Hershey’s expansion into the better-for-you (BFY) segment — which is one of the key priorities of our Strategic Growth Platforms team — is backed by proprietary research. According to our insights, around half of U.S. adults are interested in BFY confections… but their definition of “better-for-you” varies a lot.
Some groups, for example, are interested in the permissibility of smaller portion sizes — which is where our line-up of THiNS products comes into play. Other groups of BFY consumers are interested in sugar reduction for lifestyle or health reasons; Hershey's ‘Zero Sugar’ products — and recent acquisition of Lily’s, a high-growth maker of low- and no-sugar confections — serve this segment of consumers.
A third group of BFY consumers (comprising as many as 40 million U.S. adults) is much more health conscious than the average consumer — and even more health conscious than other consumers in the two aforementioned groups. These consumers, according to our research, tend to purchase from a lot of smaller niche brands within the chocolate space that carry organic, plant-based, and fair trade products.
Making new moments with this consumer group is an opportunity for Hershey, and we’re exploring new products designed to meet their preferences. Already, for example, we’ve released organic versions of our Hershey's and Reese's chocolate brands; we developed these new products after recognizing that no mainstream brands within the chocolate category were embracing organic ingredients. (These new products are still very early in terms of gaining distribution, but we're excited to see what kind of “organic growth” is ahead.)
Now, we’re testing a move into the plant-based segment — which we find to be one of the fastest growing BFY segments.
In my role as Team Lead of Strategic Growth Platforms (SGP) at the Hershey Company, I’ve been helping spearhead a cross-functional initiative to test an exciting innovation for our future: Hershey's Oat Made Chocolate bars, in extra creamy almond and sea salt as well as classic dark chocolate.
Plant-based product development & in-market testing
We started our work on the Hershey's Oat Made products by evaluating the current plant-based offerings on the candy market. After finding that the ingredient formulas of existing products could be improved upon, our masterful R&D team at Hershey developed formulas using oats that we believe deliver better on consumers’ expectations than what is in the marketplace today. (Oat was a preferred substitute among all the other plant-based substitutes that we considered.)
To validate our concepts with the Hershey's Oat Made products, we're currently doing real-time, in-market testing, which helps us manage uncertainty and measure the additional benefit to both the category and to the Hershey portfolio. A key signal for us will be to evaluate how well our plant-based offerings reach new consumers and create new occasions to enjoy our brands. We’re working with partners to keep a limited number of stores supplied with a limited quantity of inventory, enabling us to have Hershey's Oat Made products out on the shelf and analyze how they perform in the real world.
We chose locations based on a "shopper fit" to reach a segment interested in plant-based offerings. Working with our retailer partners we are able to cordon off a group of stores to carry the products while having a like group of stores be our control set that does not carry the products. (In some circumstances, the cordoning-off occurs geographically by customer. In other circumstances, it's more of a selection of a range of stores across the country.)
We’ll use the results of our in-market testing to determine whether we take the products to a national launch in the future. We’ll be analyzing the sales velocity of the product and working to understand as much as we can about the shopper who purchases it — helping us find out whether we are getting into new households and new occasions.
Building on our BFY success
It’s so important for us to test for reality, that we’re intentionally planning a marginal level of advertising delivered to certain geographic areas for the Hershey's Oat Made products. In fact, should they make it to market, it may be under a different moniker (as we’re still testing out whether to use the current "Oat Made" name or simply call them “plant-based”). Once naming and branding for the products are defined, we’ll tackle the even-bigger questions: How do we scale up the product? When do we launch, and who are the key retailers for this product? How soon do we complement the launch of our Oat Made chocolate with a plant-based Reese's?
Time and consumer insights will help us determine the answers, just as they’ve helped inform our entire BFY strategy. Already, we’ve gotten strong customer feedback that our Oat Made products taste great.
That should be no surprise, as Hershey has been leading the way in better-for-you snacking for more than a decade: Our first big foray into BFY started 18 years ago with our sugar-free products. Just this year, we repositioned to call them Zero Sugar and expanded the line-up to include different packages and price points to better meet consumers’ needs. By simply using naming to help consumers better understand the products and offering a portfolio of price points and pack sizes for multiple brands within our portfolio (including Reese's, Hershey's, Twizzlers, Jolly Rancher, and York), we’re on pace to double our Zero Sugar business this year.
We’re excited to build on this success and serve a new subsegment of BFY consumers with our exploration into plant-based chocolate products. It’s our aim that no matter what “better-for-you” means to you, there’s a Hershey confection ready to meet your moment.