Will Hershey's New Hazelnut Spread Oust Nutella?

By Sam Lewis

World-famous chocolatier is taking full advantage of Americans’ desire for chocolate spreads in their pantries

Late in 2013, Hershey announced the launch of its own Nutella-like chocolate spreads, branded “Hershey’s Spreads.” The new product comes in three varieties — chocolate, chocolate with almond, and chocolate with hazelnut — and reached retailers’ shelves last December. Less than two months after the product launch, Hershey is already thrilled with the potential these three new spreads hold for the company.

The company’s CEO, John Bilbery, even went as far as saying he is personally very excited about them, and with good reason. Chocolate spreads are quickly becoming a staple in American food cupboards. The market for spreads, such as peanut butter, marmalade, and Nutella, is already massive and still growing. Chocolate spreads, like Hershey’s new products, are performing especially well. “When we look at something like our Spreads launch, which is currently underway, what we saw is, this is a $3.4 billion category in spreads. The fastest-growing sub-segment of that are chocolate spreads,” Bilbery says.

In 2012, the chocolate spreads category grew more than 10 percent, with an estimated value over $300 million. The growth is expected to continue through 2018, according to Euromonitor. Nutella is currently holding about 70 percent of the chocolate spread market in the U.S. and the company’s sales over the last five years have tripled, totaling $240 million. Not only does Nutella have a stronghold on the U.S. spreads market, the company boasts an even higher dominance in the market in other countries, including India.

Despite Nutella’s dominance of the chocolate spreads market, the company should be worried about its competition, especially Hershey. The company is already a behemoth in the chocolate industry — holding 40 percent of dark chocolate sales in the U.S., 43 percent of  the nations’ chocolate and confectionary sales, and 10 percent of China’s chocolate market — and will likely further fragment the chocolate spreads market. Hershey’s advertising budget certainly doesn’t hurt its cause either. In 2010, the chocolate maker spent $441 million in advertising, most of which went to television commercials. And just last year, Hershey planned to escalate its advertising budget by 20 percent. By having a quality chocolate spread product accompanied by the means to influence consumers to buy it, it may not be long before Hershey’s Spreads replace Nutella.

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