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Starbucks teams up with Hershey

The coffee purveyor hopes for better results than in its first dip into the chocolate aisle.

July 20, 2007|From the Associated Press

SEATTLE — Starbucks Corp., which has a bittersweet history mixing its coffee with chocolate, is trying again, this time with Hershey Co.

The world's largest specialty coffee retailer said Thursday that it would begin offering Starbucks-branded, coffee-flavored chocolate products in the fall under a deal with Hershey, which has been struggling to perk up flat sales.

Executives with both companies said they were eager to respond to customers' growing demand for premium chocolate.

"We've found that today consumers are looking, especially in the premium area, for different kinds of indulgences," said Tom Hernquist, a senior vice president and global chief growth officer at Hershey, the nation's largest candy maker. He noted that coffee-flavored chocolate treats had proved particularly popular.

The first product slated to hit U.S. retailers' shelves this fall would be a premium hot chocolate, though Hershey executives would not say whether it would be sold in powder or drink form.

Most other products, including chocolate bars, truffles and chocolate-covered coffee beans, are likely to be available early next year, said Chris Baldwin, president of Hershey's North American commercial group.

Starbucks may sell some of the confections in its stores, but hasn't decided which ones, said Gerry Lopez, president of Starbucks' global consumer products group. "It depends on the product," he said.

Financial terms of the agreement were not disclosed.

The last big move Starbucks made with chocolate wasn't so sweet. In late 2005, the company pulled its extraordinarily rich and thick Chantico drinkable chocolate off its menu.

Some customers complained that Chantico tasted like a melted chocolate bar. It had 390 calories per 6-ounce serving, 190 of them from fat.

The companies said "expert chocolatiers" with Hershey and Artisan Confections, a Hershey subsidiary, were working with Starbucks to develop the new line of coffee-flavored chocolate products, which could also include fruit, nuts, herbs and spices.

The companies also said they were developing cocoa sourcing guidelines aimed at improving labor standards, making farming practices ecologically sustainable and boosting income for farmers.

Hershey said Thursday that second-quarter profit dropped 96% to $3.6 billion as it spent heavily to begin transforming its production lines and improve sales.

Although it was pleased with revenue for dark and premium chocolates, the company said other products had sluggish sales, including a line of candy-coated miniature Hershey's Kisses and the Take5 chocolate bar made with pretzels, caramel and peanut butter.

Shares of Starbucks rose $1.21, or more than 4.5%, to $27.71, while Hershey shares fell $1.49, or nearly 3%, to $48.45.

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