Seoul, Jan 26 - South Korea's Lotte Confectionery Co. has reached a deal with Hershey Co. to make candy for the U.S. chocolate giant in China, a person familiar with the deal said on Friday.
The agreement would mark a move into a potentially huge market for the maker of Hershey's Kisses, Reese's peanut butter cups and other products, at a time of higher costs and fiercer competition in the United States.
On Wednesday, Hershey, which posted a quarterly profit that missed its own lowered forecast, said it was looking to expand in China, India, Mexico and parts of South America.
Also on Wednesday, the company said it planned to announce details next week on a venture in China to manufacture candy that will be sold there and in other parts of Asia.
Lotte opened a chocolate manufacturing line in Shanghai in 2006.
Hershey lowered its 2006 earnings outlook in December, but results were still worse than expected, creating scepticism over its 2007 earnings forecast.
Hershey shares closed down 60 cents at $50.18 on Thursday on the New York Stock Exchange. Lotte Confectionery shares were down 1.81 percent at 1.14 million won at 0301 GMT, trailing the wider market's 1 percent fall.