48989397 Case Study Hershey Food Corporation

Marvin Luis Montilla 2AOM

1. In Intr trod oduc ucti tion on

The Hershey Company is famously known for being the biggest manufacturer of  chocolates and confectionery products in !A" having hired over #$"%%% employees worldwide and e&porting their products to ninety different countries over the world' The Hershey Company has several popular brands" some of most notable ones being Hershey(s Chocolate )ar" *it *at" Hershey(s *isses" +eese(s" ,ork -eppermint -attie" +olo and *rackle )ar' .ith the help of these brands" Hershey gained success and popularity" making the company(s net worth over /0 billion dollars' Hershey(s products include chocolates" confectioneries" food and beverage related products such as baking ingredients" toppings etc' The company lives by its mission statement" 1ndisputed Marketplace Leadership 3www'hersheys'com www'hersheys'com4' 4' Hersh ershey ey conti ontin nues to pres reserv erve a high igher pos positio ition n by successfully converting consumer desires into reality'

2. Br Bran and d Res Resea earrch

2.1Detailed History

Milton Hershey was fascinated with the process of making chocolate" and his interest began at an early age under candy maker 5oe +oyer of Lancaster" -ennsylvania' Milton was an entrepreneur who was keen to own a candy6making business' His first successful business was the Lancaster Caramel company and it was only in #789 that Milton e&pressed interest in making Chocolates' !oon after" Milton began producing chocolate coated caramels that eventually led to the founding of Hershey Chocolate Company in #780' After much e&perimentation" Milton discovered the famous Hershey(s Chocolate recipe and sold his caramel business in #8%% for the sum of /# million' :n #8%9" Milton built his company at a place called ;erry Township in -ennsylvania" which was later renamed Hershey" -ennsylvania in #8%<' This was the first step towards the company(s e&pansion since this city had a large population" was easily accessible to ports that would supply sugar" cocoa beans etc" and had a vast amount of dairy farms' Page | 1

 As =uoted on the corporate website" 1:n a long and useful life" Milton !' Hershey proved himself to be a courageous entrepreneur" a determined builder and a compassionate humanitarian 3www'thehersheycompany'com4

2.2Company Mission statement

The Hershey Company(s mission statement" according to their corporate website" read as follows" 1Our mission is to be a focused food company in >orth America and selected international markets and a leader in every aspect of our business' Our goal is to enhance our ?# position in the >orth American confectionery market" be the leader in '!' chocolate6related grocery products" and to build leadership positions in selected international markets 3www'hersheys'com4 This statement is further broken down into five categories to ensure leadership in the marketplace' #' Hershey values creation of their products' 2' @ncourage and promote healthy living' 9' Continuously note consumer desires for their product' 0' Maintain high levels of ethics and conduct' $' !ustain a strong result oriented approach to business'

2.3Corporate Expansion

:n #8<7" the company was renamed as Hershey oods Corporation' ;uring thi s time" Hershey sought to e&pand its product line by partnering up with several related companies and even created different brands for their own products' !ome famous partnerships include !an Biorgio Macaroni oods3#8<<4" ,! Candies" makers of TwiDDlers li=uorice3#8EE4" -eter -aulFCadbury(s '!' Confectionery operations3#8774 and +onDoni oods3#88%4' Hershey oods Corporation became the industry leader by the end of the 2%th century' The company continued diversifying and soon ac=uired 5oseph !chmidt confections in 2%%$ and a year later" in 2%%<" ac=uired ;agoba Organic Chocolates' This maintains Hershey(s top position in the >orth American market' 3www'hersheys'com4

3. P.E..!. "nalysis

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3.1Political#$e%al "nalysis

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Chocolate producers unable to distribute products to certain countries' MaGor issue is child labour in cocoa farms Mostly affected areas in Africa where child labour runs rampant' The Chocolate Manufacturers Association 3CMA4 and the .orld Cocoa oundation 3.C4 created the Harkin6@ngel -rotocol" which is an agreement that focuses on child labour practices on cocoa farms in .est Africa 3'!' Labour" 2%%<4' +esult opened new channels to e&port and distribute cocoa to international countries'

3.2Economic "nalysis

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:n 2%%<" due to hurricane impact" the price of refined sugar decreased from /%'97 to /%'9# per pound 3Hershey(s #%6*" 2%%84' This allowed companies to cut retail costs and redistribute the savings'  A lot of waste material is produced" and companies spend thousands of dollars on disposing it' However" there is a new opportunity born due to recent developments in biofuel' !ince 2%%E" Lovell discovered a new method of production that can use the by6product of chocolate manufacturing companies'

3.3ociocultural "nalysis

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Consumers want a larger variety of chocolates and healthier alternatives to the traditional chocolates' ;ark chocolates provided several health benefits by adding a flavonoid in the chocolate that prevents various cardiovascular problems 3Chocolate Trading Co'" 2%%$4'

3.& !echnolo%ical "nalysis

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The chocolate and cocoa industries lack supports of >on6Bovernment OrganiDations 3>BO4" which restrict the farmer(s access to business guidance" funding" and continuing education' armers can(t learn new technologies making them less efficient' This prevents the chocolate manufacturers from gaining cocoa efficiently to create more chocolates for the consumer'

&. !ar%et "udience

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The primary consumers of Hershey Chocolates include a vast audience ranging from children" teenagers and adults' )ut mostly" Hershey targets its consumers ranging from age #969% years old' The chocolate bar is considered a snack or is part of a daily diet in case of some athletes' The chocolates are available in most grocery stores" gas stations" malls etc' Consumers primarily buy chocolates according to their price' They also prefer i f the chocolates fit their health and nutritional re=uirements" although there is a very low margin of difference between selecting according to price and according to health'

'. .(.).!. "nalysis *or Hershey +ood Corporation

'.1tren%ths

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Hershey has grown from one product one plant to a /0 billion company with various =uality chocolates' :t(s a strong brand name and has a strong image' Page | 4

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)y #88<" Hershey was largest candy maker in '!' with 9%'E market share :t is also the largest pasta manufacturer in '!' with 27'0 market share .orld(s largest chocolate plant in '!'" with more than 2 million s=' feet' -owerful partnerships 3!tarbucks" *raft" Coca6Cola etc4 MaGor profits go to Milton Hershey !chool for Orphans' Also donates to +ed Cross" >:C@" and Habitat for Humanity etc' Cooperative with students and professors' Toll free number #7%%60<76#E#0" to access additional information on re=uest'

'.2(ea,nesses

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Hershey(s Blobal market share is very low" around #% Concern for natural environment needs to be e&pressed' Cocoa production rates are rising" and even a small price increase at retail level affects consumer buying' -oor decision making as company relies on brand loyalty and has reduced advertising e&penditure'

'.3)pportunities

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-otential to e&pand range of ;arkF!ugarfree products for health benefits' se partnership ventures to create chocolate flavoured coffee products' -roduce cocoa in new areas other than Africa -roduce bio6fuel from the chocolate by6products ;evelop environment friendly packaging" recycling industrial waste China" :ndia and maGority of !outh@ast Asia are untapped markets'

'.&!hreats

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Consumer demanding healthier substitutes' !teady rise in prices of cocoa" milk and sugar' Main competitors are Mars and >estle' 2$ of >estle revenues profits come from coffee' >estle plays its strengths in international markets' Hershey is more focused on Gust local markets' Mars uses e&tensive marketing and advertising e&penditures to gain market share' Hershey Gust uses product innovations

-. +ie *orces

-.1!hreat *or ne/ entrants

There is very little threat for new entrants in the chocolate industry because of the current economy" the various differences in products" and the constant need for large capital re=uirements' Also" since there is a lack of distribution channels and with the strict ;A regulations kept in place for food manufacturers" the threat for new entrants is almost non6e&istent 3Michael et al" 2%%E4

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-.2Bar%ainin% po/ers o* 0uyers

 As stated by Michael et al" 2%%E" the bargaining powers of buyers increase by two factorsI a number of large volume buyers and the buyers( relatively low profits from the product' )ut since the industry as so many different products" the presence of different costs" the bargaining power of the buyers is low to moderate at best' -.3Bar%ainin% po/er o* suppliers

The bargaining power of suppliers has decreased since the chocolate industry is an important customer for the suppliers' )ut the power is moderate to high since the suppliers are concentratedJ there are no substitute products available' -.&Pressures *rom su0stitute products

The chocolate companies compete with various substitutes that threaten the industry' There are various flavours that are used as a substitute for chocolate' These include vanilla" butter" mint" rose" lemon" etc' Many consumers readily switch to these as they also consider chocolate to be unhealthy' -.'Rialries amon%st competitors

 Among the chocolate industry" there are intense rivalries amongst the highest competitors' There are numerous strong chocolate manufacturers giving out various varieties of chocolates at different prices" resorting to creative advertising schemes" constantly giving out new products and high =uality chocolates to satisfy the consumer needs'

. Mar,etin% mix

.1Product

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The new KHershey !lim( dark chocolates will have a flavonoid substance added which helps protect the cardiovascular system and is efficient until three hours upon consumption 3Chocolate Trading Co'" 2%%$4 -roduced for health conscious consumers to ensure that Hershey favours healthier alternatives' Hershey will also assure people with health i ssues such as diabetics" that their chocolates are a safe and healthy alternative' The core strategy is to reinvent the image of chocolates from being a source of a lot of sugar and calories therefore making people fat andFor diabetic" to an image where chocolates are considered an aid for protecting the consumers from heart disease and enhancing the rate of metabolism" by using flavonoids in their products'

.2Price

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To keep the chocolates reasonably affordable" keeping current financial trends in mind' To have a promotion campaign in part with the contest Currently chocolate bars are priced at /2'$% each' As part of the contest promotion" the chocolate will be sold at /2'%% each'

.3People -

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Target Audience would primarily be consumers from age range of #969% years" particularly health conscious individuals' The most bought products are chocolate bars" which some consider as a snack" while others as part of their daily diet'

.&Place

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The chocolates will be available in grocery stores" malls" supermarkets" gas stations" coffee shops" airports" and at the main outlets' Maor Channel Distri0utors

!upermarkets ;epartment !tores -harmacy ;uty ree Outlets Brocery store Bas !tations Main outlet

econdary Channels

Commercial stores 3E6##" Cheers4  Amusement areas 3cinemas" parks4

.'Promotion -

The chocolates will be marketed through an interactive contest' Also" some promotional programs could be held under Goint sponsorships through gymsFspas'

. )0ecties and trate%ies

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.1Product

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To reinvent Hershey Chocolates as a health conscious low calorie dark chocolate' To reassure health conscious consumers to purchase this new product by providing all the necessary nutritional information

.2)0ecties

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To promote the health benefits of the new Hershey ;ark Chocolate Help the consumers change their mind6set that chocolates are unhealthy' To spread awareness and increase sales of the product'

.3trate%y -

To increase sales using promotional materials such as an interactive contest'

.e can use one of the three proposed strategies' 1. Hershey Dar, Chocolate Mascot trate%y

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@ach chocolate has a code which in the package nlocks part of a character' A total of 2$ uni=ue parts allowing consumers to create #2% variations of characters' Customers can go online and create the character of choice online and submit to the contest .inning character will be the new mascot for the Hershey !lim' .inner will also receive gift vouchers and a # month membership to California itness Bym

2. Healthy mind4 healthy 0ody /ith Hershey trate%y

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:n the chocolate packaging are instructions to visit website Consumers have to play a classic memory game which has five levels of difficulty' Cards show healthy foods" and Hershey products .inners who complete the final score under a specific time limit win a one day all access pass to California itness Bym

3. (rapperCash trate%y

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@ach Hershey !lim wrapper contains points These points can be collected under an online account -urchases can be made from the Hershey shop using these points' There would be a limit to the number of points one can input per day" per account' The more you save" the bigger better things you can buy' -roducts would mostly include e&ercise e=uipment' -ossible to buy products at half their retail price using the point system'

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Re*erences Boo,s#Papers# 5ournals

1Chocolate is good for you Chocolate Trading Co' 5uly #9th" 2%%$' +etrieved 5anuary #$th" 2%## 1Hershey Co' orm #%6*" The Hersheys Company" ;ecember 9#st" 2%%8' +etrieved 5anuary #0th" 2%##' httpIFFwww'thehersheycompany'comFassetsFpdfsFhersheycompanyF2%%8Annual+epor  t'pdf  Lovell" 5eremy' 1@at More Chocolates and Help the @nvironment -lanetArk'com >ovember Eth" 2%%E' +etrieved 5anuary #0th" 2%##' Michael et al' 1The Hershey Company  :ntroduction the .orld of Chocolate" 2%%E' +etrieved 5anuary #%th" 2%##' 1'!' Labour ;epartment unds -roGect to @valuate @ffectiveness of Anti6Child6 Labour @fforts in the Cocoa :ndustry' .orld(s Technology >ews' October 0 th"2%%<' +etrieved 5anuary #0th" 2%##'

(e0sites.

www'hersheys'com www'thehersheycompany'com

)ther 

Lot of information received directly from Hershey Company via !tudent and Teacher  +esources httpIFFwww'hersheys'comFdiscoverFresources'asp

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