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Quick Hits: Sweet News for Hershey


Brief scrutiny of today's headlines.

Liquor may be quicker, but candy is still dandy.

Hershey (HSY), the nation's second-largest candy maker, boosted sales and profits in a downbeat economy and plans to increase advertising in an effort to expand market share.

In the third quarter, Hershey earned $124.5 million, or $0.54 per share, compared with $62.8 million, or $0.27, for the same period a year ago. Excluding costs for revamping its supply chain, the company earned 64 cents a share, meeting analysts' estimates.

In August, Hershey announced a 10% price increase in the US. The maker of Hershey's Kisses, Kit Kat, Twizzlers, Ice Breakers, Reese's Peanut Butter Cups and other products, Hershey's said it expects 2008 earnings to be at the low end of its forecast range of $1.85 to $1.90 a share. The company expects 2009 earnings to grow slowly because commodity prices remain high. It expects sales to grow 2% to 3% next year.

Last month, the London Daily Telegraph reported that Nestle (NSRGY) was in talks to buy all or part of Hershey. However, the Hershey Trust controls the majority of the company's shares and has repeatedly opposed the sale of the company.

Overall, the candy industry is consolidating. Perfetti bought Van Melle in 2001; Barry Callebaut took over Stollwerk Group in 2002 and Brach's Confections in 2003; Cadbury Schweppes, now Cadbury (CBY), bought Adams in 2003, Ulker Group picked up Godiva in 2007 and Mars purchased gum kingpin Wrigley this year, giving it about 14% of the world's candy and gum market by volume.

Continuing consolidation suggests candy makers seek to take advantage of growing worldwide demand while dealing with higher costs for raw materials. Lurking in the background is growing consumer concern about nutrition, but Hershey's third-quarter results say alfalfa sprouts aren't about to replace chocolate any time soon.
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