Recession Undercuts Prices on Another Guilty Pleasure
CNBC.com News Editor
The recession has claimed another victim: Chocolate.
Hershey has decided to shutter its Web site and catalog businesses, effective at the end of the month.
“It’s a strategic decision to exit the Hershey gifts business,” said Hershey spokesman Kirk Saville. “The present business model is not sustainable.”
It’s a sad reflection on the economy, but here's the upshot for consumers: They’re having a clearance sale at hersheygifts.com — All chocolate is 25-percent off!
So, quick recap: That’s lobster, wine — and now chocolate — that have seen drastic price reductions since the recession began.
It may seem like a crazy move in the year 2009 to ditch your Web site and keep your brick-and-mortar stores. But Steven Ralston, senior analyst at Zacks.com, said it was actually a pretty smart move.
“They’re cutting costs,” Ralston said. “And they can revive the business at any time if the economy gets better.”
Hershey’s problems started long before the recession but just got worse as the economy sank deeper into recession, the analyst explained.
“In order to generate greater sales year after year instead of offering just basic products, they kept extending their lines,” Ralston said.
Beyond its popular chocolate bars and kisses, Hershey moved into special holiday candies and, in the case of the Web site, customized candy like chocolate cards or customized greetings on giant Hershey bars.
“They overextended themselves looking for the next incremental sale,” Ralston said. “At some point, you have to retrench and go back to basics.”
And, on the upside for Hershey: It’s got a strong brand name and doesn’t really need a commercial online presence, Ralston said.
Especially when you consider how ubiquitous its products are.
“I don’t see this as a problem for chocolate lovers,” said Julie Anderson, author of the Chocolate Blog. “After all, what is easier to find than a bar of Hershey’s chocolate?” she quipped.
It’s a fair point: More than two-thirds of Hershey sales are impulse purchases at the register.
“You don’t really have impulse sales on the Internet,” Ralston explained.
Ralston said it’s tough out there in every category, not just splurges like chocolate and lobster. He was surprised to find that even canned foods are struggling.
Well, yeah — why would I be eating canned foods when I can have lobster?!!
Tonight, recession, we feast in your honor.
To the recession!
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