At this time, I would like to welcome everyone to the Hershey Company third quarter 2009 results conference call. (Operator Instructions) You may begin the conference.

My name is Mark Pogharian. I head the Investor Relations group at the Hershey Company. We welcome all of you on the call today for Hershey's third quarter 2009 conference call. David West, President and CEO, Bert Alfonso, Senior Vice President and CFO, and I, will represent Hershey on this morning’s call. We also welcome those of you listening in via the Web cast. Let me remind everyone listening that today’s conference call may contain statements, which are forward-looking. These statements are based on current expectations, which are subject to risk and uncertainty. Actual results may vary materially from those contained in the forward-looking statements because of factors such as those listed in this morning’s press release and in our 10-K for 2008 filed with the SEC. If you have not seen the press release, a copy is posted on our corporate Web site www.hersheys.com in the Investor Relations section. Included in the press release are consolidated balance sheets and the summary of consolidated statements of income prepared in accordance with GAAP, as well as our pro forma summary of consolidated statements of income quantitatively reconciled to GAAP. As we’ve said in the press release, the company uses these non-GAAP measures as key metrics for evaluating performance internally. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP; rather, the company believes the presentation of earnings excluding certain items provides additional information to investors to facilitate the comparison of past and present operations. We will discuss our third quarter 2009 results excluding net pre-tax charges. The majority of charges in both 2009 and 2008 are associated with the Global Supply Chain Transformation Program. These pre-tax charges were $11.0 million and $31.0 million in the third quarters of 2009 and 2008. Our discussion of any future projections will also exclude the impact of net charges related to these business realignment initiatives. Lastly, over the last two months or so there have been numerous unconfirmed media stories related to the Hershey and confectionary industry consolidation. Per Hershey Company policy, we will not comment on, or address, these speculative stories during today's question and answer session, nor will we discuss any other potential industry M&A matters. With all of that behind us, let me turn the call over to Dave West.

Good morning everybody. I am pleased with Hershey's third quarter results. Net sales were in line with our expectations, as we are lapping the impact of last year's buy-in and our decision in the second quarter of 2009 to discontinue Starbuck's and Cacao Reserve. Excluding these items, third quarter net sales would have been about in line with retail takeaway. From a profitability perspective, earnings came in a bit better than our expectations. Our overall commodity cost profile was higher this quarter than in 2008. However, similar to the first half of the year, dairy prices did not materially increase versus our estimate and volume elasticity in the convenience store channel was better than our original forecast. In terms of Hershey's marketplace performance, total candy, mint, and gum, or CMG, retail consumer takeaway, for the 12 weeks ending October 3 and the year-to-date periods, per our custom database, in channels that account for over 80% of our retail business, was up a strong 4.8% and 7.8% respectively. As a reminder, these channels include food, drug, mass, mass here including Walmart, and convenience stores. This is higher than the SMEX stated that most of you received from IRI or Nielsen. While an important part of our business, SMEX captures only about half of our retail takeaway and excludes one of our larger mass customers, as well as c-stores, our most profitable channel. Within food, drug, mass, excluding Walmart and convenience, or FDMXC, the category also continues to grow. Year-to-date CMG is up 4.5% in the measured channels, greater than the historical growth rate of about 3% to 4%. In the third quarter CMG was up 2.7%. Again, this is excluding Walmart. As we look to 2010 we would expect historical growth rates to prevail in the category, although the underlying drivers…

Third quarter consolidated net sales of $1.484 billion was slightly down versus the prior year by minus 0.4% and in line with our expectations. Adjusted earnings per share diluted of $0.73 increased 14% year-over-year. This was primarily due to price realization, better than expected volume trends versus our original estimates within convenience store and [inaudible] and supply chain efficiencies and productivity. There were a lot of moving parts in the third quarter sales figure but before I get into the details, let me remind you that in the year-ago period sales increased 6.4%, including about 2% from the buy-in related to the August 2008 price increase. Third quarter 2009 gains were realized from U.S. price realization, partially offset by volume declines driven by pricing elasticity, unfavorable foreign currency exchange of about 1 point and previously communicated 2009 mid-year actions to discontinue the Starbucks and Cacao Reserve product lines. During the third quarter, adjusted operating gross margin increased 480 basis points, driven by net price realization, supply chain efficiencies, and productivity savings. These margin gains more than offset higher input costs of about 175 basis points, primarily reflecting total consolidated cost increases for raw materials. In addition, higher employee benefit costs, including pension expense for our manufacturing facilities, also reduced gross margin in the third quarter. Our year-over-year commodity cost impact was significant, however, similar to the first half of the year, the impact in the third quarter was less than we originally expected, primarily due to lower dairy costs. At this point in the year, we have good visibility in for our dairy needs at spot market prices and do not expect material dairy price inflation in the fourth quarter. Also in the fourth quarter we are cycling the decline of dairy prices which started in the year-ago period, therefore…

(Operator Instructions) Your first question comes from Vincent Andrews - Morgan Stanley.

Wondering, just looking a little bit forward to 2010, if you could give us some color on the breakdown of the 3% to 5% top-line growth.

As we look ahead to 2010, as we said, we will continue to work to invest in the brand and the capabilities so that we can continue to convert consumers to the higher price points. We have a carry-over effect from the price increase that was announced in August of 2008 and so that will continue through Valentines and Easter and then we have a little bit less of an FX headwind but the category has traditionally, historically grown at 3% to 4% levels. The drivers differ by year. We would expect it to be pretty consistent with that but the most important thing for us is we will continue to invest in conversion. So far we have been pretty much on track with our estimates in terms of how the consumer is going to react. So as we look to next year we will get a little bit of carry-over pricing in the seasonal period. We will read the effect the consumer has in Halloween and holiday and continue to roll forward with any adjustments that are necessary there, but next year is really about continuing to invest in brands and capabilities.

It looks like dairy turns inflationary for you in January. One, is that correct? And two, do you feel like you will need to take any pricing to deal with that our will you be able to use internal cost productivity to offset that?

We are not going to address pricing per se. What I would say, consistent with my comments earlier, is that you are right about—in the fourth quarter of this year we will start to have a more comparable dairy cost. And so we expect less of a positive impact on the fourth quarter. As we get into next year we will see how dairy prices act in the marketplace. But they will be more similar to the previous year.

Your next question comes from Alexia Howard – Sanford C. Bernstein. Alexia Howard – Sanford C. Bernstein: Just building on Vincent's question on the commodities side, we've obviously just seen cocoa prices hit historic highs in the December futures. I know you have hedged out quite a way on cocoa, but what does the commodity cost outlook look like for next year, given the recent increases in cocoa and sugar prices?

We look at it more in terms of the cost basket, although you are quite right, commodity costs are important to us and we monitor them closely. And at any particular point, depending on where we see value in the market, we do obviously take part in the forward market, with the exception of dairy, where there is not a ready forward market. I would tell you that next year we have a set we are planning on. We do have some additional savings from our Global Supply Chain Transformation, which will continue into next year, and certainly we are expecting top-line growth to help us in that regard. So right now we are looking at the cost factor in totality, commodities plus the other things that we are doing. The other thing I would add is that within our manufacturing footprint, now that we've largely completed that, we are seeing other opportunities that we did not necessarily include in the initial savings numbers, on the procurement side and taking advantage of the more streamlined footprint that we have. So we are still targeting 6% to 8% next year, within the outlook that we have, taking into account commodities and the rest of the costs. Alexia Howard – Sanford C. Bernstein: And just another quick follow-up. You mentioned that the timing of Easter shipments is going to be a bit lower in the fourth quarter. Did that benefit you in the third quarter this time around, or was there something strange going on with the timing on that?

As we look out in the fourth quarter, Valentines and Easter shipments, which normally have occurred either in the fourth quarter or the first quarter, there's just more of them in the first quarter of next year, so we have actually had some volume that would normally have moved in December, it's just basically sitting on the edge of January and December and now it looks like it's going to move in the first quarter of next year instead of the fourth quarter of this year.

Your next question comes from Robert Moskow – Credit Suisse. Robert Moskow – Credit Suisse: Could you talk a little bit about your comments about 2010? You said that it's still a difficult economic environment out there. Have you seen any changes recently in how retailers are thinking about seasonal categories, what kind of buy-in they're prepared to do? I read in a trade magazine that Halloween was actually expected to be down 10% category-wide, perhaps because of the higher pricing or just because retailers are just concerned about taking on too much inventory. Can you talk a little bit about that?

Yes, I think we continue to see that the consumer is challenged and there is some channel shifting, more oriented toward value channels. There are fewer trips to the store and what we are seeing is a shift towards more eating at home and some more stock-up trips that are more oriented around the time of pay checks and government checks, etc. With respect to the seasons, you have to put in perspective that included in anything that you see as a Halloween category seasonal buy is anything—it's candies included in that, but you're going to see costumes, novelties, any plastic pumpkins, crepe paper, paper plates, all of those things wind up in that seasonal die. And there are going to be some higher price-point items, I think, outside of candy that are probably going to suffer somewhat in this kind of economy. And very expensive costumes, etc. probably would. So I will talk about our business for Halloween. I think we are pleased with the Halloween sell-in. We think we had a good sell-in and at this point sell-through is about where we would expect it to be and obviously the biggest for us in the Halloween season is higher promoted price points and how the consumer is adapting. And at this point in time, as I said, we are pretty much on track. But I think the one thing economy is doing is creating a little bit more seasonal compression as consumers are watching their dollars more closely and they tend to be spending them a little later in the season. Robert Moskow – Credit Suisse: And maybe, Dave, you could talk a little more broadly about in the U.S. specifically, because that's really where you compete. You have Wrigley and Mars combining and integrating and now you have the possibility of a Kraft/Cadbury combination. What are you seeing out, in terms of execution, as a result of the Wrigley/Mars combination? Are you seeing anything different about how they go to market and has it made life any tougher? Because your market share is up this year so it doesn't sound like it's made life tougher yet.

I think actually in terms of the marketplace landscape, the bigger impacts, and the biggest impacts, are really macroeconomic. It's the input prices and results and need for all of us to deal with our margin structures as consumer sentiment is channel shifting. Those are, I think, the big macroeconomics, those are the things that are driving the category right now. Obviously we continue to monitor competitors and we have a healthy respect for what has always been a very good competitive category with very strong brands. We continue to come back to what our strengths are in our U.S. market, which is category leadership. You know, retail execution. Our ability, in terms of getting to scale in terms of technology and input costs and we continue to focus on those things. We think those are enduring competitive advantages for us and we're, as we said, in the second half of this year we made some investments to make sure that those competitive advantages become ever more compelling for our customers and consumers as we go out into the market. And so right now I think we're gaining share. I think the biggest thing that we're all dealing with is the macroeconomic environment as well.

Your next question comes from Terry Bivens - J.P. Morgan.

Two questions. First of all, you know you are taking all of the fun out of the call by not commenting on M&A, right?

[Slight laugh.] That was our intent.

Two things, just on the Bliss thing. And I know we sometimes go back and forth on the numbers, but as we look at it, it looks as though the Bliss Bag is not performing maybe as well as you might have hoped so far. So I guess what I'm wondering is, as you look into the Halloween season and the holiday seasons beyond that, do you think that—is it your opinion now that the higher promotional pricing is going to hold or are you beginning to think that maybe there is going to need to be a little more promotional moneys applied?

At this point, with respect to Halloween, we are seeing, when we look in the IRI data, the latest period 10/03, we haven't really seen a whole lot of the effect of that yet. You are seeing, obviously, higher price points when you read the data. So that's what's happening at retail is the price points are higher and we would expect that to be the case throughout the season as well as into holiday, and then through Valentines and Easter. I think it's a little slower start to the season than normally would happen because Labor Day was as late as it could possibly be so I think it's probably got set about a week later than they normally would. So when you look into the 10/3 data, I think it's really hard to read that data. But when you look at the prices per unit, they are significantly higher, which is what we would expect.

And the real acid test is really probably to come home this Saturday of Halloween, right? When a lot of people are going to buy.

I think it actually goes beyond that. It really is—Halloween is a destination, family-oriented, more of a give-away. When we get to holiday, again, it's a little bit of a different consumer and usage occasion and then when we get to Valentine's Day, it's a purchase for—by adults for adults. So we are going to learn a lot over the next three seasonal windows, all the way out through Valentine's Day. And I think what we're seeing is that as we look at IRI, all of the major manufacturers are recognizing higher prices in the 10/3 window.

On Bliss, we've noticed as we've moved through the year that it does appear whenever Bliss is up, Kisses seems to be down and vice versa. Are you looking at cannibalization between those two product lines?

I'm not going to specifically talk about what we think cannibalizes what. But we do watch cannibalization and what I think you will see is at the way we're promoting right now, Bliss tends to be promoted in a different window than Kisses is promoted. And so they are in different windows of promotion. So they are separate and they have been separate in terms of what they are promoted with and what the price points are. So in any case, on any of the items that we look at launching, we always look at cannibalization. When you have a market share in chocolate or in packaged candy in the 40% share range, you are likely to cannibalize yourself on some level and we always look at our own brand interaction.

Your next question comes from David Palmer – UBS.

Just a question on Bliss, a follow-up there. Could you give us a sense on any repeat metrics on Bliss? The reason we ask is, as you know, the confectionary space has had a fairly sketchy track record on year two on some strong starts and new products. And if the repeat levels are good and you can't really share exact numbers, maybe you can compare the type of repeat you are seeing to some other examples of past products to give us a sense.

A couple of things I will tell you on Bliss. Our trial and our repeat rates are tracking to what we would have initially modeled. That's absolutely the case. We have invested in Bliss in year two. We have continued to support it. We actually have more year-two support on Bliss than we did in year one. We will continue to support Bliss as we look forward into 2010, as well. I think, obviously, one of the things that certainly is a factor is the premium in trade-up spaces have been somewhat compressed from a space standpoint. That's where Bliss plays. And obviously at a slightly higher price point. One of the questions around Bliss is obviously going to be around the level of merchandising activity. But as we think about the brand health trial, repeat, consumer impression, all of those things, and consumer feedback, we always track likes and dislikes and consumer complaint ratios, all of those seem to be in line with where we would like to be. We continue to remain confident in the brand in the future and we are going to continue to invest in it. Obviously we are launching a trade-up brand into a more difficult economic environment so it may take a little more time to get to traction but we're feeling pretty good about where we are.

It sort of sounds like the trial is more of the struggle there than the repeat. Is there some sort of an analogous product that you can compare Bliss to at this point, in terms of how it's going?

Again, trial and repeat are where we thought they would be. I think what I would say is there is probably not another product that is analogous for us because this is by far the most significant year-two and year-three investment we will put in any brand so I don't think there is anything else in the portfolio that we have, frankly, supported in this way. So it kind of stands alone. It's tracking to the internal metrics and as I said, given some of the price point and pressure and trade-up, in the trade-up space, you know, merchandising has probably not been what we would have like it to have been, but that's true for all the trade-up brands, not just for Bliss.

What are you thinking about potential restructuring charges for 2010? Any rough sense there? And would you remind us if you're thinking that 2011 will be restructuring-charge-free or not?

In terms of the Global Supply Chain Transformation, I had mentioned that it is in the final stages. And so while there will be some charges next year, and potentially some pension settlement charges, they certainly will be at the lower end compared to the previous two years. So by 2011, certainly related to the Global Supply Chain Transformation, there will not be charges.

Any sort of rough brackets around what that number might be for next year?

For 2010?

Yes.

I think our costs this year are going to track close to around the $600.0 million mark. And the total project cost, which I mentioned, would be $640.0 million to $665.0 million. But again, that has a lot to do with the level of pension settlement charges and there is a threshold accounting that goes with that, so it's a number that really depends on the lump sum distributions that are made, and that's the election of the folks that are leaving the company. So it's more of a range. So you could think of it as $600.0 million this year and somewhere around $50.0 million next year. Incremental.

I think it's about $603.0 million year-to-date and as Bert referenced, there will be some pension settlement in the fourth quarter to push that number up maybe closer to the $620.0 million range. So it doesn't leave much left for next year.

Your next question comes from David Driscoll – Citi Investment Research. David Driscoll – Citi Investment Research: No one else seems to be acknowledging it but I will, you guys really have done a great job turning the ship around here and this performance is remarkable. A number of questions. Dave, on the big picture thesis here, I continue to feel like folks are missing the forest here through the trees. What should the operating margin be at Hershey? You ended 2008 at 15%. We are seeing enormous margin increases on both the gross and operating margin side. I want to argue a high-teens operating margin is a very respectable and reasonable place for Hershey to ultimately get to. Would you agree with that basic framework?

I'm not going to give you an exact target because we typically don't forecast gross margin. Certainly we are very pleased with the quarter, where gross margin expanded 480 basis points and 290 year-to-date. When you think about the fourth quarter, I mentioned that dairy would not be as favorable, year-on-year, simply because of we are lapping the lower prices. We do expect gross margin expansion in the fourth quarter. Not at the level that we achieved in Q3. And as you look forward into next year, we're still tumbling the numbers, but our objective is to continue to be able to improve gross margin.

I think if you look at the—if you imply 6% to 8% long-term growth going forward I think you can model it out. What we think about it from a macro sense is we've been very pleased this year on two different fronts. We have gotten the gross margin expansion that we felt we needed to get in the P&L, given our input costs, so the Global Supply Chain savings and the pricing have certainly flowed through to the gross margin line and we're very pleased with that. Also, the important thing is we have had reasonably good earnings per share growth this year, in 2009, and we have at the same time been able to deliver a 50% increase in our advertising. And so I think that what we're doing is we've really gotten our P&L model totally shifted around here in terms of gross margin and then the ability for that gross margins to fund investments. So as I think as you leave, that's the macro statement I would make, is that we have been able to get the gross margins up as we needed to but also then been able to reinvest. So we are pleased with that model. And then as we go forward, if you look at the long-term growth, the long-term growth model, you can kind of imply where the EBIT margin goes. David Driscoll – Citi Investment Research: On the 2010 commodity outlook there were specific questions on cocoa and specific questions on dairy. You often give a more comprehensive comment when you talk about the visibility of your cost structure. Can you give us that comment for 2010 and can you say whether or not you have good visibility into the cost structure for 2010, at this point?

I'm not sure when in the year we typically do that, I think it's a little earlier than normal. What I would say is that, again, we look at it more as a cost basket. We look at our savings programs and our productivity programs, along with the increases that we expect and outside from dairy, we do have some forward cover employed, depending on where we see value in the market. I'm not going to comment specifically on cocoa or any of the other commodities but what I think we do feel that we can acknowledge right now is that the 3% to 5% and 6% to 8% for next year is certainly achievable with our plans at this point. David Driscoll – Citi Investment Research: For the quarter, I estimate that pricing was something around 13%, give or take. I know you don't like to comment on this exactly, but because these numbers are so large, can you just tell me whether or not I've got it in the right ballpark?

It was low-single digits. David Driscoll – Citi Investment Research: Pricing?

Low-double digits. Sorry. David Driscoll – Citi Investment Research: That was going to be a double and triple take if that was right.

Your next question comes from Eric Serotta – Consumer Edge Research. Eric Serotta – Consumer Edge Research: I wanted to drill into the third quarter gross margin in a little bit more detail. Obviously, you had a very nice benefit from that low-double-digit price increase. You also have 175 or so basis point headwind from the commodities that you mentioned. Could you help me bridge the year-over-year delta a bit? It would seem that there was a real step change that occurred this quarter. You have been realizing high-single- to low-double-digit pricing increases year-over-year over the past two quarters. Was there a step change in terms of the Global Supply Chain cost savings, the ramp up of production in Mexico? Anything like that that would help explain the really outsized gross margin gains this quarter relative to the past few?

I would say that our performance in supply chain overall was quite good, not just the Global Supply Chain Transformation Program . Although, we said it earlier in the year and continue to see it, that our Global Supply Chain Transformation Program savings were toward the back half of the year. And that was just the timing of the plants. The last couple of plants that we closed happened to be toward the end of last year. And so we are seeing the benefit, year-on-year, at this time of the year. So that combined with what I would say is also very good performance, in just overall productivity within our supply chain is what was making the difference. Eric Serotta – Consumer Edge Research: It seems to be just a very large difference when you factor in the commodity headwinds and the like, so it sounds like you're doing a lot of good work there. Dave, you mentioned that the one channel that's been disappointing has been the drug channel, and if I remember correctly you talked about both category weakness and share loss there. Could you give come insight into what you think is going on in that channel and why your performance in that channel is different from your performance in other channels.

What I would ask you to do is kind of reflect back to 2004, 2005, and 2006, and the business model that we are going to market with was actually hugely successful in working with the drug retailers. And we had some extremely good performance, some really strong share gains and it was really around the levels of innovation and some of the expansions we had made from a category management standpoint. As we have kind of reshifted our model, and our model is much more about focusing back on cored SKUs, taking out a lot of limited editions and some of the variance, and then also really shifting our focus more to consumer and pull versus some of the push initiatives that we had in 2004, 2005, and 2006, that strategy has not worked as well for us with the drug customers. And so these are really important customers, they are large customers for us, we have enjoyed very long-standing and valued relationships with them and we are working really hard with them to make sure that our kind of go-to-market and business strategies are more aligned. And clearly, we haven't quite hit the right stride with them yet, with respect to some of the price increases and other things that we're doing from a consumer standpoint. We're working really hard with them, to make sure that it's right. Because as I said, we have great long-standing relationships with them and drug is such a large part of the category, and so we are working with them. To go any further than that would be inappropriate in terms of the specifics of each customer's relationship. Eric Serotta – Consumer Edge Research: Just to ask you one more question on the subject, not at the customer level, but it seems like some of the things that you mentioned, in terms of the focus on the core brands, the shift from a push to a pull model have been in place for the past year and a half or so. Is this weakness in the drug class of trade new to this quarter or was it new to the third quarter or is it something you've been seeing but you're really only just calling it out this quarter?

It's actually been exacerbated in this quarter but it's not new to our performance, it's just gotten a little worse in the third quarter and into the fourth quarter and I think a lot of that is around price increase and some of the seasonal executions. And I'm not sure that our go-to-market strategy exactly lines up 100% with what they're doing, and we need to make sure that we figure out how to make that work.

Your next question comes from Eric Katzman - Deutsche Bank.

I'm not sure what Dave Driscoll is having for breakfast but I hope I can get some, because I just don't view your top line as being nearly good as he is. Your profitability was excellent but if your pricing was up 10+% and your currency was a negative one, does that imply that your volumes were down close to double digit?

If you do the math you have to also remember there was a 2% to 3% buy-in that we are cycling from the year ago. So you have to adjust for that factor, as well. So I think when you make the adjustments for those kind of one-off items as well as the discontinued items in premium and trade-up with Cacao Reserve Starbucks, overall we tracked pretty close to the takeaway numbers that we mentioned in terms of the category. And given the significance of the price increase, we would expect to have unit fall-off. And as I said, that's not a surprise to us. We've been talking about this since the beginning of the year that as we got into the third and fourth quarters that that would happen. And as we've said, we're pretty much in line, if not a little bit ahead, of what we thought unit progression would be.

Okay, so let's say volumes are down 5% to 6%. I've also heard that you did a really good job on Halloween versus competition. So I would say in some points of execution you are outperforming. And yet with 50% of boost in advertising, the volumes are still down so much? What would volumes have been if your advertising was only up 25%, which is a big number?

Again, we have invested in the consumer in advertising, merchandising, and at retail, to make sure that consumers have every vehicle at their disposal and we are top of mind as we convert to higher price points. We took a 10% to 11% list price increase and actually had promoted volume in the volume in the category moves promoted. Those price increases are 20% to 25%. So when you model the elasticity, on some level you are really modeling against the 20% to 25% price increase, not a 10% or 11% price increase. So we have actually taken our revenue outlook up as we have gone through the year. We started the year with 2% to 3% as our revenue target. Now we are back into the range of 3% to 5% and that really is a signal, I think, that we are progressing through the price increase in the unit conversion a little better than we thought we would be. So we are not surprised about where we are. We have done, I think, a good job at retail and we've been fortunate to get our margins in line with some good supply chain productivity and reinvested in the brands in the businesses. So this is the strategy that we started the year on and it's playing out as we would have expected it to play out.

I'm not going to argue on the gross margin and the profitability side. You have done a great job there and I'm sure focusing on the core brands has helped a lot. But I'm sorry, I just don't see that even with all the pricing, the volume versus the amount of advertising that you've put into the business, which I think is the right thing to do, especially given the competitive set and what's changing in terms of the environment, I'm just a little surprised that the relationship there is what it is. Next question, it seems to me that the whole kind of effort by the company over the last few years in premium has really struggled. You mentioned that the online business, which I assume was planned to be a higher margin business, that you shut that down. We know about Starbuck and the Cacao Reserve. What do you think it is about the brands or the efforts of the company so far that's prevented it from really doing well in the more premium priced business? And how do you have to change that in order that when the economy comes back that you are positioned for that move?

We are doing what we feel is appropriate to be positioned for what we think will ultimately be a return on some level to more trade-up in premium products. We have done a lot of consumer research. We have done a consumer landscape and we have a much better understanding of what the consumer wants and what the need states are within those different segments. We think that what we missed, some of it we just missed the timing with respect to Cacao Reserve and Starbucks, but frankly, we didn't have as good a consumer proposition as we should have had. And I think what we're doing right now, we have Scharffen Berger, which we think is well positioned in premium. We have Bliss, which we are pleased with Bliss' traction in trade-up, so the initiatives we are currently investing behind, we feel good about. It's just not a large growth driver of the category now and as it becomes one, we think we are going to be much better positioned to participate there, and it really comes back to the consumer insight and then the execution. We have learned along the way from what didn't work in the past, as well as what is currently working for us and I think we will be better positioned when the right time comes.

Your next question comes from Kenneth Zaslow – BMO Capital Markets. Kenneth Zaslow – BMO Capital Markets: I am going to the same point in general, when I look at your long-term guidance of 6% to 8%, the 6% is the number that kind of strikes me as a little bit on the lower side. Why—if you kind of set it 7% to 9% or something like, it seems like that would be more structurally correct with how your business is set up, your growth algorithm. Why do you think that the lower side of that, the 6% to 7% part of it is appropriate for a company like Hershey, given you're spending behind the advertising, you're doing the right things in terms of your brand focus. Why so low on the 6%, I keep on coming back to that point.

We set those ranges back in the middle of 2007—I'm sorry, the middle of 2008. In the first year, which is obviously 2009, we're going to be above them. But we think over the long term, given the economic situation that all categories are currently facing, and what we're doing from a business model standpoint, we think that 3% to 5%, 6% to 8% is a long-term good place to be. Some years we're going to be above that. In 2008 we were below it. So there are going to be pluses and minuses along the way but when we look at 3% to 5% and then the implied margin to 6% to 8%, we think that that's appropriate and it allows us the room to invest in the brands in the category the way we need to. So I think we're comfortable sitting with that long-term guidance and I think more importantly, what needs in this economic times with everything going on in our category, as we look at 2010 we feel good about those numbers. Kenneth Zaslow – BMO Capital Markets: Do you think there is something structurally different in your categories or your business models than some of the other packaged food companies that kind of signal more to the high-single-digit rates?

I think we have structurally a good strong solid category. I think it's an impulse-driven category. It's also got expandable consumption in it. It actually has very good margins for both us and for the retailers. And so we feel very good about our category. We think it's an advantage category and as I said, the long-term guidance is something that we set in the middle of 2008 and we think it's appropriate to leave it sit, especially given where the economy in the world is right now. Kenneth Zaslow – BMO Capital Markets: I know private label is not a big influence on your category. With the economy changing, with consumers trading down, do you think that there is a possibility that private label could become a bigger force within your categories, or still you're not seeing any sort of indications of that?

There is private label in the category. There always has been. It's about 3% or so of the category. Between 3% and 4%. Much higher in the sugar, non-chocolate aspect of it where I think the availability to source those items is probably a little more readily available. In chocolate it's lower than that 3% to 3.5%. Clearly where private label tends to find its way into the categories is where the price value equation goes tilt. We don't think we have that issue because confections continues to be a very, on an individual unit basis, a very approachable price point, and it's a category where brands are key, where there are a lot of good strong brands, and frankly, where taste is the driver in every purchase decision. So we think that we're very conscious of, obviously continuing to provide the appropriate price/value equation. From time to time you will see retailers experiment with store brand confections. To date, we haven't seen anything really stick in the chocolate segment, with respect to that, but we constantly monitor it and make sure our price value equation works with consumers.

Your next question comes from Christine McCracken - Cleveland Research.

When we look at the retail channel generally, it seems to be becoming much more competitive. You see a lot of the larger retailers going after pretty aggressive promotions, across the board, channel by channel and I'm wondering, given maybe some of your commodity trends you may not be as well positioned to participate in that competition. I'm just wondering, are you getting pressure from the retail channel, at all, to kind of step up in terms of these promotions? Maybe you can give us a little more color around the competitive set there as we see competition and maybe some price wars breaking out.

I think what's unique an actually gives our category a lot of strength with retailers is the strength it has with consumers. I mean, our category at Valentine's, Easter, Halloween, holiday, is a destination category for consumers. Consumers expect to see us merchandise. Retailers also know that it is an expandable consumption point at the holiday periods. We have also added Smores and some other things that I think there is a reason for us to be merchandised, almost a necessity for us to be merchandised, and it's a category that has merchandising intensity and our merchandising frequency this year, frankly, has not suffered at all, even despite higher price points. So we are still getting the merchandising frequency we would expect. I think the other thing that our category has is that it is so multi-channeled. We are not totally focused in any one given channel for all of our volumes. So we have the ability to program specific to customer and channel needs and so I think that also gives us some flexibility in the way we go to market. So I think, right now, the category growth rate this year, year-to-date, all in has been very good. I think retailers have been pleased with the category growth rate. And so our strategy so far is playing out about as we had expected and we are still getting the merchandising frequency that we would have anticipated on the lay-in. So overall I think we are pleased with the strategy and how it's played out at retail.

Just a follow-up on an earlier question. On sugar, as you have moved some of your production to Mexico, and given some of the differences in sugar costs in Mexico, does that affect at all your production plans relative to that particular shift, or has that impacted your overall cost benefit analysis, when you look at Mexico versus the U.S.

The U.S. market is regulated. We know that sugar prices are high, lower prices in Mexico, which is the case today, would impact our Mexican business. Our Mexico [feedback in audio] the U.S. are different. The [feedback in audio] are different, so it's not the way you're thinking about it.

Your next question comes from Bryan Spillane - Bank of America-Merrill Lynch.

Just a clarification on cost of goods sold and gross margins for 2009. I think you articulated before that you expected cost of goods to be less than $175.0 million this year. Is there any change to what you're expecting for the full year? And is there an aggregate number?

We really haven't given a number. We have said that it's below the $175.0 million and we started to say that right around the first quarter. The dairy costs have remained a bit lower. That will be more equalized in the fourth quarter. And so we are not providing a specific number. But yes, it's right around where we thought we would be at the last call.

If I remembered it right, in the second quarter you had made an adjustment to your standard cost forecast for dairy, which caused you to have a catch-up accrual in the quarter. Did the same thing happen in the third quarter?

No, it did not.

Your next question comes from Andrew Lazar- Barclays Capital.

With some of the supply chain savings from the restructuring project starting to come through and in a bigger chunk this year, as we look forward, can I still think it's reasonable to try and get a better sense of maybe what the sort of ongoing productivity plan looks like? A lot of companies in the space sort of have various metrics that they will put out there, whether it's reduction in cost of goods incrementally every year, either as a percent of cost of goods or as a percent of sales. And you mentioned some additional cost-saving opportunities beyond the program itself, going forward. I'm just trying to get a sense of how robust do you think that plan is. Is there a way to sort of quantify the ongoing every year? And will some of these incremental programs or opportunities that you've highlighted, are those things that take investments up front, that you're going to absorb into the P&L going forward, or are those additional restructuring charges?

I think what I would tell you is that we continue to focus on productivity within the existing facilities, within the four walls of the existing facilities. And that's what any good supply chain organization does when—they know that they need to, at a minimum, offset their inflation with good basic kind of four-walls productivity, if you will. And that's no different for us. We have had the Global Supply Chain Transformation Program over the last couple of years which has given us a step up in that productivity. As we exit 2009 and head to 2010, we will see a little bit more incremental savings up from the Global Supply Chain Transformation Program in 2010 but I think what Bert referenced earlier is now that you get to the point where you focused on creating the new footprint, closing six facilities and opening a brand new one, we are now at that place where you then start to take a look at how you—if you will—how you work in that new network. So it's how do you source and supply to it and how do you ship and deploy from it. And so there is an awful lot of upstream and downstream savings in procurement and logistics, in customer service, that once you now work your way into the footprint, you can go get those savings. And I think what's very encouraging for us is you are already seeing it show up in our working capital trends. Our inventory trends have consistently come down as we have built the new network and we will start to take advantage of the improvements in inventory and some of those improvements in terms of the new footprint, both in terms of the way we source and procure and the way we deploy out the back-end. Part of the investment we've talked about making in the second half of the year here was some one-time costs associated with looking at some of those initiatives on both the front end and back-end of the supply chain. So you've already seen us, or will see us, through the third and fourth quarter, incur some of that cost to start to get to those savings in 2010 and 2011.

Some of the things that you're doing around long-term investments, consumer capabilities, customer insights, and category management, are those things that, as you benchmark, where Hershey is sort of, as you would think about it, catching up to where you think industry benchmarks are, or do those get you actually ahead of where you think some of these other larger entities either are or will be?

I think we have very good category management capabilities. We have very good go-to-market capabilities, and I think very good retail capabilities. What we are looking at in terms of investment right now is to be best in class and best in class across all CPGs. So we are looking at technologies from a retail standpoint, we are looking at the way we deploy resources, we are looking at aisle architecture, we are looking at category management capabilities, we are looking at digital marketing capabilities, which we believe are at the forefront of where the industry is heading. And we think that that's where we want to be. That's our goal. And we think we have a pretty good set of capabilities already and now we are just going to add on to them.

There are no further questions in the queue.

We thank everybody for joining us on today's call. If you have any follow-up questions, the investor relations group is available to help you out.

This concludes today’s conference call.