January 29, 2015 / 12:20 PM / 4 years ago

Chocolate maker Hershey to enter meat snacks business

(Reuters) - Hershey Co (HSY.N) agreed to buy jerky maker Krave Pure Foods Inc for its first foray into meat snacks, a fast-growing market that is tempting health-conscious consumers away from chocolate.

A package of Krave beef jerky is shown in this illustration photography in Encinitas, California January 29, 2015. Chocolate maker Hershey Co is in late-stage talks to acquire Krave, a maker of healthy beef, turkey and pork jerky snacks, according to people familiar with the matter. REUTERS/Mike Blake

The maker of Hershey’s Kisses said its 2014 net sales and operating profit missed its expectations, as candy sales were hit by the popularity of meat and bakery snacks. The company cut its sales and profit forecast for 2015.

Hershey shares fell as much as 7 percent in early trading.

“Snacking categories perceived as healthier — trail mixes, nuts, meat snacks — are outpacing growth within traditionally indulgent categories such as chocolate, cookies, crackers and salty snacks,” JP Morgan analyst Ken Goldman wrote in a note.

By acquiring Krave, a maker of healthy beef, turkey and pork jerky snacks, Hershey gains entry to the $2.5 billion U.S. meat snacks market — a market the company says is growing at “double-digit pace” in percentage terms.

The company, which also makes Reese’s Peanut Butter Cups, did not disclose the purchase price. Reuters reported on Tuesday that Hershey was in late-stage talks to buy Krave in a deal valuing it at $200 million-$300 million.

Krave had net sales of about $35 million over the last 12 months, Hershey said.

Higher cocoa and dairy costs prompted Hershey to raise its chocolate prices last year, along with competitors Mondelez International Inc (MDLZ.O) and Mars Chocolate North America. This also contributed to slower sales growth.

On Thursday, Hershey trimmed its 2015 adjusted earnings growth forecast to 8-10 percent from 9-11 percent, citing higher spending on advertising and promotions.

Hershey expects earnings per share growth to be pressured in the first quarter due to “brand building,” Humberto Alfonso, president of international business, said on a conference call.

The company cut its net sales growth forecast to 5.5-7.5 percent for 2015 from 7-9 percent, citing the stronger dollar.

Hershey’s net income rose to $202.5 million, or 91 cents per share, in the fourth quarter ended Dec. 31, from $186.1 million, or 82 cents per share, a year earlier.

Excluding items, the company earned $1.04 per share.

Revenue rose 2.7 percent to $2.01 billion.

Analysts on average had expected earnings of $1.06 per share on sales of $2.07 billion, according to Thomson Reuters I/B/E/S.

The company’s shares fell 5.7 percent to $101.52 on the New York Stock Exchange on Thursday.

Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Joyjeet Das

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