Hershey’s New Sweet Tooth: Sugar-Free Treats

“Bowtie” strategy will deliver indulgence + healthier versions

When it comes to their post-Covid food choices, many consumers today seem to want to have it both ways. On one hand, chocolate and candy sales went up sharply during Covid as home-bound consumers wanted more comfort foods, and these preferences have been hard to shed. On the other hand, a large swath of even the most indulgent are recognizing the impact of diet on health, and looking for better-for-you food choices to go along with splurges. Hershey’s, proud maker of peanut butter cups and its iconic chocolate bars, is hoping to profit from both trends.

Over the past year we’ve seen the Pennsylvania-based confectioner make some bold moves into the better-for-you candy market, without abandoning its traditional lineup of indulgent treats that many people still crave. This strategy will position Hershey’s to meet the need from the growing segment of consumers who want healthier options. I’m hoping that the confectionary behemoth will give other companies more confidence that satisfying these demands is good business.

The chocolatier is deploying a multi-pronged strategy to grab leadership at both ends of the snacking spectrum. It’s introducing more portion-controlled treats, such as Reese’s Thins and a 180-calorie Reese’s Big Cup with Pretzels. It’s devoting R&D efforts to developing technologies to reduce sugar without compromising taste and has introduced Zero Sugar items in both its Hershey’s and Reese’s products. It has also introduced more organic and vegan items to these lines, including peanut butter cups and milk chocolate candy bars.

And in its boldest move yet, it is acquiring or partnering with companies with a big presence in the alternative sugars space. Hershey’s has been a leading voice in the campaign with the FDA to gain sugar exemption labeling for rare sugars. A National Institute of Health study showed that these sugars, whose chemical structure differs slightly from the common refined cane sugar, may offer benefits for people struggling with diabetes and other dietary-related illnesses.

In 2021 The Hershey Company
HSY
acquired Lily’s, an increasingly popular confectioner that uses only stevia and natural alternatives to refined or processed sugar. Lily’s, a pioneer of using stevia as an substitute sweetener, recorded strong sales growth of 27% in 2021. Hershey’s also has partnered with ASR Group to invest in start-up Bonumose Inc, maker of plant-based ingredients and rare and natural sugars, such as monosaccharides and disaccharides. The manufacturer recently broke ground on a new $27.7 million, 36,000-square-foot plant that will be critical in making rare sugars more affordable and accessible.

Whether this is out of concern for people’s well being or not, the company sees “health” as a powerful financial move. Like smart marketers, it’s looking for opportunities among new consumer segments and eating occasions.

Dan Mohnshine, Hershey’s Vice President of Innovation and R&D, shared with me that because 50% of confectionery users want to reduce sugar, the company has adopted a “Bowtie” strategy; meaning that the company will play on both sides of the consumer preference spectrum – indulgence on one side and better-for-you on the other.

This strategy shows that Hershey’s understands where the market for treats is heading. A 2022 study by FMC Gurus illustrates that 56% of consumers have changed their attitudes towards sugar over the past two years, concluding that “consumers see sugar as a cause of obesity” and predicting that “the war on sugar will only intensify.”

At the same time, many consumers still want to indulge at least on occasion, as a Partnership for a Healthier America study points out. Hershey’s, despite increasing its production capacity in 2021, has said it still can’t meet consumer demand for sweets and treats. This is not a market Hershey will be ready to abandon any time soon, especially its king size business.

While I’d still like to see Hershey’s and other food companies do more to respond to trends for healthier options, the company’s recent progress is worth applauding, and provides some leadership lessons for other companies who’ve been too reticent to embrace the better-for-you market:

• Better-for-you is no longer a niche strategy. It is a means to capture new users and eating occasions.
• Marketers must learn how to navigate consumer desires for both comfort and better-for-you. They need to adopt “Bowtie” thinking.
• Iconic brands can grow faster with better-for-you versions. Even larger food and beverage corporations that continue to push their classic (read: high calorie, sugar; fat) brands can capitalize by incorporating healthier and smaller portions into their product portfolios.

Hershey’s has shown the way for other companies caught between the still-comfortable markets for their traditional products, which may fall out of favor if trends continue, and the growing demand for healthier alternatives. In embracing the trend towards better-for-you products and ramping up its capabilities in that arena, the confectioner is betting that encouraging people’s desire to be healthier is good business.