Have been looking into Hershey´s and other similar companies e.g. Nestle, Diageo and Pernod. These companies share some similarities: good historic performance as brand perception remained high, which enabled them to distribute there products widely. They pushed pricing as product desirability permited so and there was not a lot of pushback in terms of volumes. These companies built there models on years of investing in advertising. They benefited from the TV era as only the major companies were able to afford ads. This has obviously changed and we have seen the rise of smaller brands as they can reach consumers directly.

In the case of Hershey´s, they face some obvious headwinds. Volumes likely won´t grow (think in the past decade,organic volumes have increased by less than 1%/yr), and if they do, it will be minimal. Chocolate consumption in the US most likely won´t grow and it is reasonable to expect more competition from smaller brands. They have limited pricing power as there brands are not specialty or luxury. Also, they do not control the whole chain so they will receive pushback from customers (e.g. retailers or distributors). Brands like See´s have a completely different model as they sell directly to the consumer and their product is seen as a good gift or high quality. They should be able to push pricing for years to come.

In a world where there is no volume growth, end consumers are over time eating less of your product, distributors are pushing back with more strenght, competitors are able to reach customers with more ease and consumers willing to try other brands, how much is a traditional brand like Hershey´s worth. 20x earnings for 3% growth (at best)? Seems expensive. Probaly something like 12x might make it more interesting.

These companies also have some debt on them. In addition, over time they have done some big deals with little success. So reasonable to expect this might continue and not all fcf will end up in shareholder´s pockets.