HSY 2010 Cagny

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February 16, 2010February 16, 2010

David J. WestDavid J. WestPresident & CEOPresident & CEO

The Hershey CompanyThe Hershey Company

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Forward Looking StatementsForward Looking StatementsThis presentation contains statements that are forwardThis presentation contains statements that are forward--looking. These looking. These statements are made based upon current expectations that are substatements are made based upon current expectations that are subject to risk ject to risk and uncertainty. Actual results may differ materially from thoseand uncertainty. Actual results may differ materially from those contained in contained in the forwardthe forward--looking statements. Factors that could cause results to differ looking statements. Factors that could cause results to differ materially include, but are not limited to: issues or concerns rmaterially include, but are not limited to: issues or concerns related to the elated to the quality and safety of our products, ingredients or packaging; chquality and safety of our products, ingredients or packaging; changes in raw anges in raw material and other costs and selling price increases, including material and other costs and selling price increases, including volume declines volume declines associated with pricing elasticity; market demand for our new anassociated with pricing elasticity; market demand for our new and existing d existing products; increased marketplace competition; political, economicproducts; increased marketplace competition; political, economic, and/or , and/or financial market conditions; changes in governmental laws and refinancial market conditions; changes in governmental laws and regulations, gulations, including taxes; risks and uncertainties related to our internatincluding taxes; risks and uncertainties related to our international operations; ional operations; the impact of future developments related to the investigation bthe impact of future developments related to the investigation by government y government regulators of alleged pricing practices by members of the confecregulators of alleged pricing practices by members of the confectionery tionery industry, including risks of subsequent litigation or further goindustry, including risks of subsequent litigation or further government action; vernment action; pension cost factors, such as actuarial assumptions, market perfpension cost factors, such as actuarial assumptions, market performance and ormance and employee retirement decisions; and such other matters as discussemployee retirement decisions; and such other matters as discussed in our ed in our Annual Report on Form 10Annual Report on Form 10--K for 2008. All information in this presentation is as K for 2008. All information in this presentation is as of February 16, 2010. The Company undertakes no duty to update aof February 16, 2010. The Company undertakes no duty to update any ny forwardforward--looking statement to conform the statements in this presentationlooking statement to conform the statements in this presentation to to actual results or changes in the Companyactual results or changes in the Company’’s expectations.s expectations.

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Key messagesKey messages Delivered strong 2009* resultsDelivered strong 2009* results

–– Net Sales +3%, +4% constant currencyNet Sales +3%, +4% constant currency

–– EPS +15%EPS +15%

–– Gross Margin 38.9%, +310 bpsGross Margin 38.9%, +310 bps

–– EBIT Margin 16.2%, +120 bpsEBIT Margin 16.2%, +120 bps

*Adjusted, excludes business realignment and *Adjusted, excludes business realignment and impairment chargesimpairment charges

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Key messagesKey messages Delivered strong 2009 resultsDelivered strong 2009 results

Reshaped our core businessReshaped our core business–– New supply chain post Global Supply Chain New supply chain post Global Supply Chain

TransformationTransformation

–– New approach to brand building focused on New approach to brand building focused on consumer first, activated with retail excellenceconsumer first, activated with retail excellence

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Reshaped our core businessReshaped our core business

WellWell--positioned to build on core strengths positioned to build on core strengths –– BrandsBrands

–– Consumer/shopper insightsConsumer/shopper insights

–– InnovationInnovation

–– International expansionInternational expansion

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WellWell--positioned to build on core strengths positioned to build on core strengths

Poised with strong financial position and good Poised with strong financial position and good visibility to our longvisibility to our long--term modelterm model

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AgendaAgendaStrong results and foundationStrong results and foundation––

2009 results2009 results

––

Category reviewCategory review−−

HersheyHershey’’s core assetss core assets

Reshaped our businessReshaped our business––

Focus on cost structureFocus on cost structure

––

New approach to brand buildingNew approach to brand building

Leveraging/investing for the futureLeveraging/investing for the future––

GoGo--toto--market capabilitymarket capability

––

InnovationInnovation––

International expansionInternational expansion

Ability to deliver over the long term Ability to deliver over the long term

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2009 EPS exceeded long2009 EPS exceeded long--term target term target ……

Consumer uncertaintyConsumer uncertainty

~11% price increase Aug 08~11% price increase Aug 08

Increased commodity costs Increased commodity costs

Pension headwindPension headwind

2008 2009

$1.88$1.88

$2.17$2.17

+15% YoY

+15%+15% YoYYoY

Against a challenging backdropAgainst a challenging backdrop

*Adjusted, excludes business realignment *Adjusted, excludes business realignment and impairment chargesand impairment charges

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2007 2008 2009

…… with improvements in gross margin with improvements in gross margin ……

38.9%38.9%

Gross Margin (%)*Gross Margin (%)*

Pricing actionsPricing actions

Global Supply Chain Global Supply Chain TransformationTransformation


35.5%35.5%35.8%35.8%

+310 bps YoY

+310 +310 bpsbps YoYYoY

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2007 2008 2009

…… and EBIT margin and EBIT margin ……

15.0% 16.2%17.6%

EBIT Margin (%)*EBIT Margin (%)*

Absorbed 50% Absorbed 50% advertising increaseadvertising increase

Invested in emerging Invested in emerging marketsmarkets

Focused on adding Focused on adding new capabilitiesnew capabilities


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…… and generating record cash flowand generating record cash flow

2004 2005 2006 2007 2008 2009

$520

$1,066

*Includes $277m pension contribution*Includes $277m pension contribution **Includes GSCT charges**Includes GSCT charges

Record Operating Cash Flow in 2009 ($m)Record Operating Cash Flow in 2009 ($m)

$779$723

$462

$788

** ****

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Confectionery an advantaged categoryConfectionery an advantaged category

Source: IRI BuildersSource: IRI Builders

High impulse purchasesHigh impulse purchasesHigh impulse purchases

High household penetrationHigh household penetrationHigh household penetration

Low private label presenceLow private label presenceLow private label presence

Responsive to merchandisingResponsive to merchandisingResponsive to merchandising

Recession resistant … as we’ve seenRecession resistant Recession resistant …… as weas we’’ve seenve seen

Seasonal destinationSeasonal destinationSeasonal destination

High purchase frequencyHigh purchase frequencyHigh purchase frequency

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Confectionery is ubiquitous Confectionery is ubiquitous ……

CC-- StoresStores

Dollar StoresDollar Stores

Special ChannelsSpecial Channels

Drug StoresDrug Stores

42%42%42%

SupermarketsSupermarkets

MassMass MerchandisersMerchandisers

Wholesale Wholesale ClubsClubs8%8%

13%13%

31%

27%27%

9%9%

8%8%

% of Sales% of Sales

Source: Hershey salesSource: Hershey sales

4%4%

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Salty Snacks

Bakery Snacks

Snack/Nutrition Bars

Confectionery

Cookies/Crackers

…… and onand on--trend with consumerstrend with consumers

26%26%

17%17%

41%41%

4%4%12%12%

U.S. Snack Market $71bnU.S. Snack Market $71bn Percent MixPercent Mix

Source: Data Monitor, IRI, Hershey EstimatesSource: Data Monitor, IRI, Hershey Estimates

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U.S. CMG Annual U.S. CMG Annual Category Growth RateCategory Growth Rate

2006 2007 2008 2009

CMG category grows consistentlyCMG category grows consistently

+2.8%+2.8% +4.0%+4.0%

Source: Nielsen/ IRI, Hershey custom databaseSource: Nielsen/ IRI, Hershey custom database FDMxCFDMxC 5252--Weeks 1/2/10Weeks 1/2/10

+3.1%+3.1%+4.4%+4.4%

$15 $15 bnbn+3.6%

’05-’09 CAGR

+3.6%+3.6% ’’0505--’’0909 CAGRCAGR

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Hershey has iconic brands Hershey has iconic brands ……

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#2#2#2

#4#4#4

#5#5#5

…… loved by consumers loved by consumers ……Harris InteractiveHarris Interactive

Brand Equity RankingBrand Equity Ranking

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…… with strong corporate reputation with strong corporate reputation ……

98105112115121

130131

147155 148

Top 10 Corporate Top 10 Corporate MillwardMillward Brown Reputation ScoreBrown Reputation Score

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…… built on unique heritage built on unique heritage ……100 Years of Corporate Social Responsibility 100 Years of Corporate Social Responsibility ……

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…… still at heart of the company todaystill at heart of the company today

CoCo--founder and member of World Cocoa Foundationfounder and member of World Cocoa Foundation

Partner with Bill and Melinda Gates FoundationPartner with Bill and Melinda Gates Foundation

Fund farmer education via Sustainable Tree Crops Fund farmer education via Sustainable Tree Crops Program & Farmer Field SchoolsProgram & Farmer Field Schools

Sustainable Supply ChainSustainable Supply Chain

http://www.cocoainitiative.org/

Blank for MHS video / commercial

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Hershey Mars Nestle R.Stover Lindt P/L

Leadership in U.S. Chocolate Leadership in U.S. Chocolate ……

43%43%

7%7%

31%31%

5%5%4%4%

1%1%


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Mars/Wrigley

Hershey Cadbury Nestle P/L R. Stover Lindt

…… strong overall category position strong overall category position ……


8%8%

28%28%

6%6%

3%3%

MarsMars

WrigleyWrigley

2%2%

In the largest most profitable market in the

world

In the largest In the largest most profitable most profitable market in the market in the

worldworld

2%2%

33%33%

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…… with significant competitive advantageswith significant competitive advantages

Iconic brandsIconic brands

Category leadershipCategory leadership

Dedicated direct sales forceDedicated direct sales force

Proprietary goProprietary go--toto--market toolsmarket tools

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We are evolving our entire supply chainWe are evolving our entire supply chain

Buy Buy Buy MakeMakeMake MoveMoveMove Sell/ Market Sell/Sell/

MarketMarket

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Buy Buy Buy

GSCT

Working capital

MakeMakeMake

20082008--20092009

MoveMoveMove Sell/ Market Sell/Sell/

MarketMarket

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Optimizing manufacturing networkOptimizing manufacturing network

North AmericanNorth American Manufacturing Manufacturing

FacilitiesFacilities

Distribution Distribution CentersCenters

Capital Capital ExpendituresExpenditures$190m $190m --

$200m$200m$140m $140m -- $160m$160m

FromFrom ToTo

55 44

1717 1111

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2009 2010+

Improved cost profile and gross margin Improved cost profile and gross margin

Annualized Cumulative Savings ($m)Annualized Cumulative Savings ($m)

$160A$160A

$175$175--$185 Est.$185 Est.

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Improving service, lowering inventoryImproving service, lowering inventory

2008 2009

Inventory ($m)Inventory ($m)U.S. Case FillU.S. Case Fill

2008 2009

~99%~99%

~97%~97% $520$520

$593$593

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2006 2010

Still room for improvementStill room for improvement

42%42%

~58%~58%

Capacity Utilization %Capacity Utilization % 7 Days / 3 Shift Basis7 Days / 3 Shift Basis

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Buy Buy Buy

Procurement and sourcing initiative

MakeMakeMake MoveMoveMove Sell/ Market Sell/Sell/

MarketMarket

GSCT

Working capital

Freight, warehousing, distribution realignment

20102010--20112011 20082008--20092009 20102010--20112011

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Commodities & Packaging

Manufacturing Overhead

Distribution

Productivity visibility Productivity visibility ……

Productivity/continuous improvement, historically, Productivity/continuous improvement, historically, about 3% of variable manufacturing overheadabout 3% of variable manufacturing overhead

Total COGS spend ~$3 billionTotal COGS spend ~$3 billion

Expanding to include indirect spending, G&AExpanding to include indirect spending, G&A

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Significant opportunity in new footprintSignificant opportunity in new footprintContinuous improvement mindsetContinuous improvement mindset

++Freight/warehousing/logistics in new footprintFreight/warehousing/logistics in new footprint

++Procurement/sourcing now can be revisited first time Procurement/sourcing now can be revisited first time

since 2006since 2006

++Global shared services projectGlobal shared services project

==Focus will approach 2x the current cost savings Focus will approach 2x the current cost savings Focus will approach 2x the current cost savings

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Buy Buy Buy

Procurement and sourcing initiative

MakeMakeMake MoveMoveMove Sell/ Market Sell/Sell/

MarketMarket

GSCT

Working capital

Freight, warehousing, distribution realignment

Enhanced customer integration

20102010--20112011 20082008--20092009 20102010--20112011 20112011--20142014

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Fundamental reFundamental re--grounding in the consumergrounding in the consumer

Source: IRI BuildersSource: IRI Builders

DemographicsDemographicsDemographics

Need StatesNeed StatesNeed States

Shoppers and Channel Dynamics

Shoppers and Channel Shoppers and Channel DynamicsDynamics

Usage OccasionsUsage OccasionsUsage OccasionsWhen They ConsumeWhen They ConsumeWhen They Consume

Brands, Packs, Tastes, Textures

Brands, Packs, Tastes, Brands, Packs, Tastes, TexturesTextures

Where/How They BuyWhere/How They BuyWhere/How They Buy

What They BuyWhat They BuyWhat They Buy

Why They BuyWhy They BuyWhy They Buy

Who They AreWho They AreWho They Are

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Spoke with countless consumersSpoke with countless consumers

Shopper insightsShopper insights

Shopper segmentationShopper segmentation

Seasonal ethnographySeasonal ethnography

Chocolate segmentationChocolate segmentation

Controlled store testsControlled store tests

Purchase driversPurchase drivers

Consumer Demand LandscapeConsumer Demand LandscapeConsumer Demand Landscape

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Loyal IndulgersLoyal IndulgersPractical Value SeekersPractical Value Seekers

The Who: grounded in the consumerThe Who: grounded in the consumer

Engaged Exploring Engaged Exploring MunchersMunchers

ControllersControllers Detached OccasionalistsDetached OccasionalistsConfection Loving Confection Loving Moderators Moderators

6 Identified Segments6 Identified Segments

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…… confectionery need states the why/how confectionery need states the why/how ……

More EmotionalMore Emotional More Physical/Functional More Physical/Functional

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…… confectionery need states the why/how confectionery need states the why/how ……

More EmotionalMore Emotional More Physical/Functional More Physical/Functional

Reward Reward MeMe

22 33 44 55 66 77 88 Oral Oral CareCare

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The intersection of The intersection of ““whowho”” and and ““whywhy””

Segments

Nee

d St

ates

Total Confection Demand LandscapeTotal Confection Demand Landscape

Engaged Exploring Munchers

Loyal Indulgers

Practical Value Seekers

Confection Loving

Moderators ControllersDetached

Occasionalists

Reward Me

2

3

4

5

6

7

8

Oral Care

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Hershey Demand Landscape drives decisionsHershey Demand Landscape drives decisions

$$ Brand ABrand A

$$$$$$ Brand BBrand B

((RelaunchRelaunch))

$ Brand D$ Brand D

White SpaceWhite Space

White SpaceWhite Space

$$ Brand C

$$$$ Brand EBrand E

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Changes the game for growthChanges the game for growth

Identifies biggest opportunitiesIdentifies biggest opportunities

Optimizes portfolio rolesOptimizes portfolio roles

Brand positioningBrand positioning

Market mix modelingMarket mix modeling

Price realization analysisPrice realization analysis

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Demand Value Propositions

Demand Value Demand Value PropositionsPropositions

Brand propositions strengthenedBrand propositions strengthened……

DL SegmentDL SegmentDL Segment


Benefits/AttributesBenefits/AttributesBenefits/Attributes

Usage OccasionsUsage OccasionsUsage Occasions


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“Perfect Combination”

““Perfect Perfect CombinationCombination””

EEM + LIEEM + LIEEM + LI

Younger, M/FYounger, M/FYounger, M/F

Indulgence/CupIndulgence/CupIndulgence/Cup

E-day + SeasonalEE--day + Seasonalday + Seasonal

EmotionalEmotionalEmotional

Blank for Reese’s commercials

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Drives powerful marketing mixDrives powerful marketing mix

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Positive, sustainable resultsPositive, sustainable results

52W 5-19-07 May-Dec 07 Yr 2008 Yr 2009

Source: Nielsen/IRI Source: Nielsen/IRI FDMxCFDMxC (Reese(Reese’’s Peanut Butter Cups, all s Peanut Butter Cups, all packtypespacktypes))

FDMxCFDMxC Retail TakeawayRetail Takeaway

+1.1%+1.1%

+5.7%+5.7%

+12.5%+12.5%

--0.3%0.3%

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“Pure”ChocolateHappiness

““PurePure””ChocolateChocolateHappinessHappiness

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Positioning strengthens SPositioning strengthens S’’mores activationmores activation

Blank for Hershey’s S’mores (Rascal Flatts) & Pure commercials

2/16/2010 9:39 AM CAGNY - 2010 54

52 wk 4-19-08 May - Dec 08 Yr 2009

Solid resultsSolid results

Source: Nielsen/IRI Source: Nielsen/IRI FDMxCFDMxC (Hershey, Hershey with Almonds,(Hershey, Hershey with Almonds, Special Dark and Cookie & Cream bar productsSpecial Dark and Cookie & Cream bar products all all packtypespacktypes))


+3.3%+3.3%

+12.0%+12.0%

+7.1%+7.1%

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“Break time.Anytime.”

““Break time.Break time.Anytime.Anytime.””

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Kit Kat and coffee, break time in actionKit Kat and coffee, break time in action

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52 wk 8-8-09 Sept - Dec 09

Good results Good results ……


Advertising Begins

Advertising Advertising BeginsBegins

+7.9%+7.9%

Source: Nielsen/IRI Source: Nielsen/IRI FDMxCFDMxC ((KitKatKitKat franchise,franchise, all all packtypespacktypes))

Blank for Kit Kat Commercial

2/16/2010 9:39 AM CAGNY - 2010 59

52 wk 8-8-09 Sept - Dec 09

…… improved with advertisingimproved with advertising


Advertising Begins

Advertising Advertising BeginsBegins

+7.9%+7.9%

+13.8%+13.8%

Source: Nielsen/IRI Source: Nielsen/IRI FDMxCFDMxC ((KitKatKitKat franchise,franchise, all pack types)all pack types)

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Blank for Commercials

Kisses FactoryTwizzler

BlissYork

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+25-30%

+50%

+26%+18%

-13%

2006 2007 2008 2009 2010P

Advertising spending increasing Advertising spending increasing ……

Total Company AdvertisingTotal Company Advertising YoYYoY Chg. (%)Chg. (%)

$350m$350m

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2007 2008 2009

Trade Promotion Advertising

…… as we shift the marketing mixas we shift the marketing mix

$830$830$928$928 $963$963$1bn$1bn

16.8%16.8% 18.1%18.1% 18.2%18.2%Total as aTotal as a

% of Net Sales% of Net Sales

$128$128$161$161 $241$241

$702 $767 $722

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Activated at retail with good programs Activated at retail with good programs ……

Q4Q4Q4Q3Q3Q3

Q1Q1Q1 Q2Q2Q2

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…… and unique retail sales coverageand unique retail sales coverage

Hours InHours In--StoreStore YoYYoY Increase (%)Increase (%)

2006-2009 2010P

+8%+8%+38%+38%

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Strong 2009 marketplace resultsStrong 2009 marketplace results

+7.2 +7.2 FDMxCWFDMxCW

Highest in over a decadeHighest in over a decade

BroadBroad--based growthbased growth

FDMxCFDMxC +0.1 pts+0.1 pts

First gain since 2005First gain since 2005

Only top four Only top four manufacturer to gain manufacturer to gain shareshare

2009 Market Share 2009 Market Share FDMxCFDMxC Performance (pts)*Performance (pts)*

2009 Retail 2009 Retail FDMxCWFDMxCW Takeaway (%)*Takeaway (%)*

*IRI/Nielsen, Hershey custom database,*IRI/Nielsen, Hershey custom database, 5252--weeks ended 1/2/2010weeks ended 1/2/2010

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Consumer demand model strengthened Consumer demand model strengthened

Improved Hershey and retailer profitability

Improved Hershey and Improved Hershey and retailer profitabilityretailer profitability

Improved category dynamics

Improved category Improved category dynamicsdynamics

Strong merchandisingConsumer promotionRetail excellence

Strong merchandisingStrong merchandisingConsumer promotionConsumer promotionRetail excellenceRetail excellence

Adv

erti

sing

Adv

erti

sing

Pric

e Re

aliz

atio

nPr

ice

Real

izat

ion

Trad

e Pr

omot

ion

Trad

e Pr

omot

ion

== Strengthened brand equity

Strengthened brand Strengthened brand equityequity

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Hershey already advantaged Hershey already advantaged

Retail SalesRetail SalesRetail SalesPlanogramsPlanogramsPlanogramsSeasonal NavigatorSeasonal Seasonal NavigatorNavigator

Syndicated Dashboard SyndicatedSyndicated DashboardDashboard

Demand LandscapeDemand Demand

LandscapeLandscape Shopper InsightsShopper InsightsShopper Insights

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Opportunities exist to improve selling Opportunities exist to improve selling

Take HomeTake HomeTake Home

Front EndFront EndFront End

SeasonsSeasonsSeasons

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2/16/2010 9:39 AM CAGNY - 2010 72

Seasonal excellenceSeasonal excellence

Retail ExecutionRetail Execution

FSI FSI Television Television Tab Support Tab Support

Mobile Mobile Smart TV Smart TV

Online Online

https://mobile.hersheys.com/HFBMM705/My Documents/Random Crap/My Documents/Co-Marketing Events/Easter/2009/CAT_Reese.wmv

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Seasons = merchandisingSeasons = merchandising

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Seasons are Seasons are merchandised merchandised

37 weeks37 weeks of the year!of the year!

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Seasonal collaboration is Seasonal collaboration is ‘‘Best in ClassBest in Class’’

HersheyHershey RetailerRetailer““SeasonsSeasons””

Best in ClassBest in Class

SegmentationSegmentationSegmentation

Sales ToolsSales ToolsSales Tools

Marketing ProgramsMarketing ProgramsMarketing Programs

InsightsInsightsInsights


Retailer OutletsRetailer OutletsRetailer Outlets



Advanced collaboration to unite tools

and capabilities

Advanced Advanced collaboration collaboration to unite tools to unite tools

and capabilitiesand capabilities

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Developing common viewDeveloping common view

Manufacturer ViewManufacturer ViewManufacturer View Retailer ViewRetailer ViewRetailer View

Demand Landscape

Retailers

Trip Missions

Consumers

2/16/2010 9:39 AM CAGNY - 2010 77

HersheyHershey RetailerRetailer

IInsightsnsights

DDrivenriven

PPerformanceerformance

IDP is the Common Language IDP is the Common Language -- The The ““Operating SystemOperating System””

Integrated selling excellenceIntegrated selling excellence

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Marketing LeversMarketing Levers

Retail LeversRetail Levers

ProductsProducts

ConsumersConsumers

CustomersCustomers

Profit Pooling

Demand Profiling

Demand Drivers

Shopper Preferences

MerchEfficient

Assortment Planogram DistributionGaps

MediaMarketing Insights

IDP transforming HersheyIDP transforming Hershey’’s capabilitiess capabilities

Insights Driven

Performance

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Stores will have a demand profile Stores will have a demand profile ……

DetachedDetached

Practical Value Practical Value SeekingSeeking

Engaged Exploring Engaged Exploring MunchersMunchers

Loyal IndulgersLoyal Indulgers

Confection Loving Confection Loving ModeratorsModerators

ControllersControllers

100%

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…… with preferences activated at store levelwith preferences activated at store level

Demand PreferencesDemand Preferences

Right brands

Right packtypes

Right retail programs

Right retail execution

Right marketing

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Advanced collaboration to enable Advanced collaboration to enable ‘‘Best in ClassBest in Class’’


Sales ToolsSales ToolsSales Tools



ManufacturerManufacturer RetailerRetailerBest in Class


Retailer OutletsRetailer OutletsRetailer Outlets



Advanced collaboration to unite tools and

capabilities

Advanced Advanced collaboration to collaboration to unite tools and unite tools and

capabilitiescapabilities

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Will partner to provide mutual solutionsWill partner to provide mutual solutions

Shoppers Shoppers

SyndicatedSyndicated

LoyaltyLoyalty

DatabasesDatabases

MetricsMetrics

CategoryCategory

Fast FactsFast Facts

ToolsTools

CommunicationCommunication

StandardsStandards

FixturesFixtures

InsightsInsightsInsights AnalyticsAnalyticsAnalytics PartnersPartnersPartners SolutionsSolutionsSolutions

Hershey as full service providerHershey as full service providerHershey as full service provider

Contracting Contracting with with proprietary proprietary partnerspartners

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Technology will accelerate transformationTechnology will accelerate transformation

2/16/2010 9:39 AM CAGNY - 2010 84

CC--Store Store videominingvideominingCC--Store Traffic MapStore Traffic Map

Min

Max

Source: Videomining, 2008

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Winning space at checkoutWinning space at checkout

2/16/2010 9:39 AM CAGNY - 2010 86

Aisle merchandising principles Aisle merchandising principles


WayfindingWayfindingWayfinding

Shop-abilityShopShop--abilityability

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Testing various merchandising strategiesTesting various merchandising strategiesHershey ++Hershey ++Category ++Category ++

Hershey +++Hershey +++Category +++Category +++

No Segments or Signage

No SegmentsNo Segments or Signageor Signage SegmentationSegmentationSegmentation Segmentation

+ Signage Segmentation Segmentation

+ Signage+ Signage

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Investing in our future Investing in our future ……

IDP work well underway in 2009IDP work well underway in 2009

Pilots scheduled for 2010Pilots scheduled for 2010

RollRoll--out 2011out 2011

…… to strengthen category leadershipto strengthen category leadership

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2/16/2010 9:39 AM CAGNY - 2010 90

A disciplined focus on innovationA disciplined focus on innovation

Enhanced consumer and category understanding Enhanced consumer and category understanding

Broadened to encompass products, packaging, Broadened to encompass products, packaging, marketing services, and business modelsmarketing services, and business models

Developed disciplined process Developed disciplined process

Delivering an incremental, sustainable innovation portfolio

Delivering an incremental, Delivering an incremental, sustainable innovation portfoliosustainable innovation portfolio

2/16/2010 9:39 AM CAGNY - 2010 91

Increasing hurdle ratesIncreasing hurdle rates

Understanding cannibalizationUnderstanding cannibalization

Partnering with retail customers on lead timesPartnering with retail customers on lead times

Innovation disciplineInnovation discipline

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Controlled new product launchesControlled new product launches

New forms of coreNew forms of coreNew forms of core

New equities, segmentsNew equities, segmentsNew equities, segments

Close-in variety of coreCloseClose--in variety of corein variety of core

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Blank for Pieces commercials

2/16/2010 9:39 AM CAGNY - 2010 95

New products in the secondNew products in the second--half of 2010half of 2010

2/16/2010 9:39 AM CAGNY - 2010 96

2/16/2010 9:39 AM CAGNY - 2010 97

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2/16/2010 9:39 AM CAGNY - 2010 100

Increasing our global footprint Increasing our global footprint ……

Hershey International Net SalesHershey International Net Sales% of Total Company% of Total Company

2004 2006 2009

Canada RoW

10%10% 11%11%

14%14%

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Organic With M&A

…… with strong growth outside U.S./Canadawith strong growth outside U.S./Canada

+20%+20%

+14%+14%

Hershey International 2004Hershey International 2004--2009 CAGR2009 CAGR Net Sales* (%)Net Sales* (%)

*Excludes Canada*Excludes Canada

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International investment is workingInternational investment is working

BrandsBrands

InsightsInsights

AdvertisingAdvertising

GoGo--toto--market expertisemarket expertise

Our Capabilities are Extendable GloballyOur Capabilities are Extendable Globally

…… aided by JVaided by JV’’s and test/learn approachs and test/learn approach

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Strong brands and partnersStrong brands and partners

2/16/2010 9:39 AM CAGNY - 2010 104

MultiMulti--country brand platformscountry brand platformsBrazilBrazil MexicoMexico

ChinaChina KoreaKorea

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Anchored in the consumer and categoryAnchored in the consumer and category

Consumer SegmentsConsumer Segments

Personal Personal RewardReward

Oral Oral CareCare

U.S. Demand LandscapesU.S. Demand LandscapesU.S. Demand Landscapes

China Chocolate SegmentationChina Chocolate SegmentationChina Chocolate Segmentation

Mexico Demand LandscapeMexico Demand LandscapeMexico Demand Landscape

Personal Reward

Indulgent Pleasure

Need StatesNeed States

http://www.cnn.com/WORLD/9607/25/mexico.healthcare/3woman.child.lrg.jpg

http://www.uky.edu/SocialWork/courses/mexico/pics/families-12.JPG

http://i209.photobucket.com/albums/bb90/mblogger/najera3.jpg

http://www.scradmin.org/albums/May2008/Mexican_Woman_by_Richard_Paine.jpg

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2007 2008 2009 2010

Investing in international advertisingInvesting in international advertisingInternational* AdvertisingInternational* Advertising

YoYYoY % Inc% Inc+26% CAGR +26%+26% CAGRCAGR

+35%+35%+21%+21%

+38%+38%

~+20%~+20%

*Excludes Canada*Excludes Canada

Int’l Adv Spots - Pure Mexico, - China

2/16/2010 9:39 AM CAGNY - 2010 108

Today + 5 Years

Creating meaningful presenceCreating meaningful presence

$1b+

At current organic rates, At current organic rates, business could be business could be

$1 $1 billion billion

outside of U.S./Canada in 5 outside of U.S./Canada in 5 yearsyears

Only requires growing with Only requires growing with the marketsthe markets

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Global confectionery is fragmentedGlobal confectionery is fragmented

Source: Euromonitor 2008 global market share Source: Euromonitor 2008 global market share ($ retail sales)($ retail sales)

KraftKraftCadburyCadbury

Mars/Mars/WrigleyWrigley

FerreroFerreroNestleNestle HersheyHershey PerfettiPerfettiVanVan

MelleMelle

LindtLindt LotteLotte

14.9%14.9%

7.9%7.9%

4.6%4.6% 4.5%4.5%

3.0%3.0%2.0%2.0% 1.6%1.6%

14.5%14.5%

2/16/2010 9:39 AM CAGNY - 2010 110

Global confectionery scaleGlobal confectionery scale

Global BrandsGlobal BrandsGlobal Brands

Research & DevelopmentResearch & DevelopmentResearch & Development

Manufacturing Know-HowManufacturing KnowManufacturing Know--HowHow

Financial ResourcesFinancial ResourcesFinancial Resources

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Regional scale can be equally relevantRegional scale can be equally relevant

Regional manufacturing Regional manufacturing

Customized flavor profilesCustomized flavor profiles

Local routesLocal routes--toto--marketmarket

Regional customersRegional customers

112

Most customers are regionalMost customers are regional

Limited Overlap of Top Retailers Across GeographiesLimited Overlap of Top Retailers Across Geographies

Fo

od

Dru

gM

ass

North America

Latin America

Western Europe

Asia

http://www.kroger.com/

http://images.google.com/imgres?imgurl=http://blogs.westword.com/latestword/safeway%2520lo%2520go.jpg&imgrefurl=http://blogs.westword.com/latestword/2009/09/quiet_--_to_much_quiet_--_afte.php&usg=__EhXYJlqChsdnhiOArSRRUAtE44k=&h=480&w=430&sz=20&hl=en&start=3&um=1&tbnid=s-OR1st0DeflpM:&tbnh=129&tbnw=116&prev=/images%3Fq%3Dsafeway%26hl%3Den%26rls%3Dcom.microsoft:*:IE-SearchBox%26rlz%3D1I7DMUS%26sa%3DN%26um%3D1

http://www.cvs.com/CVSApp/user/home/home.jsp

http://www.riteaid.com/

http://images.google.com/imgres?imgurl=http://www.sohe.wisc.edu/centers/cre/images/target400.jpg&imgrefurl=http://www.sohe.wisc.edu/centers/cre/index.html&usg=__c_nQehXpmTTaKzd6Ipg6LfTHCzA=&h=400&w=400&sz=28&hl=en&start=1&um=1&tbnid=vcynPRx5_1j40M:&tbnh=124&tbnw=124&prev=/images%3Fq%3Dtarget%26hl%3Den%26rls%3Dcom.microsoft:*:IE-SearchBox%26rlz%3D1I7DMUS%26sa%3DN%26um%3D1

http://images.google.com/imgres?imgurl=http://www.dealsip.com/edeal/images/merchant_images/1252382648M1%40kmart.gif&imgrefurl=http://www.dealsip.com/edeal/main/frmCoupon.php&usg=__aK0l_tiuxI-TYsM3rAqO9_D6uhc=&h=365&w=365&sz=4&hl=en&start=1&um=1&tbnid=fPdl6Pn308wyJM:&tbnh=121&tbnw=121&prev=/images%3Fq%3Dk-mart%26hl%3Den%26rls%3Dcom.microsoft:*:IE-SearchBox%26rlz%3D1I7DMUS%26sa%3DN%26um%3D1

http://www.aeon.info/

http://images.google.com/imgres?imgurl=http://www.ana.co.jp/eng/amc/reference/tameru/other/shopping/image/matumotokiyoshi_logo.gif&imgrefurl=http://www.ana.co.jp/eng/amc/reference/tameru/other/shopping/matumotokiyoshi.html&usg=__7S0IzqdpiglGxg7w7dzYnkRP9ZM=&h=200&w=200&sz=17&hl=en&start=4&um=1&tbnid=E15Hlf2pzZpl-M:&tbnh=104&tbnw=104&prev=/images%3Fq%3DMatsumotokiyoshi%26hl%3Den%26rls%3Dcom.microsoft:*:IE-SearchBox%26rlz%3D1I7DMUS%26sa%3DN%26um%3D1

http://www.farmatodo.com.ve/

http://www.dm-drogeriemarkt.de/

http://images.google.com/imgres?imgurl=http://jenslapinski.files.wordpress.com/2008/12/tesco.jpg&imgrefurl=http://jenslapinski.wordpress.com/2008/12/15/monopoly-game-discount-by-tesco/&usg=__TZVtEXUzM6W2ifhahAwW4pIqxrc=&h=272&w=827&sz=67&hl=en&start=3&um=1&tbnid=_idszP3jqpzElM:&tbnh=47&tbnw=144&prev=/images%3Fq%3Dtesco%26hl%3Den%26rls%3Dcom.microsoft:*:IE-SearchBox%26rlz%3D1I7DMUS%26um%3D1

http://en.wikipedia.org/wiki/File:Groupe_Casino.svg

http://en.wikipedia.org/wiki/File:Carrefour.png

http://en.wikipedia.org/wiki/File:Carrefour.png

http://www.aeon.info/

2/16/2010 9:39 AM CAGNY - 2010 113

Regional markets still largely unconsolidatedRegional markets still largely unconsolidated

Share of MarketShare of Market

Top 3Top 3 Top 5Top 5Western EuropeWestern Europe 3939 5252

North AmericaNorth America 5858 6464

Asia PacificAsia Pacific 2424 3434

Latin AmericaLatin America 4747 5353

Eastern EuropeEastern Europe 4444 5555

Middle East/AfricaMiddle East/Africa 3737 4545

AustralasiaAustralasia 7474 8080

Source: EuromonitorSource: Euromonitor

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Good opportunity to augment organic Good opportunity to augment organic growth via M&Agrowth via M&A

Global knowGlobal know--how, brandshow, brands

Strong balance sheet and cash flowStrong balance sheet and cash flow

Willingness to partner where it makes senseWillingness to partner where it makes sense

Evolving category creates opportunitiesEvolving category creates opportunities

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Ability to deliver over the long termAbility to deliver over the long term

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Net Sales Earnings per Share*

LongLong--term growth ratesterm growth rates

+6+6--8%8%

+3+3--5%5%

*Diluted excluding items affecting comparability*Diluted excluding items affecting comparability

Achievable, consistent and predictable, while allowing for Achievable, consistent and predictable, while allowing for growth and investmentgrowth and investment

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LongLong--term net sales growth term net sales growth ……

+3+3--5%5%

U.S. Growth +3-4%

U.S.U.S. GrowthGrowth +3+3--4%4%

International Growth

+++

InternationalInternational GrowthGrowth

++++++

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…… achieved via multiple leversachieved via multiple levers

Price / Volume / MixPrice / Volume / Mix

Market share gainsMarket share gains

InnovationInnovation

Distribution, channel mixDistribution, channel mix

2/16/2010 9:39 AM CAGNY - 2010 119

Key drivers of longKey drivers of long--term EPS profileterm EPS profile

Investment in brand building initiativesInvestment in brand building initiatives

Continued investment in emerging marketsContinued investment in emerging markets

Aggressive productivity, optimize Aggressive productivity, optimize ““newnew”” manufacturing footprint manufacturing footprint

Commodity market volatility Commodity market volatility

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2004 2005 2006 2007 2008 2009

$520

$1,066

*Includes $277m pension contribution*Includes $277m pension contribution **Includes GSCT charges**Includes GSCT charges

$779$723

$462

$788

** ****

Generating strong cash flowGenerating strong cash flow

Record Operating Cash Flow in 2009 ($m)Record Operating Cash Flow in 2009 ($m)

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Balance sheet flexibilityBalance sheet flexibility

Continued investment in core businessContinued investment in core business

AcquisitionsAcquisitions

Dividends Dividends

Share repurchasesShare repurchases

Cash usage prioritiesCash usage priorities

2/16/2010 9:39 AM CAGNY - 2010 122

January off to a good startJanuary off to a good start

Lat 4 Wks 12/26/09 Lat 4 Wks 1/24/10

Source: Nielsen/IRI FDMxC

FDMxCFDMxC FoodFood DrugDrug MassxMassx CC--StoreStore

Hershey U.S. Retail Takeaway Hershey U.S. Retail Takeaway

2.9%2.9%

6.0%6.0%

--5.55.5%%--3.3%3.3%

3.6%3.6%

9.0%9.0%

4.0%4.0%4.2%4.2%6.0%6.0%

11.4%11.4%

2/16/2010 9:39 AM CAGNY - 2010 123

Reaffirming 2010 outlookReaffirming 2010 outlook

20102010

Net SalesNet Sales 33--5%5%

Adjusted earnings per Adjusted earnings per shareshare--diluted*diluted* 66--8%8%

*Excludes business realignment and impairment charges

2/16/2010 9:39 AM CAGNY - 2010 124

SummarySummary

Delivered strong 2009 resultsDelivered strong 2009 results


WellWell--positioned to leverage our core strengths positioned to leverage our core strengths

Strong financial position and good visibility to Strong financial position and good visibility to our longour long--term modelterm model

2/16/2010 9:39 AM CAGNY - 2010 125

Reconciliation of GAAP and NonReconciliation of GAAP and Non--GAAP GAAP InformationInformation

Appendix I

For the years ended December 31, Income Income Income

Net Per Share- Net Per Share- Net Per Share-In millions of dollars except per share amounts EBIT Income Diluted EBIT Income Diluted EBIT Income Diluted

Results in accordance with GAAP $761.6 $436.0 $1.90 $589.9 $311.4 $1.36 $458.8 $214.2 $0.93Items affecting comparability: Business realignment charges included in cost of sales 10.1 6.3 0.03 77.8 53.4 0.23 123.1 80.9 0.35 Business realignment charges included in selling, marketing and administrative ("SM&A") 6.1 3.8 0.02 8.1 4.9 0.02 12.6 7.8 0.03 Business realignment and asset impairments, net 82.9 50.7 0.22 94.8 60.8 0.27 276.9 178.9 0.77

Non-GAAP results excluding items affecting comparability * $860.7 $496.8 $2.17 $770.6 $430.5 $1.88 $871.4 $481.8 $2.08

20082009

Reconciliation of GAAP and Non-GAAP Information

2007

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Reconciliation of GAAP and Reconciliation of GAAP and NonNon--GAAP InformationGAAP Information

*Excludes business realignment and impairment charges*Excludes business realignment and impairment charges

Possible adjustments to exclude business realignment charges forPossible adjustments to exclude business realignment charges for 2010 are not known at this time; therefore, the Company is unab2010 are not known at this time; therefore, the Company is unable to provide a le to provide a reconciliation of adjusted earnings per sharereconciliation of adjusted earnings per share--diluted for 2010. diluted for 2010.

These nonThese non--GAAP financial measures, as shown in the reconciliation above, aGAAP financial measures, as shown in the reconciliation above, are used in evaluating results of operations for internal purposere used in evaluating results of operations for internal purposes. These s. These nonnon--GAAP measures are not intended to replace the presentation of fiGAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, the Company belnancial results in accordance with GAAP. Rather, the Company believes ieves exclusion of such items provides additional information to invesexclusion of such items provides additional information to investors to facilitate the comparison of past and present operationstors to facilitate the comparison of past and present operations. .

20072007 20082008 20092009

Reported EPSReported EPS--DilutedDiluted $0.93$0.93 $1.36$1.36 $1.90$1.90

Total Business Realignment Total Business Realignment and Impairment Chargesand Impairment Charges

$1.15$1.15 $0.52$0.52 $0.27$0.27

Adjusted EPSAdjusted EPS--Diluted*Diluted* $2.08$2.08 $1.88$1.88 $2.17$2.17

Appendix IIAppendix II

2/16/2010 9:39 AM CAGNY - 2010 127

Economy & Finance

HSY 2010 Cagny