The Hershey Company, a chocolatier in Pennsylvania probably loves Valentine’s Day more than anyone else. For Hershey Co (NYSE:HSY), increasing demand for its chocolates this time of year is a big part of its business model. Hershey’s devotes an entire part of its website to Valentine’s Day, where it advertises many different types of special products such as personalized labels, and heart-shaped chocolate boxes.
Famous investor Warren Buffett said one of the secret formulas to a successful business is to “buy commodities, and sell brands.” That is exactly what Hershey is doing. It purchases sugar, milk, cocoa, etc, and sells products that have major brand recognition. About half of the chocolate consumed in America is milk chocolate, and that is what Hershey is known for. If someone goes into a candy store to buy a Hershey chocolate bar and the store owner says “sorry, we don’t have Hershey, but we have this other generic brand that is 20% cheaper,” then the customer will probably leave and try to find another store to get his Hershey fix. That is the power of brand loyalty. It automatically puts a 20% value premium over other businesses offering the same food. Check out some of the awesome brands Hershey is responsible for.
Hershey’s global reach is surprisingly wide, and Forbes has ranked the Hershey brand 5th overall. Hershey is America’s largest chocolate producer with 43% of the U.S. chocolate market. It sells products in over 2 million retail outlets in 50 different countries under 60 brand names and growing. Most of its sales come from the U.S.
One of the metrics I at when analyzing a stock is its earnings growth and sales growth, in other words, the bottom line and revenue trends. So let’s take a look at its financials. Revenue = total sales. Earnings = after tax profit.
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