xx Friday, October 29, 1999

Trick-or-treaters beware

Computer woes hamper Hershey candy sales

 HERSHEY, Pa. (AP) -- Problems involving a new computer system have disrupted distribution of Hershey's chocolates, so some little ghosts and goblins will be disappointed -- or snacking on rival Mars bars -- come Halloween.

 And Santa might be next in line to be affected.

 Hershey Foods Corp., the nation's largest candymaker, announced a 16 percent drop in third-quarter earnings per share earlier this week. Hershey Chairman and Chief Executive Officer Kenneth L. Wolfe acknowledged that the company's distribution woes have led to lost sales and increased costs.

 He said the company had hoped to get customer service back to normal by the end of the month but that the goal would not be met. He said the company still expects to improve through the end of the year.

 He gave few details, but The Wall Street Journal reported today that spot shortages of Hershey's products have prompted many stores to replace their usual supplies of the company's candies with other brands.

 Sales have increased for rivals like Mars Inc. and Nestle USA without any special promotions to boost sales, the newspaper said. And some customers and industry analysts said they believe the problems could persist at least through Christmas.

 Callers to a Hershey's consumer phone line today were told the company is "doing everything possible to correct these temporary difficulties. We apologize for the inconvenience and appreciate your patience. You should be able to locate your favorite products in your stores soon."

 Hershey said it lost about one-tenth of a percentage point of its still-dominant market share in the four weeks ended Sept. 12, and retailers forecast a sharper drop for October, the Journal reported.

 Hershey spokesman John Long had no comment on the article, other than to refer to the earnings announcement, issued Monday.

 The company planned to bring its new, $112 million computer system online during a slow period in April but was forced to delay until July when development and testing were not completed, the newspaper reported. That's the month that retailers begin ordering for Halloween.

 In discussing the problem last month, the company said earnings for the entire fiscal year could be 8 percent to 10 percent below previous projections.

 "For a candy company to miss part of Halloween is not as bad as a toy company missing part of Christmas, but it's close," John M. McMillin, who follows the food industry for Prudential Securities, said at the time.