Thursday, November 29, 2007

Canadian Probe of Hershey for Involvement in Chocolate Price Fixing Will Not Melt Profits

An investigation is under way by Canada's consumer watchdog agency, the Competition Bureau, into allegations of price-fixing by the Canadian divisions of Hershey, Nestle, Cadbury and Mars, according to the Toronto Star.

The probe concerns allegations that the companies worked together to influence prices in the Canadian chocolate-bar business.

Canadians buy about $2.3 billion worth of chocolate and candy every year, according to the Confectionery Manufacturers Association of Canada.

Principal chocolate products manufactured and sold in Canada by The Hershey Company (HSY-$39.88) are HERSHEY’S milk bars and milk chocolate bars with almonds, OH HENRY! candy bars, REESE PEANUT BUTTER CUPS candy, HERSHEY’S KISSES, and WHOPPERS malted milk balls.

The Hershey Company derives less than 11% of its net sales from customers located outside the United States. Ergo, we doubt that any evidence uncovered of alleged anti-competitive practices in the Canadian chocolate confectionery trade will have much of an adverse material impact on the U.S.-based candy maker’s financial performance.

Editor David J. Phillips does not hold a position in any of the stocks mentioned in this article. The 10Q Detective has a Full Disclosure Policy.

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