Hershey's China bet leaves bitter taste

Hershey's $584m bet on China has not been all that sweet for the US chocolate maker.

The company behind Kit Kats and Reese's candies on Thursday reported weaker-than-expected results and lowered adjusted sales forecast for the year amid slowing sales growth in China.

Net sales rose 3.5 per cent to $1.91bn in the first three months of the year, below the $1.96bn the market was expecting.

Net income for the period fell 3 per cent to $244.7m, or $1.10 per share as the stronger dollar ate into its overseas profits. The market had forecast net adjusted income of $256.1m.

Hershey ramped up its presence in Asia's largest economy with the acquisition of Shanghai Golden Monkey in 2013.

However, consumer willingness to splash out on sweets appears to be slowing in tandem with the economy.

John P Bilbrey, chairman, president and chief executive of Hershey, said: "Consolidated results were less than our expectations, primarily due to softness within the China modern trade where many consumer packaged goods categories declined. We believe this weakness is partially due to a decline in consumer confidence related to mixed macroeconomic data. China chocolate category retail sales increased; however, growth was much less than the year ago period."

Excluding the net benefit of acquisitions and divestitures and unfavourable foreign currency exchange rates, full-year net sales were expected to increase 3.5 per cent to 4.5 per cent, he said.

This was less than the previous estimate of 4 per cent to 6 per cent, primarily due to lower than expected growth in China.

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