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FOCUS-Computer glitch haunts Hershey's Halloween sales
(Updates; edits; adds comment from Kroger in 15th graf)
By David Morgan
PHILADELPHIA, Oct 29 (Reuters) - Halloween could turn out to be a real horror
story for Hershey Foods Corp. (NYSE:HSY - news), the leading U.S. candy maker,
whose distribution channels continue to be haunted by problems with a new
computer system, analysts say.
The maker of Hershey's chocolate bars and Kisses, Reese's Peanut Butter Cups,
Kit Kats and Twizzlers has not been able to get all of its Halloween inventory
onto store shelves soon enough to fill the plastic orange jack-o'-lanterns of
trick-or-treaters, who are expected to stalk American neighborhoods on Sunday
Analysts on Wall Street had expected the gremlin in Hershey's $112 million
order-and-distribution system to be exorcised by mid-October. But now they fear
lingering problems could jinx candy sales through Christmas and maybe even into
``This is serious stuff. The fourth quarter represents about 40 percent of
profits, and Hershey could lose $100 million in sales between back to school,
Halloween, Thanksgiving and Christmas,'' said Merrill * analyst Leonard
The Hershey, Pa.-based company had $4.44 billion in revenues last year.
Most serious is the potential for a 0.5 percent loss in U.S. market share to
privately held Mars Inc. and Nestle SA , as consumers who find store shelves
bare of Hershey products switch to rival brands.
Hershey, which has had no production problems, also must face the potential
costs posed by pallets of undelivered ``Cat 'O' Lantern'' milk chocolate
snacks, Reese's Peanut Butter ``Pumpkins'' and other seasonal goods marketed in
highly decorated holiday wrappers only at this time of year.
The company's computer system, which uses software from SAP AG and Siebel
Systems Inc. (NasdaqNM:SEBL - news), began operating in July. But it quickly
presented the 1,200-strong sales force with a steep learning curve. Managers
are now expected to have the upper hand by the first quarter of 2000.
Industry executives believe Hershey has not been able to fill orders at 100
percent and has resorted to flying some shipments out to keep relations sweet
with key customers such as Kmart Corp. (NYSE:KM - news) and Wal-Mart Stores
Inc. (NYSE:WMT - news).