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Mixed News From Hershey: Recession is Good - Closing Plants

Today, the Hershey company announced in an article in the Wall Street Journal (subscription required) that their "Profits Jumped 51% Amid Signs Consumers Are Trading Down but Not Giving Up Chocolate."

However, yesterday in an announcement reported in the San Francisco Gate that shocked many who live in the San Francisco Bay Area it was revealed that Hershey is planning to shutter BOTH the Scharffen Berger plant in Berkeley and the Joseph Schmidt plant in San Francisco.

From the article:

Hershey already makes the majority of its Scharffen Berger products in its newly upgraded plant in Robinson, Ill., said spokesman Kirk Saville from the chocolate giant's headquarters in Hershey, Pa. He said the plant closures will affect a total of about 150 employees from both facilities. Saville said Hershey intends to maintain the quality of the brands, which make up the company's wholly owned subsidiary, Artisan Confections Co. "We will continue to source the world's best cacao to create our rich and distinct chocolate," he said. "We will maintain the highest quality standard for all our artisan productions."

That provided little solace to Bay Area fans of the chocolate-makers. Both brands have created a strong legacy and helped increased the popularity of high-end, gourmet chocolates around the country.

What say you? Is this the beginning of the end for Artisan Confections Company brands? And what are your thoughts about how they are doing maintaining the quality of the brands?

From the Wall Street Journal article:

But, as with coffee, eating out, and apparel, the recession has consumers trading down with chocolate. Supermarket sales in the premium chocolate category in the fourth quarter were flat versus last year, Hershey Chief Executive David West told analysts Tuesday. Mr. West said he expects that to continue, adding that manufacturers have been making premium chocolates faster than consumers have been buying them and that retailers probably will devote less shelf space to them.

High-end chocolatiers have noticed. Katrina Markoff, president and founder of Chicago-based Vosges Haut-Chocolat, said sales slowed in the fourth quarter. People aren't splurging on offerings that cost $100 and up, she said, although sales of products in the $25-to-$50 range are growing.

Last Valentine's Day, she said, people spent an average of $75 to $80 on online orders; she thinks they will spend an average of just $50 this year. "People still want to have a little taste of luxury and decadence," she said.

At a Fannie May chocolate counter Tuesday in downtown Chicago, accountant Karen Martin said the recession hasn't dimmed her taste for chocolate -- but she is cutting back on price.

"I still indulge but not on huge items," she said. "When I want a really nice treat, I go out and buy it. It's like $2 -- maybe." Even thriftier, her friend Nora Wideikies snapped up four Santa Claus chocolates on sale for a dollar.

However, Jim Goldman, chief executive of Yildiz Holding's Godiva Chocolatier Inc., said he expects sales to grow. "One of our best-selling products this holiday season was the 'Ultimate Collection,' a $130 offering of the best of Godiva truffles, chocolate and biscuits," Mr. Goldman said in an interview. Lower-priced items also sold well during the winter holidays, and he said he expects strong Valentine sales.

Swiss chocolate maker Lindt & Sprüngli AG, maker of premium Lindt chocolates, reported a 5.8% sales increase in 2008, saying that was at the low end of its long-term goal of 6% to 8% annual sales growth.

"Considering the market conditions, this result is encouraging," the company said last week in a news release.

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Has there been any news about what's happening to the factory? I sure hope another chocolate maker moves in there! It's such a great space.
Good tip on Foodzie...thanks!


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