Hershey's Logo Change Is Fine, So Stop the Whining

 

NEW YORK (TheStreet) -- Hershey's (HSY) new logo, with the word "Hershey" next to a Kiss candy, is being slammed on social media, with some comparing it with human excrement. 

The company response, which was sent to TheStreet.com, is the logo is part of a "comprehensive visual identity system" built around "iconic," even "beloved" brands.

So here is the thing, social media. The logo is not about you. I don't think it's even about America or the West. It's about China, as a quick visit to the company's own Web site reveals.

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Of all Hershey's international markets, China is the one where the Kiss is the most prominently featured product. It's also a vital market for Hershey, with sales of over $100 million last year; 40% of Kiss sales are now outside the U.S.

After entering the market through a factory co-owned by Lotte, a Korean company, Hershey doubled down on the market last year, buying 80% of Shanghai Golden Monkey for an estimated $584 million.

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Hershey's overall goal, announced two years ago, is for 26% growth in its largest international markets, including China. While Hershey dominates the U.S. market, it only has a 7% market share globally - Mars, Mondelez (MDLZ) and Nestle (NSRGY) all beat it on a global basis. But it has been missing those international growth goals regularly, making up for it with stronger results in North America.

This has not gone unnoticed by Wall Street. Since hitting a high of over $108 a share in February, the stock has been falling and currently trades around $91, down 6% for the year to date. Overall growth has slowed -- sales for the June quarter of this year were $1.578 billion against $1.508 billion a year earlier. The company is considered a mediocre yield stock, at 2.34%, about the rate you get on a 10-year Treasury.

Which brings us back to the Hershey China Web site. Take a close look and what do you see? I see mostly American faces. Check out its flagship Shanghai store  -- It's a proudly American brand selling an American image.

This makes Hershey vulnerable to the "tipping point" some analysts see in the U.S.-China relationship, which is being felt in the economic sphere where U.S. businesses complain China is using its antitrust law to harass U.S. companies and China complains some emigrants are criminals. 

It's against this backdrop that Hershey made its decision on China. While internal e-mail addresses are at hersheys.com, the new logo drops the possessive apostrophe s, which is very confusing to Chinese speakers, and adds an image of the Kiss, its top-selling product in China. Having bought a major Chinese confectionary producer, Hershey is in no position to retreat from the China market.

Asked about these issues, the company responded directly. "China continues to be a growth engine for Hershey," it said in a statement. The acquisition of Shanghai Golden Monkey is "another example of our commitment to China." The statement also notes that Hershey recently introduced a new brand, called Lancaster, specifically for the Chinese market and engineered for Chinese tastes.

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"The version of Lancaster sold in China is different than the U.S. version because it was specifically tailored for the distinct taste preferences and palates of Chinese consumers," the company said. Investors in Hershey hope it's a hit in any language.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.


TheStreet Ratings team rates HERSHEY CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate HERSHEY CO (HSY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated." You can view the full analysis from the report here: HSY Ratings Report

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