Morningstar

Hershey Scoops Up Pirate Brands

We estimate the acquired mix will contribute just a low-single-digit percentage to sales, and as such, it doesn't stand to alter our fair value estimate.

Securities In This Article
The Hershey Co
(HSY)

Building off of the deal that brought Amplify to its fold late last year,

CEO Michele Buck has expressed an interest in pursuing further tie-ups (particularly those that expand the firm’s reach within the health and wellness realm on its home turf, with an ideal target slated in the $300 million-$400 million range), and this deal aligns with that sentiment. Firms throughout the consumer product industry have succumbed to lackluster sales and volume, and we believe this deal affords Hershey another avenue by which to elevate its sales trajectory. For one, we surmise Hershey will likely look to broaden the distribution of Pirate Brands’ product mix into the convenience, drug, and mass markets, where Hershey has a strong foothold. We aren’t blind to the competitive and inflationary headwinds plaguing firms across the landscape, though we posit that Hershey will weather these challenges with its leading brand mix, entrenched retail relationships, and vast global scale (which underlie our wide moat rating).

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About the Author

Erin Lash, CFA

Sector Director
More from Author

Erin Lash, CFA, is a sector director, AM Consumer, for Morningstar*. In addition to leading the sector team, she covers packaged food and household and personal care companies. Beyond managing a team of nine analysts and associates covering an array of consumer firms, Lash also conducts fundamental analysis of 13 multi-billion-dollar market capitalization firms in the packaged food and household and personal care space.

Before joining Morningstar in 2006, Lash spent four years as an investment analyst covering retail, transportation, and technology firms for State Farm Insurance. In this capacity, Lash analyzed financial statements, business strategy, and fundamentals of owned companies and potential investments, presenting her recommendations based on this analysis to State Farm portfolio managers for ownership consideration.

Lash holds a bachelor’s degree in finance from Bradley University’s Foster College of Business. She also holds a master’s degree in business administration, with concentrations in accounting and finance, from the University of Chicago Booth School of Business. Lash has completed the Chartered Financial Analyst® designation. She ranked second in the food and tobacco industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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