Rising dairy costs and building competition took their collective toll on Hershey , which saw its third-quarter net income fall dramatically. This morning, the nation's largest candy maker said net income for the latest reporting period reached $62.8 million, or 27 cents per share, a 66% drop from year-ago levels. Excluding a restructuring charge, Hershey would have banked 68 cents per share, 3 cents shy of analysts' expectations.

Revenue slipped 1.2% lower to $1.4 billion, amid lower inventory levels. The reading was basically on par with expectations of $1.44 billion. In the past 18 months, the company's market share has dropped by 2 percentage points to 42%, while chief rival Mars has seen its market share advance 1.6 percentage points to 26%.

For 2007, Hershey expects to earn earnings per share of $2.08 to $2.12, down from a prior outlook of $2.25 per share.

Hershey's CEO Richard Lenny expressed satisfaction with the company's restructuring efforts, noting that it remains on track and is scheduled to deliver savings of about $15 million by the end of the year with a significant step-up in 2008. Lenny is set to retire from his post on December 1 and has already left his seat on the company's board.

In pre-market trading, Hershey shares are down about 3%. If the stock opens at these levels, it will hit a new 52-week low. The equity has been drifting slowly lower since its May 2005 peak and recently violated its 80-month moving average for the first time since mid-2000.