Hershey Chases the Protein Craze With Beef Jerky

Why Hershey Is Turning to Beef Jerky
  • Candy company faces falling U.S. chocolate consumption
  • American icon turns to high-protein snacks to fill gap

Hershey, Pennsylvania, smells like chocolate. The streetlamps are shaped like Hershey Kisses, and its roads bear names like Cocoa Avenue.

So it’s a bit strange that Hershey Co., the iconic 122-year-old candy giant whose annual revenue swelled to more than $7 billion selling chocolate with peanut butter, chocolate with almonds, and just plain chocolate, would be staking so much of its future on a snack that’s not chocolate.

Hershey beef jerky.

Krave Jerky
Krave Jerky
Source: Hershey

With sugar widely branded a health boogeyman and Americans cutting back on sweets in favor of Greek yogurt and protein bars, Hershey saw sales fall in 2015 for first time in more than a decade. To help turn the tide, the company is betting on the growing appetite for dried meat.

“If it says protein on it, consumers will buy it,” said Carl Jorgensen, a director of wellness strategy at Daymon Worldwide, a retail-marketing firm in Stamford, Connecticut. “This is something Hershey has to do.”

Americans, especially millennials, are snacking more than ever, noshing throughout the day rather than sitting down for three square meals. Hershey wants to ride that trend. The company is rolling out snack bars made with acai berries, trail mixes that feature small pieces of Reese’s Peanut Butter Cups, and jalapeno almonds and pumpkin seeds coated in protein. The goal is to make $2 billion in snack revenue to provide growth even as U.S. chocolate consumption declines, with a quarter of that coming from jerky and other meat products.

Meat Snacks

Hershey signaled its shift away from chocolate in early 2015, when it acquired Krave Pure Foods, a maker of premium beef jerky with about $35 million in sales. Krave, based in California’s wine country, put Hershey in the fast-growing meat-snack category and gave the company access to Whole Foods customers. Hershey has said Krave could be a $500 million brand.

Sales of meat snacks have ballooned in recent years as jerky has shed its image as a salty, overprocessed gas-station staple and been reimagined as a convenient nibble that’s low in carbohydrates and high in protein. Hershey has more than doubled Krave sales and plans to launch a line of meat bars later this year.

“With consumers having less traditional meals and snacking more, they’re looking for sources of protein,” said Michele Buck, Hershey’s president for North America. “These things ebb and flow, but protein is here to stay.”

Hershey’s snacking push comes as chocolate consumption in the U.S. has flattened. Growth has come from higher prices, not people eating more chocolate, according to data from IRI, a Chicago-based market-research firm. 

With sugar in decline, consumers have moved to fancier dark chocolate products, which are perceived as healthier than mainstream items like Kisses or Reese’s Pieces, according to Jared Koerten, a Chicago-based analyst at Euromonitor International. Hershey has acquired brands such as Brookside to boost its premium chocolate offerings and expand into snack bars, but it’s a crowded market, Koerten said.

“Hershey faces an uphill battle to edge in,” he said.

Chocolate Sales

It’s not clear whether snacking can save Hershey. For one thing, snacks accounted for about 2 percent of Hershey’s U.S. business last year. Hershey generates almost all its sales from selling chocolate in the U.S., and an ill-fated expansion into China contributed to a $98 million loss in the company’s international unit last year, with analysts predicting another loss in 2016.

Hershey’s performance -- its shares fell 14 percent last year -- has led to speculation the company could be a takeover target amid consolidation among the big U.S. food producers. But about 80 percent of the voting rights in Hershey stock are controlled by the Hershey Trust Co., lowering the probability of a deal.

In a research note, Chris Growe, an analyst at Stifel Financial Corp., called Hershey’s U.S. performance a “real weak spot” and said sales could lag for the rest of the year. In addition to health concerns about sugar, Hershey faces increased competition from its top U.S. rival, closely held Mars Inc., the makers of M&Ms, Snickers and Milky Way.

Eager to Talk

These days, inside the company’s headquarters on East Chocolate Avenue, where ubiquitous bowls of candy are never far from reach, Hershey executives are eager to talk about their new snacks. But they’re also quick to clarify: Hershey is still very much a chocolate company. It remains the No. 1 seller of chocolate candy in the U.S., controlling nearly a third of the market. Even at $2 billion, snacks would have accounted for only about a quarter of Hershey sales in 2015.

One fact is impossible to ignore, however. The amount of chocolate candy eaten in the U.S. fell last year, and has continued dropping so far in 2016, according to IRI. And with sugar’s bad rap, Hershey sees its future in snacks such as jerky.

“We don’t want to be a Blockbuster, we don’t want to be a Kodak,” said Tony Tyree, the vice president of Hershey’s global snack business, referring to two once-dominant companies that went the way of the dinosaur. “You can’t be focused on the rear view.”

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