Hershey Expects Improved Gross Margins In 2009

Hershey Co. (HSY) - which reported second-quarter earnings above of expectations - said it expects gross margins in 2009 to improve as dairy prices and other commodities moderate.

The company will also no longer be marketing the Starbucks Corp. (SBUX) brand of premium chocolate and is also winding down its high-end brand of Cacao Reserve. Higher-end chocolate hasn't done as well as consumers have cut back spending and retailers have been more reluctant to give up shelf space to lower-performing products.

Referring to the Starbucks chocolate brand, Hershey's Chief Executive David West said the recession had been a bad time to launch a premium brand and noted that on that brand Hershey had been dealing with a partner that had other issues in its own core business.

Speaking to investors on an earnings conference call, the company's executives said it boosted its market share in the U.S. during the quarter. The recession has helped Hershey's traditional brands because consumers have moved to cheaper candy. The company will offer fewer promotions later this year.

The stock was up 4.7% to $40.76 in trading early Thursday.

-Anjali Cordeiro; Dow Jones Newswires; 212-416-2200; [e-mail]