Hershey has revealed details of a three-year programme to grow its profit margin by optimising its supply chain, streamlining its operating model and reducing administrative expenses.
The American confectioner said that its Margin for Growth programme, combined with strong growth in confectionery and snacks, will help it ‘to further deliver on its financial objectives’.
It expects the initiative to generate savings of up to $175 million a year by the end of 2019, but it could result in a 15% reduction in the size of its workforce globally, driven primarily by cuts to hourly jobs outside the US.
Over the long-term, Hershey expects to be able to realise net sales growth of between 2% and 4%, driven primarily by its North America business. Earlier this month, the confectioner posted net sales for 2016 of $7.44 billion – a 0.7% increase on 2015 – and operating profit for the year of $1.2 billion.
Hershey plans to continue investing in its core confectionery business in the next three years, and expanding its breadth across the entire snack spectrum by capturing new usage occasions and participating in on-trend categories.
The company’s incoming president and chief executive officer, Michele Buck, said: “Hershey has tremendous assets – its iconic brands, remarkable people and a history of executional excellence – that position the company well to deliver top- and bottom-line growth.
“We’re making progress against the Margin for Growth-related initiatives that should give us the flexibility to invest in certain parts of our business. Our objective is to ensure that we always have the right level of innovation, marketing plans and consumer and customer expertise to drive net sales growth, especially in our North America confectionery and snacks business.
“In addition, we’re working to return our international businesses to profitability as soon as possible. Combined, these efforts should enable the company to achieve its adjusted operating profit margin target of about 22% to 23% by year-end 2019.”
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