The Hershey Company (HSY) recently closed the acquisition of The Allan Candy Company, a leading chocolate company in Canada.
Allan Candy has more than half of its present manufacturing facilities that produce Hershey Sweets & Refreshment products such as Jolly Rancher hard candy and Lancaster caramels for North America.
With this acquisition, Hershey will operate Allan’s three confectionery manufacturing facilities in Canada. This also includes a 170,000 square feet manufacturing plant in Granby, Canada. The acquisition will expand the Hershey Sweets & Refreshment products manufacturing capacity in North America. Meanwhile, post acquisition, Hershey’s portfolio will include all the iconic confectionery brands of Allan Candy, such as Allan, Big Foot, Hot Lips and Laces.
Hershey’s will benefit from Allan‘s leading position in the Canadian Easter novelty chocolate business and the Canadian Candy Cane market. This will further strengthen Hershey’s long-term position in Canada, where it already enjoys a strong demand.
In fact, Canada is Hershey’s second largest sales market in the world. Thus, having manufacturing facilities in Canada will improve the company’s productivity and cost savings.
The acquisition is also in line with Hershey’s long-term strategy. In an effort to boost long-term growth, management has been optimizing its North American manufacturing footprint, and adding manufacturing capabilities in international markets. The cost savings from these efforts are being invested in brand building and to support growth and gain marketplace insights which in turn are boosting the company’s margins. The company expects to generate annual productivity gains in the range of $60 to $70 million per year from these initiatives.
Hershey carries a Zacks Rank #3 (Hold).
Some better-ranked companies from the consumer goods sector include Aramark (ARMK), The Clorox Company (CLX) and Dr Pepper Snapple Group, Inc. (DPS). While Aramark sports a Zacks Rank #1 (Strong Buy), The Clorox Company and Dr Pepper Snapple Group carry a Zacks Rank #2 (Buy).
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