2013 Proxy Statement and 2012 Annual Report
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Letters to Stockholders The Hershey Company Notice of 2013 Proxy Statement and Annual Meeting 2012 Annual Report and Proxy to Stockholders Statement March 19, 2013 To Our Stockholders: It is my pleasure to invite you to attend the 2013 Annual Meeting of Stockholders of The Hershey Company to be held at 10:00 a.m. Eastern Daylight Time on Tuesday, April 30, 2013. Business scheduled to be considered at the meeting includes (1) the election of ten directors, (2) ratification of the appointment of KPMG LLP as the Company’s independent auditors for 2013, and (3) a non-binding advisory 2012 Annual vote on approval of the Company’s executive compensation (say-on-pay). Management will review the Company’s 2012 performance and will be Report to available to respond to questions during the meeting. Stockholders The meeting will be held at GIANT Center, 550 West Hersheypark Drive, Hershey, Pennsylvania. Directions to GIANT Center are included with these materials. The doors to GIANT Center will open at 8:30 a.m. Please note the only entrance to the meeting will be at the front of GIANT Center. Seating will be in the arena seats and will require use of the stadium steps. There will be designated seating for those using wheelchairs or requiring special assistance. If you plan to attend the meeting, you will need an ADMISSION TICKET and a government-issued PHOTO IDENTIFICATION to gain admission. Any of the following items will serve as your ADMISSION TICKET: • The Notice of Internet Availability of Proxy Materials you received by mail, directing you to the website where proxy materials could be accessed; • The top half of your proxy card, if you received your proxy materials in paper form; •AnAdmission Ticket supplied by our Investor Relations Department upon your request if your proxy materials were delivered by email; or •Aletter from your broker, bank or other holder of record, or your most recent account statement, indicating that you were the beneficial owner of Hershey stock as of the record date, if your shares are held in street name. Please remember that, if you are a street-name holder and want to vote your shares at the meeting, you also will need to bring a legal proxy from your broker, bank or other holder of record. As in prior years, security measures will be in place at the annual meeting. We highly recommend you do not carry items such as handbags and packages to the meeting as all such items will be inspected. Weapons and sharp objects (such as pocketknives and scissors), cell phones, pagers, cameras and recording devices will not be permitted inside the meeting room. Please note that we will not distribute voting ballots during the meeting. If you plan to vote at the meeting, pick up a ballot at the Voting Booth upon your arrival and place it in one of the ballot boxes located near the Security Booth area or inside the meeting room, or submit your ballot to a meeting usher at the time designated during the meeting. We also invite you to visit HERSHEY’S CHOCOLATE WORLD visitors center on the day of the annual meeting. Please note that this year the visitors center will be open from 9:00 a.m. to 5:00 p.m. Once again, we are offering stockholders a special 25% discount on selected items. You will need to show your ADMISSION TICKET (in any of the forms described above) at HERSHEY’S CHOCOLATE WORLD to receive the special discount. To assure proper representation of your shares at the meeting, we encourage you to submit your voting instructions to the Company in advance by Internet, phone or mail. Please refer to our proxy materials for more information on how to vote your shares. I look forward to seeing you at the meeting. Regards, James E. Nevels Chairman of the Board of Directors John P. Bilbrey President and Chief Executive Officer March 19, 2013 Dear Stockholder, The Hershey Company continued its strong performance in 2012. Our financial and marketplace results demonstrate another good year for the company. We have the right strategies and long- term growth plans in place, and they are delivering solid results for our shareholders. I believe we are just starting to unlock the growth potential of our company. We reported record net sales in 2012 of $6,644,252,000, an increase of 9.3% versus a year ago. We also achieved another solid year of earnings per share – diluted (EPS) growth, giving us a double- digit EPS compound annual growth rate for the last five years. The consumer-centric business model that we have been executing against for the past five years has created a virtuous cycle that is delivering predictable, profitable and sustainable results. We’ve accelerated profitable organic sales growth, increased our leadership position in the U.S. marketplace, boosted margins and returns, and delivered record profitability. Our dedicated employees continue to execute our plans with excellence, enabling us to operate from a position of strength. Our strong results provide us with the financial resources to fuel investments in our growing international businesses. Our Canadian business delivered its best year in 2012. Net sales in Canada hit an all-time high and the Reese brand further solidified its lead as the No. 1 chocolate brand in Canada. In China, our Hershey’s Kisses and Hershey’s chocolate are helping to drive double-digit sales increases. Our team in Mexico continues to win with strong performance from the Hershey’s and Hershey’s Kisses brands. We overtook Mars in the Mexican food channel to become the No. 2 player. Pelon Pelo Rico also continued its winning streak with growth of nearly 25% in 2012. In Brazil, our growth was more than double the category’s growth. At current exchange rates, we expect net sales in our businesses outside of the U.S. and Canada to grow 15 to 20% in 2013, putting us on track to achieve close to $1 billion in net sales by the end of 2014. The U.S. CMG – candy, mint and gum – category continued its track record of solid growth in 2012 and was within its historical 3 to 4% growth rate. In 2012, Hershey’s retail takeaway outpaced the category and was up 5.7%, resulting in a market share gain of 0.6 points. In fact, we’ve gained market share in every channel in which we compete for two consecutive years. We take category leadership seriously and since 2009 have increased market share by 2.1 points. Our U.S. CMG market share is 30% and we have driven almost half of the category’s growth during the last three years. 2012 was another strong year for Hershey from a corporate social responsibility (CSR) perspective. We continue to distinguish the company as a CSR leader. We started the year with our announcement of Hershey’s Bliss chocolates certification and ended by committing to use 100% third-party certified cocoa in all of our products by 2020. In April, we released our second full CSR report, showing the progress we have made in supporting and implementing programs to protect the environment, support our communities, create a safe and desirable workplace, and demonstrate ethical business practices. Our efforts resulted in a number of recognitions and accolades from many significant stakeholders, including: • Bloomberg Civic 50 as one of the 50 most civic-minded companies, • Newsweek’s 2012 Green Ranking, moving up 172 spots from last year, • The prestigious Dow Jones Sustainability Index and one of only seven North American companies for the Food & Beverage category, and • The Sustainability Accounting Standards Board advisory council to help develop sustainability reporting standards for the food and beverage industry. Demonstrating our Hershey values strengthens our reputation and loyalty among the millions of consumers who love our products and expect nothing less from this great company. Looking ahead to 2013, I continue to feel good about the direction of our core U.S. business and the innovation, variety and excitement we are bringing to the category. We have strong products, promotions, programs and merchandising in place for all our channels. These include the launch of several innovative new products such as Kit Kat Minis, Twizzlers Bites and Jolly Rancher Bites. We’ll support these new products and programs with coordinated in-store programming, merchandising and advertising that we believe will drive trial, repeat and increased velocity. I’m also excited about the recent launch of our Brookside products into the food, drug and mass channels across the U.S. Brookside has proven to be a popular new addition to the confectionery landscape and we believe it will attract new consumers to the category. We will build on our success in 2013 and are confident we’ll drive core brand volume growth and increase market share in the U.S. and our key geographies. While the macroeconomic environment remains challenging, we are well positioned to succeed in the marketplace and deliver on our commitments in 2013. Our management team is confident in the company’s ability to deliver long-term value for all of our stockholders. Thank you for your continued support. John P. Bilbrey Safe Harbor Statement Please refer to the 2012 Annual Report to Stockholders that accompanies this letter for a discussion of Risk Factors that could cause future results to differ materially from the forward-looking statements, expectations and assumptions expressed or implied in this letter to stockholders or elsewhere. This letter to stockholders is not part of our proxy soliciting material. TABLE OF CONTENTS Page NOTICE OF ANNUAL MEETING OF STOCKHOLDERS ➞ PROXY STATEMENT 1 ➞ Information about the Annual Meeting and Voting ..................................