Hershey’s High End Binge

by Jeanne

                                                  Josephschmidt

After the close of the market yesterday Hershey announced it was acquiring San Francisco-based chocolate maker, Joseph Schmidt Confections. It also closed the deal on Bay Area-based Scharffen Berger Chocolate. The two acquisitions, taking place in less than a month are part of a new subsidiary of Hershey, Artisan Confections Company. The combined value of the two deals rests in the neighborhood of $46.6MM- $61.1MM; combined annual sales are approximately $25 million.

Founded in 1983, Joseph Schmidt’s signature products include high-quality, artistic, handcrafted truffles.  He can shape chocolate as well as any sculptor. He uses a Belgian chocolate for his products. I have fond memories from the time I ran the retail gift shop during SF Ballet’s Nutcracker boutique. To hell with sugarplums, tall chocolate painted soldiers were big sellers.  These chocolates are available in both department and specialty stores and in the company’s own Bay Area retail outlets. 

On the surface it looks like CEO Richard Lenny is looking to gain a share of  the $1.7 billion premium segment. Scharffen Berger is a leader in the high-cacao-content, distinctive dark chocolate arena, while Joseph Schmidt specializes in fine, handcrafted chocolate gifts. The industry defines premium chocolate as any chocolate that is priced higher than $16 per pound. Category leaders such as Scharffen Berger, Ghirardelli and Lindt have become more widely available. 

American tastes have shifted over the years to a preference for dark chocolate and a higher quality milk chocolate.  The smaller premium chocolate, often available in small packages are perfect for snacking or treating yourself.  A recent Mintel survey suggests that 65% of respondents who buy chocolate would rather have a little bit of something really good rather than something that’s just average. (People get paid to quantify and qualify data like this!)

And with the two top chocolate buying seasons ahead (Christmas and Valentine’s Day) Hershey’s will be looking to realize a return on this sweet deal. 

So perhaps our urban landscapes will be populated with Cafe Cacaos across the US.  There will be shelves of dark chocolate bars and marble bars proffering tastings of single origin chocolates next to gift boxes of truffles.  One thing’s for sure, Joseph Schmidt the man, the artist is as much his brand as the chocolate art he creates.  Building this effort out on the scale that Hershey is most likely seeking, as the company has had some recent ups and downs, will be a challenge. Let’s just hope we don’t loose our two local chocolate providers to Pennsylvania, or worse, that the quality suffers. I’m available if the company needs some local marketing assistance–will work for partial trade!

Image:  Rugged Elegance

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