Hershey cuts profit forecast, reports lower US sales due to growing income gap

Chocolate maker Hershey Co reported a lower-than-expected US sales Wednesday, cutting its profit forecast for 2015 due to the increasing gap among US households.

Reuters reported that Hershey is suffering this squeeze as consumers look for more expensive treats or simply tightening their belts. The chocolate maker of Kisses and Reese's peanut butter cups reported lower sales and profit forecast, bringing down its shares to 6.5 percent. It is the fifth consecutive quarter that the company cut its profit forecast. According to the company's executives the growing gap between the low income and high income earners in the US has changed the buying patterns of most their customers. Higher income earners look for premium more organic chocolate bars, while low earners look for discounted sweets.

According to Market Watch, Hershey reported a 31 percent drop in its third-quarter earnings. Its shares went down 2.5 percent to $92.01 during the pre-market trading.

Fox Business also reported that Hershey expected sales to be flat and only slightly higher this year. This is a decrease from its 1.5-2.5 percent growth that it forecasted in August.

Meanwhile, reports show that the numbers of consumers going to stores to buy sweets are declining. Retailers responded to this trend by cutting out spaces to promote chocolate products and other sweets like Hershey.

Hershey Chief Executive John P. Bilbery said, "We think the consumer bifurcation has been an important driver." He said the company secured space for its product for this coming holiday season and expected trends to go up before the end of the year.

Hershey is not the only company feeling the pressure of the US income gap. Various companies like Campbell Soup Co and Modelez International Inc are also suffering from the same trends. Some companies launched new products to cater to low-income consumers at dollar stores and convenience stores. Cadbury chocolates and Oreo cookies are introducing new sizes and prices for their products to keep up with the trend.