Hershey's Top Shareholder Sour on Performance

Associated Press

The charitable trust that controls Milton Hershey's fortune and The Hershey Co., the U.S. chocolate company he founded, said Tuesday it is not satisfied with the company's lackluster performance, and is working to improve it.

The Hershey Trust board's strongly worded statement, obtained by The Associated Press, came eight days after Hershey's chairman, president and chief executive, Richard H. Lenny, abruptly announced he would leave the company by the end of the year.

"The trust has communicated to the company board ... that the trust is not satisfied with the company's results," the statement said. "The company has been underperforming both the market and its own stated expectations."

Hershey , which is in the midst of closing six North American plants and shifting production to Mexico, India and China, has yet to recover from its stumble last fall while releasing new organic and dark chocolate products. Advertising flopped, leaving stores backed up with its older products.

Hershey lost U.S. market share in both candy and chocolate, while its closest competitor, Mars Inc., which makes M&M's, gained ground. It has slashed its earnings forecast twice this year.

The statement did not say specifically what steps are being taken to correct the company's slide, other than trying to focus the company board on resolving Hershey's challenges and pursuing new growth strategies.

The trust's holdings in Hershey, which underwrites a school for underprivileged children, has lost more than $1 billion in value, the statement said.

The Wall Street Journal first posted the statement on its Web site. A spokesman for the trust, Tim Reeves, would not give the same statement to The Associated Press, which obtained it from a third party.

Lenny's departure came amid speculation that Hershey would be bought by rival candy maker Cadbury Schweppes or vice versa. The Trust's statement did not address Cadbury, but said it is not opposed to growth domestically or internationally, as long as it maintains control of the century-old company.

Citing unnamed people, the Journal reported Tuesday that Hershey Trust representatives met with Cadbury in early September to discuss a merger, and asked whether a deal could maintain the trust's controlling stake in Hershey.

Lenny was not present at the meeting, the Journal reported.