The Hershey Co.'s acquisition of a snack bar maker is taking it into a new segment: breakfast foods.
The company, which is known for its chocolate and candy, bought ONE Brands for $397 million in September. The company produces protein bars with a low sugar content — a "sweet spot" with strong growth among snack bars, Chairman, President and CEO Michele Gross Buck said during an Oct. 24 call with analysts to discuss Hershey's third-quarter results.
"It also gives us a play in the morning snacking occasion where we are underdeveloped," Buck said.
Hershey plans to expand distribution of ONE products, the CEO added. The brand has annual sales of about $100 million.
Playing up ONE's role as a health-focused morning food would take Hershey into a category with long-established competitors trying to find new ways to stoke sales. Kellogg Co., for instance, has reported declining sales in recent quarters of its breakfast cereals, which include Frosted Flakes and Special K, as U.S. consumers move away from foods high in sugar. Kellogg also recently sold some of its snack brands, including Keebler, to Ferrero SpA and initiated a restructuring of its business in North America.
General Mills Inc. executives, meanwhile, acknowledged in June that sales of the company's bar brands, which include Fiber One and Nature Valley, need improvement.
Hershey is not alone in trying to grab sales in the snack bar market. In June, Mondelez International Inc. said it would become the majority shareholder in Perfect Snacks, which makes refrigerated nutrition bars, for an undisclosed amount. Kellogg bought RXBar, which sells protein bars and features ingredients prominently on their labels, for $600 million in October 2017.
Asked by an analyst about ONE's prospects in an increasingly crowded category, Buck said: "We certainly think that there's room to have a couple of brands that play in that space in the marketplace, consistent with other categories."