The Hershey Company · NYSE:HSY
The Hershey — Hershey — Investor Day (August 2018)
56 slides from The Hershey's investor day presentation, Aug 28, 2018
Slide 1: Winning in Digital Commerce
EXHIBIT 99.1 WINNING IN DIGITAL COMMERCE AUGUST 28, 2018
Slide 2: Michele Buck, Chief Executive Officer
MICHELE BUCK CHIEF EXECUTIVE OFFICER
Slide 3: Delivering Innovative Snacking Leadership
DELIVERING INNOVATIVE SNACKING LEADERSHIP EXPAND GROW DRIVE CONFECTION & MARGINS REALLOCATE RESOURCES EXPAND BREADTH IN TO EXPAND MARGINS SNACKING INCREASE & FUEL GROWTH SHAREHOLDER VALUE INVEST STRENGTHEN CAPABILITIES FOR COMMERCIAL ADVANTAGE
Slide 4: Solid Progress Against Key Priorities
SOLID PROGRESS AGAINST KEY PRIORITIES RESET INTERNATIONAL EXPAND GROW CORE CMG GROWTH MARGINS BUSINESS MODEL INCREASE PORTFOLIO EVOLUTION SHAREHOLDER REDUCE FOUNDATIONAL VALUE COST STRUCTURE INVEST CORE CAPACITY ERP DIGITAL TRANSFORMATION
Slide 5: Right Data, Right Technology, Right Culture
RIGHT DATA RIGHT TECHNOLOGY RIGHT CULTURE
Slide 6: Digital Transformation Powering Every Part of the Organization
DIGITAL TRANSFORMATION POWERING EVERY PART OF THE ORGANIZATION Marketing Sales CREATE Finance COMMERCIAL ADVANTAGE Strategy IS Supply Chain Media
Slide 7: Keys to Success: Leveraging Capabilities from Physical to Digital
KEYS TO SUCCESS LEVERAGING CAPABILITIES FROM PHYSICAL TO DIGITAL BE FOUND BE BRILLIANT Media, planograms, Pack design, digital content search KNOW THEM Understanding journeys and missions CONSUMER BE LOVED BE ON THE LIST Customer partnerships, 1:1 Relationships with sales reps, merchandising, shoppe
Slide 8: Capabilities to Capture Attractive Financial Opportunity
CAPABILITIES TO CAPTURE ATTRACTIVE FINANCIAL OPPORTUNITY Leveraging Competitively Building Capabilities Creating Financially Advantaged, Translatable Unique to Digital Attractive Digital Capabilities Commerce Commerce Model • Deep consumer insights • Unique Portfolio • Comparable gross margins • Gre
Slide 9: Takeaways from Today
TAKEAWAYS FROM TODAY Retail evolution changing how products are purchased, but consumers’ needs and desire for our brands remain We are translating our existing competitive advantages and building capabilities unique to digital commerce We have created a financially attractive digital commerce model
Slide 10: Doug Straton, Chief Digital Commerce Officer
DOUG STRATON CHIEF DIGITAL COMMERCE OFFICER
Slide 11: For Today
FOR TODAY UNDERSTANDING THE RETAIL ECOSYSTEM HERSHEY STRATEGY AND KEYS TO SUCCESS WHAT WINNING IN DIGITAL LOOKS LIKE WHERE WE ARE AND WHERE WE ARE HEADED Q&A
Slide 12: Understanding the Retail Ecosystem
UNDERSTANDING THE RETAIL ECOSYSTEM
Slide 13: We Expect Mid Single Digit U.S. FMCG Digital Commerce Penetration in 5 Years
WE EXPECT MID SINGLE DIGIT U.S. FMCG DIGITAL COMMERCE PENETRATION IN THE NEXT 5 YEARS European Indicators Online Snacking Less Fragmented Population Penetration Penetration Competitive Densities and 5.6% (Europe) Tracks with Environment Geography Overall Sources: Kantar WorldPanel, Fung Global Retai
Slide 14: U.S. FMCG Is ~1-2% Driven by Recent Retailer Investments
U.S. FMCG IS ~1-2% DRIVEN BY RECENT RETAILER INVESTMENTS Acquired ABS Acquired by AMZ CheckList CheckList Invested Acquired Launched Launched Launches 1000th Store in by KR by HEB 2000 2005 2010 2015 2020 Launches Online Launched Delivery Pilot Launched Pick-Up Acquired Pick-Up Launches by WM 1700th
Slide 15: What Hasn't Changed, and the How and Where Have
THE WHAT HASN’T CHANGED - THE HOW AND WHERE HAVE CONSTANTS CHANGES Consumer Wants Shopping Behaviors Consumer Shops Trips Consumer Buys Paypoints UNDERSTANDING THE RETAIL ECOSYSTEM
Slide 16: Retail Evolution Unlocks New Consumer Access
RETAIL EVOLUTION UNLOCKS NEW CONSUMER ACCESS RETAIL DYNAMICS OPPORTUNITIES Store in a Pocket More Digital Trips Fewer physical trips Data & Algorithms Price-Basket Dynamics Impulse purchase declines More Engagement Metropolitan Areas Points UNDERSTANDING THE RETAIL ECOSYSTEM
Slide 17: We Must Play Along the Entire Consumer Shopping Journey
WE MUST PLAY ALONG THE ENTIRE CONSUMER SHOPPING JOURNEY ONLINE Search Reviews Digital Billboard Landing Page Mobile SMS App Newsletter Blog Chat/Voice Email Email Email Email 3rd Party Online Ads Website Website Blog SHOPPER JOURNEY Self-Fulfilled PR Word of Mouth Ship-to-Home On-Invoice Call Direct
Slide 18: Hershey Strategy and Keys to Success
HERSHEY STRATEGY AND KEYS TO SUCCESS
Slide 19: Hershey Has Leverageable, Translatable Capabilities to Win in Digital
HERSHEY HAS LEVERAGEABLE, TRANSLATABLE CAPABILITIES TO WIN IN DIGITAL… Beloved Deep Customer Recognized Strength in Paid Retailer Brands Relationships Category Expertise & Earned Media Profitability #1 most Ranked #5 by retailers Ranked #1 by 3B earned Amongst the highest loved brand in consumer goo
Slide 20: ...And We Are Winning
…AND WE ARE WINNING Driving Higher Trips Building Bigger Maintaining Winning Share Average Selling Increasing Baskets Margin Profile Price +250bps Online Visits > 1.2x to 3.5x 1.0x to 3.5x Within year to date Offline Trips brick and mortar brick and mortar 100-150 bps of THC Avg Source: Retailer spe
Slide 21: We Know the Keys to Success in Digital Commerce
WE KNOW THE KEYS TO SUCCESS IN DIGITAL COMMERCE BE FOUND BE BRILLIANT Win At Search: The Shelf Digital Content: The Pack KNOW THEM Journey and Missions CONSUMER BE LOVED BE ON THE LIST CRM: The Relationship Algorithm and Missions and Models: The Cart HERSHEY STRATEGY AND KEYS TO SUCCESS CRM = Consum
Slide 22: WHAT WINNING IN DIGITAL LOOKS LIKE
WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 23: Consumer
CONSUMER CONSUMER WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 24: Understanding Mission and Models Unlocks Growth and Profit
UNDERSTANDING MISSION AND MODELS UNLOCKS GROWTH AND PROFIT CONSUMER MISSION MODEL PORTFOLIO ECONOMICS WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 25: Shoppers Now Have Options Beyond Filling Their Own Baskets
SHOPPERS NOW HAVE OPTIONS BEYOND FILLING THEIR OWN BASKETS CONSUMER Deal Hunting/ Family Family Snacking Refill Family Snacking Refill Sudden Craving Special Purpose MISSION Snacking Refill Ship-to-home Delivery Pick-up On-demand DTC MODEL Items found in C-store; Large bags, multi-packs Unique Propo
Slide 26: New Options Provide Opportunity to Drive Basket and Consumption
NEW OPTIONS PROVIDE OPPORTUNITY TO DRIVE BASKET AND CONSUMPTION CONSUMER Index to Brick and Mortar Purchase Ship-to-home Delivery Pick-up On-demand DTC MODEL ECONOMICS AVG. PRICE 3.5x 1.2x 1x 40x AVG. BASKET 3.5x 1.2x >1x 5.5x Source: May 2018 Hershey CMG Data; Multiple Retailers POS Data WHAT WINNI
Slide 27: Retailers Field Multiple Models to Keep Shoppers in a Walled Garden
RETAILERS FIELD MULTIPLE MODELS TO KEEP SHOPPERS IN A “WALLED GARDEN” CONSUMER Store In Stock Pick-up In Stock In Stock Delivery (27) WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 28: Consumer Connections
CONSUMER CONNECTIONS WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 29: Search Is the New Shelf
SEARCH IS THE NEW SHELF CONNECTIONS Holistic Captaincy EYE LEVEL SHELF = FIRST PAGE SEARCH WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 30: First Page of Search Is Eye Level
FIRST PAGE OF SEARCH IS EYE LEVEL CONNECTIONS “Chocolate” Paid Display Paid Search Organic Search Results WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 31: Moving New Items to Eye-Level
MOVING NEW ITEMS TO EYE-LEVEL CONNECTIONS Pre-Event Event Post-Event #4893 #20 #1 WHAT WINNING IN DIGITAL LOOKS LIKE Source: Direct Retailer Analytics
Slide 32: Consumer Content
CONSUMER CONTENT WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 33: Digital Visits Precede and Exceed Physical Trips
DIGITAL VISITS PRECEDE AND EXCEED PHYSICAL TRIPS CONTENT DIGITAL SHELF PHYSICAL SHELF WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 34: Online Content Is the Equivalent of Packaging Content
ONLINE CONTENT IS THE EQUIVALENT OF PACKAGING CONTENT From Foot- Stopping to VS Thumb-Stopping WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 35: Packaging Needs to Win from Inches to Feet
PACKAGING NEEDS TO WIN FROM 5 INCHES TO 20 FEET CONTENT WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 36: Picking Up Product on a Digital Shelf
PICKING UP PRODUCT ON A DIGITAL SHELF CONTENT WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 37: Consumer Convert
CONSUMER CONVERT WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 38: Purchase History Is a Gift That Keeps on Giving
PURCHASE HISTORY IS A GIFT THAT KEEPS ON GIVING CONVERT 1 Purchase Online or Offline 5 Algorithm Impulsive adds to consumption purchase GET ON THE LIST, history GET IN THE PANTRY Drive Frequency 2 AND EXPAND 4 Drive Basket Size CONSUMPTION Shopper Shopper repurchases shops from previous 3 history W
Slide 39: Purchase Histories Create the Perfect List
PURCHASE HISTORIES CREATE THE PERFECT LIST CONVERT REORDER REMINDER SUBSCRIPTION SHOP FROM LIST $1.99 $4.99 $3.49 $3.09 WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 40: Impulse Consumption Is an Opportunity
IMPULSE CONSUMPTION IS AN OPPORTUNITY CONVERT WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 41: Impulse Purchase Is Still Important but Takes New Forms
IMPULSE PURCHASE IS STILL IMPORTANT BUT IT TAKES NEW FORMS CONVERT CHECKOUT LANE POST ORDER MAKE THE MINIMUM AUTO-ADD RECIPE ADD-ON You’re 2 ingredients away from Chocolate Cookie Cake! Here’s all you need for the perfect dessert WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 42: Impulse-Focused Digital Convenience Stores
IMPULSE-FOCUSED DIGITAL CONVENIENCE STORES CONVERT WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 43: Magnifying the Seasonal Opportunity
MAGNIFYING THE SEASONAL OPPORTUNITY CONVERT Mobile Desktop Store WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 44: Best-in-Class Drop-Ship Capability
BEST-IN-CLASS DROP-SHIP CAPABILITY CONVERT Chilled unlocks Enables Fully Scalable Summer Scalable DTC WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 45: Consumer Community
CONSUMER COMMUNITY WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 46: Building Relationships with Shoppers Through Data Acquisition
BUILDING RELATIONSHIPS WITH SHOPPERS THROUGH DATA ACQUISITION COMMUNITY TARGETING Individuals, Look-a-Likes SMARTER CAMPAIGNS PERSONALIZATION Messaging, Experience, Products & Services SALES LIFT HIGHER ROI DEEPER INSIGHTS Scaled, Owned Audiences CONSUMER RELATIONSHIP MARKETING (CRM) IDENTIFY, SEGME
Slide 47: Using That Data to Find the Right Consumer Community
USING THAT DATA TO FIND THE RIGHT CONSUMER COMMUNITY Previous Reese interaction You or Someone Like You BUY NOW WHAT WINNING IN DIGITAL LOOKS LIKE
Slide 48: Where We Are and Where We Are Headed
WHERE WE ARE AND WHERE WE ARE HEADED
Slide 49: Where Are We on Our Journey
WHERE ARE WE ON OUR JOURNEY FUNDAMENTALS IN PLACE MAGNIFYING OUR STRENGTHS Digital & Digital Commerce Strategy Snacking Focus Enterprise Approach Customer Relationships & Captaincy Technology Stack Media Strength Fit to Compete Structure & Talent Data & Data Science WHERE WE ARE AND WHERE WE ARE HEA
Slide 50: Team Is Both Integrated and Independent
TEAM IS BOTH INTEGRATED AND INDEPENDENT RIGHT STRUCTURE Cross-functional Enterprise Digital Transformation & Business Unit Digital Operations Best Practice RIGHT TEAM WHERE WE ARE AND WHERE WE ARE HEADED
Slide 51: Hershey Is Performing in Digital
HERSHEY IS PERFORMING IN DIGITAL Food US: Average Gartner L2 Digital IQ Index Score by Parent Company July 2018, n=87 Brands Across 10 Enterprises With Five or More Brands 160 GENIUS 140 GIFTED 110 100 98 96 94 94 92 AVERAGE 90 89 89 84 82 CHALLENGED 70 FEEBLE 20 General THE HERSHEY Campbell PepsiCo
Slide 52: What's Next 2019-2023
WHAT’S NEXT 2019-2023 Opportunity STRUCTURE BEND THE FUNDAMENTALS AND TEAM GROWTH CURVE WHERE WE ARE AND WHERE WE ARE HEADED
Slide 53: Using Technology to Interact with Consumers Along Their Journey
USING TECHNOLOGY TO INTERACT WITH CONSUMERS ALONG THEIR JOURNEY Optimized Retailer, Profitable Social Price-Pack Data and Efficient & Content Scalable Brand, DTC/B2B Digital Any Device Media Architecture CRM Dynamic Media Management Logistics Websites Commerce Strength Measurement and Performance RI
Slide 54: Bending the Curve to Accelerate Growth
BENDING THE CURVE TO ACCELERATE DOLLAR OPPORTUNITY GROWTHHERSHEY ACCELERATORSACCELERATORS Holistic Captaincy & Media Optimization HERSHEY Dynamic & Modular Content Ecosystem ACCELERATORS Robust Data Acquisition, Application, Analytics RETAILER INFRASTRUCTURE INVESTMENT Full Digital Measurement & Per
Slide 55: Hershey Has Leverageable, Translatable Capabilities to Win in Digital
HERSHEY HAS LEVERAGEABLE, TRANSLATABLE CAPABILITIES TO WIN IN DIGITAL… Beloved Deep Customer Recognized Strength in Paid Retailer Brands Relationships Category Expertise & Earned Media Profitability #1 most Ranked #5 by retailers Ranked #1 by 3B earned Amongst the highest loved brand in consumer goo
Slide 56: ...And We Are Winning
…AND WE ARE WINNING Driving Higher Trips Building Bigger Maintaining Winning Share Average Selling Increasing Baskets Margin Profile Price WHERE WE ARE AND WHERE WE ARE HEADED