Hershey's sales have dipped in the pandemic, but one bright spot has been e-commerce. Doug Straton, the candy maker's chief digital officer, said that the company's online sales growth has been "shocking," with penetration reaching double digits across several retailers practically overnight.
As the Hershey Co. — along with its competitors — gears up for Halloween, Business Insider caught up with Straton on how the company is doubling down on online shopping. Our conversation was edited for clarity.
Is e-commerce growing for you?
Absolutely. Where e-commerce is now as a percent of the overall business is where we thought it would be maybe in two, three years. It's just shocking how much the penetration has increased. Our hypothesis was the longer the pandemic has drawn out, the more locked in the behaviors become. We've got a couple of key retailers whose online penetration is in the mid-teens and is sticking.
Which retailers are these?
Walmart, Target, Kroger. Those that invested earlier than a lot of their retail competition and invested in more than one fulfillment model. So they might have a combination of click-and-collect delivery, ship from store, ship from fulfillment center, or all of those. Instacart is another one.
Does their growth come at the cost of other retailers like Amazon?
Amazon is clearly a major player, but they're not as well penetrated in online grocery. So if you have perishables, the advantage is actually with the big incumbents. They have temperature control; a model that's really winning right now, which is click-and-collect; and they can use their physical assets or their stores as a advantage. Amazon has Amazon Fresh, which is very competitive on delivery, but they don't have the ability beyond Whole Foods to leverage that physical footprint.
Are you spending more with the incumbents?
We're moving investments to areas that have the highest ROI. Where we're moving budgets from — it could be in-field or shopper marketing type budgets or national media budgets — doesn't really matter. The retailers are becoming more like media partners and media partners are trying to get a little bit more like retailers.
Are you spending more shopper marketing budgets online then?
It would vary by retailer. Those that are already putting more emphasis on their digital engagement, yeah. More of that shopper marketing budget is being pushed towards the digital component. But retail and brand budgets, whether shopper marketing or buying media on TV or Google or Facebook, what used to be two budgets is really more like one now.
Who are the winners and losers in this situation?
Traditional TV has been the net loser for a while. Digital has been the net beneficiary, because you can not only get a read on your media through traditional methods, but you can also get data on sales relative to spend. Retailers have also certainly benefited. Instacart, for example, provides delivery as a service, but because they also cover a couple of hundred meaningful retailers, can be a media partner. It's something that I think most manufacturers are recognizing and playing with.
Which retailers are a focus for you?
Kroger, Walmart, and Target have all grown inordinately fast, both in percentages and absolute dollars over the last year. Things were already moving in this direction. But the fact that we had a pandemic and you had at least three, four or five retailers, really set up to take advantage of it and scale very quickly really was a major advantage.
How are you testing these platforms?
We've been doing tests with good ROI with a number of different retailers like Walmart. We've been measuring how we get the return, both at the specific retailer, but also the halo effect because they have very good reach across the retail landscape. We're also changing the way we're driving media. So if you see a Hershey ad right now, through Facebook for example, you'll see a call to action and the ability to click the ad itself and it drives right into the basket. We're also seeing clickthrough rates with MikMak up into the 15% range, depending on the creative, which is extraordinary.
