One of America’s premier candy companies has made a move into the meat snacks category. Is candy on the downslide, or are meat snacks on the rise? You be the judge.
There are a few iconic American brands with near-universal name recognition, a well-known backstory and a stockpile of positive imagery among consumer.
That club, unfortunately, has a limited membership, but somewhere near the top of the list is the Hershey Company, manufacturers of the classic Hershey bar. Most people know that the company was founded by entrepreneur Milton Hershey — back in the 19th century — who perfected the recipe for milk chocolate, acquired dozens of Cuban sugar cane plantations, built the ultimate company town in central Pennsylvania and for several decades virtually cornered the U.S. market for chocolate candy.
Hershey, Pa., is practically a destination resort these days, with streetlights shaped like Hershey’s Kisses, factory tours that resemble and amusement park ride and a downtown that’s a museum to all tings chocolate.
Heck, more than a century after its introduction, mini-Hershey bars are still one of the top three treats kids prefer on Halloween (and Hershey’s other brands are also in the top 10, including Reese’s, Kit Kat and Twizzlers). All in all, a remarkable corporate track record.
The evolution of snacks
Here’s the news of interest to the meat industry. According to a report on ABC News, the company just announced that it’s moving into the snack foods sector with the pending acquisition of Sonoma, Calif.-based Krave Jerky — for an undisclosed sum, of course. Krave is positioned as a premium jerky brand, with the distinction of offering such unique flavors as black cherry barbecue, basil citrus and lemon garlic.
Business analysts are debating whether the move is a response to declining demand for candy, or a recognition of the growing potential of protein snacks. It may be the former, because earlier this week, Hershey reported 4th-quarter sales and profit that missed analysts’ expectations and lowered its earnings and revenue outlook for the year.
In addition, company officials hinted that the motivation for acquisition is the potential for tapping into a growth category.
“We know consumers have an interest in portable and protein-based nutrition,” Michele Buck, president of Hershey North America, said in a phone interview with the Associated Press. Buck added that the company plans to continue expanding its offerings across the “snacking continuum” through acquisitions and in-house development.
In a recommendation to investors, J.P. Morgan analyst Ken Goldman noted that the Krave deal “perhaps indicates that Hershey is less enamored of candy’s growth potential than it previously was.” According to ABC News, Goldman said that “indulgent snacks” like chocolates and cookies generally underperformed categories like trail mixes, nuts and meat snacks.
While Hershey is a major player in sweets, analysts said that the Krave deal gives the company a foothold in snacks regarded as “healthy fuel.”
Not to mention that Americans’ devotion to snacking is hardly in decline. Last year, U.S. jerky sales totaled $1.41 billion, according IRI, the Chicago-based market researcher, an increase of 13 percent versus 2013.
As the ABC News story noted, “The push to expand beyond impulsive sweets comes as Americans’ addiction to snacking grows. Rather than sticking to three meals a day, people are increasingly grazing on smaller bites around the clock.”
The only piece of that observation I question is the world “smaller.”
But the more important point in dissecting the larger trends backstopping the Hershey’s acquisition is the evolution of snack foods themselves. The line is blurring between “indulgence,” candy and other sweets, and “nourishment,” mainly protein-based product such as jerky and yogurt.
Jon Sebastiani, the founder of Krave, told ABC the jerky market has a big upside, especially if manufacturers improve the category’s image among women consumers by getting rid of products with nitrates, artificial flavors and high salt content.
Along those lines, Sebastiani said Krave plans to launch a “meat bar” later this year to compete with granola bars found near supermarket checkout aisles.
That would be a significant development: A display in the checkout line from which shoppers didn’t have to steer away their kids.
The success of that snack item might just burnish the image of the entire meat category.
That will be confirmed the day kids come home from trick or treating hoarding their meat bars along with the Hershey’s and Kit Kats.
The opinions expressed in this commentary are solely those of Dan Murphy, a veteran food-industry journalist and commentator.