard into emerging markets especially China making its largest acquisition ever of Shanghai Golden Monkey China's 6th largest chocolate company. HSY plans to increase China sales by a factor of seven over the next five years by introducing other products like Jolly Rancher and Reese. Its HSY kisses candy was its first product in China to reach $100m in annual sales outside of the US and has grown 20 fold over the past 5 years.
Source: http://www.thehersheycompany.com/pdfs/fact-book.pdf
This international growth potential has helped HSY to be recently ranked as the fastest growing large consumer products company with sales over $5 billion by Boston Consulting Group and IRI.
Source: http://www.candyindustry.com/articles/86135-study-hershey-fastest-growing-large-cpg-company
The US confectionery market is tough its made up of over 1,200 brands and approximately 1,000
companies. However only 15-20 of the 1,000 companies have national distribution. HSY has a monopoly like position with 44.5% market share of the US chocolate market. HSY can use this strong position to grow overseas. As an example Mondelez the owner of Oreo's receives 80% of its sales outside North America while HSY is the exact opposite with 16% of sales overseas. HSY's also has a decent 2.3% dividend yield which is above the S&P500 yet as seen above it is also one of the fastest growing consumer packaged goods companies. HSY's strong US market share combined with its emerging market growth and 3D printer opportunities makes for an appetizing stock just like its products.
Jason
Disclosure: Decisive does not have a position in Hershey (HSY) stock
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