I remember when Rocky Mountain Chocolate Factory (NASDAQ: RMCF) was a cool stock. Unfortunately, that was then and this is now. The economy is horrible, and it's getting worse. Rocky Mountain is not the company with which to ride the storm out.

The third-quarter earnings report, issued on Thursday, showed terrible data. Revenues declined well over 16% to $6.3 million. Earnings per diluted share took a big drop of 30%, coming in at $0.14. And it doesn't stop there. Comps for franchised outlets dipped over 2%. Same-store pounds of products bought by franchisees dropped 10%. Let's face it, people are cutting back on Rocky Mountain's confections. I'm sure they're delicious, but it just doesn't matter. Rocky Mountain is going to continue to struggle as we make our way through this macro mess. Management points out that the stock does pay a dividend of $0.10 per quarter. That gives a yield, as of Thursday's closing price, of just about 6%.

That's not bad, and I suppose if you're a long-term value investor who has extremely solid patience, you might want to take a look at Rocky Mountain's shares. I mean, we all know that equities are pretty irrationally priced these days. But, would I step in and buy the stock as any sort of defensive position for my portfolio? No way. I think it's headed lower. And besides, if I wanted to step in and buy something related to confectionery pleasures, I'd probably consider Hershey (NYSE: HSY) first. Not only am I a big fan of the Reese's peanut butter cup, but I perceive the portfolio controlled by Hershey to be a lot more valuable in these troubled times than Rocky Mountain's line of products. Let's hope all the Halloween trick-or-treaters out there are gearing up to help out the confection industry at the end of this month by demanding a whole lot of treats. Goodness knows, the market has already had its share of tricks this year.

Disclosure: I don't own any company mentioned; positions can change at any time.

This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.

One might assume that chocolatier Hershey Company (NYSE: HSY) got its name from the small Pennsylvania town it is located in, population 12,771. However, the truth of the matter is that the company is named after its founder, Milton S. Hershey, and that the town, which was formerly known as Derry Church, was renamed Hershey, Pennsylvania, in 1906 because of the popularity of the chocolate.

Milton Hershey built the milk processing plant he would use to make his milk chocolate in 1896 with profits he made from selling his caramel company, and three years later, in 1899, the "Hershey process" was born. In 1903, Hershey began construction of a chocolate plant in what would later become Hershey, Pennsylvania. The manufacturing plant, which now covers over two million square feet of manufacturing space, is now the largest chocolate factory in the world.

Just as important to the town's prosperity as the chocolate manufacturing plant is Hersheypark, an amusement park that is affiliated with the Hershey Company. The theme park is a huge employer for the town, a tourist attraction, and a branding device for the Hershey brand.

Hershey, Pennsylvania is truly a place where the company and the town have merged into a single identity. While there, you can tour Hershey's Chocolate World, Hershey Museum, and visit Hersheypark, all of which feature the history of both the company and the town, which will be forever intertwined.

Be sure to check out more Big Company, Small Town posts.

Shares of Hershey Co. (NYSE: HSY) have jumped more than 6% on the news of the $23 billion takeover of Wm. J. Wrigley Co. (NYSE: WWY) by Mars Inc. and Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A) as investors bet that the maker of the eponymous chocolate bar won't stay independent for long.

Hershey, though, is a basket case thanks to soaring commodity costs and hopefully the growing interest in healthier eating. That will heighten the pressure on Hershey management to do a deal with Cadbury Schweppes Plc. or find another sugar daddy (pun intended).

The case for a merger between Cadbury and Hershey are pretty compelling as Reuters notes.

"The deal would have clear strategic logic, as Cadbury, the world's biggest confectionery group, lacks presence in the U.S. chocolate market, while Hershey is looking to expand overseas," according to the news service.

During the first quarter earnings conference call, Chief Executive David West sounded upbeat, saying the company was "making progress, while it is slower than we would like, we do see the initial signs of improving marketplace trends." He has high hopes for new products such as the Hershey Bliss. Investors, though, may not be patient.

The Hershey Trust Co., the chocolate company's largest shareholder, has resisted buyout offers in the past from Wrigley and has vowed to keep the company independent. You have to figure that the trust's board will change its tune at the right price.

Candy-making behemoth Hershey (NYSE: HSY) moved under the earnings spotlight this morning to report a (gulp) 65% decline in fourth-quarter profit. The company banked $54 million, or 24 cents per share, compared to a year-ago profit of $153.6 million (65 cents per share). Excluding items related to changes in the firm's global supply chain, the firm would have earned $124.1 million, or 54 cents per share, a penny shy of analysts' consensus estimate of 55 cents.

Sales for the reporting period were virtually flat, at $1.34 billion, narrowly edging past the Street's expectations of $1.31 billion. For all of 2007, HSY sales came in at $4.95 billion, a modest $2.5 million advance from 2006 sales.

Last month, Canadian regulators began an investigation into allegations of price-fixing involving Hershey Co. (NYSE: HSY), Cadbury Schweppes PLC (NYSE: CSG) Mars Inc. and Nestlé SA (VTX: NESN).

Now our own Justice Department is looking into the issue as well. Chocolatiers have been battling with surging dairy prices and there have been allegations that various firms colluded to fix prices. Ontario's Superior Court of Justice has granted search warrants for the above candy makers, but no charges have been filed.

According (subscription required) to the Wall Street Journal, "It isn't clear precisely what the Justice Department is looking into or whether the preliminary inquiry will become a formal criminal investigation. Price fixing can be a serious offense, leading to heavy fines and, in some cases, jail terms for executives."

The legal issues aside, does anyone really think that lack of access to affordable chocolate is a serious problem in the United States? Judging from The US of A's collective waistline, a little price fixing and consumer gouging could do our body mass indexes a bit of good.

Campbell's (NYSE: CPB) has reached a deal to sell Godiva to Turkey's Yildiz Holding for $850 million, about 15 times EBITDA.

This marks the end of a more than 40-year run for Godiva as a subsidiary of Campbell's. During that time, the chocolatier has grown to more than 270 retail locations around the world. Campbell's sought to divest the brand as part of an effort to focus on its core brands, including Campbell's, Pepperidge Farms, and V8. Godiva is different from these brands in that it's higher end and generally distributed more through specialty stores, rather than mass market grocers.

In a press release announcing the deal, Campbell's CEO Douglas Conant said that, "We are very pleased with the value we obtained for Godiva. The sale price reflects the strength of the Godiva business. Godiva is one of the world's leading premium chocolate businesses and is an excellent strategic fit within Ulker's portfolio. The agreement allows Ulker to expand and diversify its portfolio with an elite, global luxury brand and enables Campbell to sharpen our strategic focus on simple meals, anchored by soup, baked snacks, and vegetable-based beverages..."

It's interesting that a Turkish firm emerged as the high-bidder, perhaps further evidence that American companies are not in acquisition mode in the current market.

Campbell Soup (NYSE: CPB) is selling its Godiva chocolate business since too few people want to eat the sweet stuff while they are having a hot bowl of chicken noodle soup. But Starbucks (NASDAQ: SBUX) may think that chocolate and coffee go together.

The Wall Street Journal reports, however, that "should Starbucks indulge in Godiva, which Campbell put up for sale in August, it would be a departure from its modus operandi." Wall Street experts put the price of Godiva at around $800 million.

If Starbucks buys Godiva, it would be a huge mistake. The coffee retailer's shares are near a 52-week low, trading at under $26. They have a 52-week high of more than $40.

The doubts about Starbucks center around its long-term goal of having 40,000 stores worldwide. Investors are concerned that current same-store sales may be too weak to support that kind of expansion. If Starbucks goes into a second business without fixing its first, the company's stock could take another hit.

Godiva may seem like a sweet deal, but all it would do is take Starbucks' eyes off the ball.

Douglas A. McIntyre is an editor at 247wallst.com.

Whoever said, "Don't buy the cow when you can get the milk for free," clearly wasn't working for The Hershey Company (NYSE: HSY). The nation's largest candy maker -- with brands such as Jolly Rancher, Reese's, and Kit Kat under its umbrella -- said rising dairy costs contributed negatively to the company's bottom line.

This morning, Hershey reported third-quarter net income of $62.8 million, or 27 cents per share, a 69% drop from year-ago results. Excluding a restructuring charge of 41 cents per share, Hershey's would have earned 68 cents per share, or 3 cents south of the 71 cents expected on Wall Street.

Revenue fell 1.2% to $1.4 billion, on par with analysts' expectations. For 2007, Hershey now expects to earn between $2.08 and $2.12 per share, down from a prior outlook of $2.25 per share.

Some people are disinterested in chocolate, while others of us would drive through a hurricane to feed our Godiva jones. According to the UK Telegraph, a new study in the Journal of Proteome Research suggests that the culprits may live in our stomach.

According to the findings of scientists at the Nestle Research Centre and others, the type of bacteria busy aiding in digestion in the guts of chocolate lovers may be different than those of people who don't crave the brown bliss. Since 90% of the cells making up a human being are actually bacteria and other symbiotic partners along for the ride, how could we expect to be able to fight off the urgings of such a throng?

While the findings are only suggestive of a link, I wonder if any chocolate company executives are already fantasizing about the effects on sales of adding the sweet-craving bacteria to their products.

I can't decide if this is good or bad news for the Hershey Co. (NYSE: HSY) and other chocolatiers. If you could eliminate your desire for chocolate, would you?

The Hershey Co. (NYSE: HSY), which is the largest U.S. candy maker, is getting a new Chief Executive, David West, who is moving over from the COO suite. Shareholders will be anxious to see if this suite move really translates into a sweet move for the stock, which is down for the year about 25% from $56.75, closing near its 52-week low today at $44.50.

I have been watching this stock for a few weeks now as I search out what will be valuable in the coming year -- and then going forward for a lifetime. As "my pal Warren" likes to say, the proper holding period for a stock is "forever." Chocolate is a candidate for sure, and Buffett certainly would have to support this notion since Berkshire Hathaway (NYSE: BRK.A) owns a premier American Brand in See's Candies.

Chocolate may be as recession-proof as beer and lipstick, so this company is worth looking at as an investment opportunity. When I review the numbers I see both good and bad. To the good, it is paying a 2.56% dividend yield, which does sweeten the pot (OK, I'll stop that). To the bad, it is facing increased prices for sugar, now competing I suppose with the energy sector (ethanol), ironic since chocolate bars are promoted as energy food. Oil seems to have dipped in the past few days but I'm not sure the demand for sugar will.

According to a report from Bloomberg this morning, Campbell Soup Co. (NYSE: CPB) is looking to rake in somewhere between $1 billion to $1.5 billion when it sells off its boutique chocolate brand Godiva Chocolatier. News of the company's interest in selling off the brand came early last month, at which time analysts had predicted the sale would bring in between $750 million and $1 billion.

The company first got involved with Godiva back in 1966 when it purchased one-third of the company, and following that took over ownership. Godiva represents around 7% of Campbell's total revenues, but the company has been careful to keep the brand separate from the core Campbell's name brand.

It makes sense that Campbell's would try to unload Godiva as it is trying to focus on "centering on convenience, wellness and quality," and are looking to expand its soups business more in China and Russia, two countries that have faster growing economies and larger soup consumption than America.

Some potential buyers for Godiva could be Hershey Co. (NYSE: HSY), Mars Inc. and Cadbury Schweppes Plc (NYSE: CSG), according to Credit Suisse. Another company that has publicly stated interest is Swiss chocolate maker Lindt & Spruengli, which has announced yesterday that it will be raising its product prices from between 6 and ten percent, depending on the country, and will be looking into the possibility of picking up Godiva.

[Thanks to Jaye_Elle for the photo]

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer

In February, Hershey Co. (NYSE:HSY) unveiled a new grand strategy, the Global Supply Chain Transformation (GSCT), a half-billion dollar initiative to streamline production and send it to more cost-efficient markets. The company took a major part of this hit in the second quarter earnings report announced today, with net income of $3.55 million and EPS of only $.01.

Taking out the costs of GSCT steps such as the construction of a new plant in Monterrey, Mexico and cooperative ventures in China and India, and net income would have finished at $0.35 EPS, still down appreciably from 2006 year/year of $0.42.

The company reported strong sales in high price-point products such as dark chocolate, but new items and refreshments fell short of their target. Increased dairy prices were one element blamed when the company revised its 2007 earnings outlook in May, warning investors to expect diluted EPS from operations to grow only 4-6% this year.

The brightest spot of the report was the announcement that Hershey will be producing Starbuck's-branded (NASDAQ:SBUX) chocolate for sale in the coffee merchant's locations.

It's still early days to evaluate the impact of the GSCT on performance, but the sales shortfall has to be a cause for concern. Investors will be looking for a sweeter report before the end of the year.