Hershey Foods Corporation

“FOSTIIMA Business School, New Delhi” CASE ANALYSIS OF “HERSHEY FOODS CORPORATION” BY ATUL JAIN Dated: 11th Nov. 2009 SUBMITTED TO: Ms. Nadira Ma’am SUBMITTED BY: Atul Jain (69) Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 1 TABLE OF CONTENTS S. NO. TOPICS EXECUTIVE SUMMARY OBJECTIVE CHAPTER. 1. INTRODUCTION 1. 1 BACKGROUND 1. 2 GROWTH 1. 3 GROWTH GLOBALLY 7 8 9 PAGE NO. 5 6 CHAPTER. 2. CHAPTER. 3. PRODUCTS SWOT ANALYSIS 3. 1 STRENGTHS 3. 2 WEAKNESSES 3. 3 OPPORTUNITIES 3. 4 WEAKNESSES FINANCE 4. 1 FINDINGS 4. 2 RECOMMENDATION MARKETING 5. 1 FINDINGS 5. RECOMMENDATION 10 11 11 12 12 CHAPTER. 4. 13 14 CHAPTER. 5. 15 16 CHAPTER. 6. PRODUCTION 6. 1 FINDINGS 6. 2 RECOMMENDATION 17 18 Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 2 CHAPTER. 7. ORGANIZATION STRUCTURE 7. 1 FINDINGS 7. 2 RECOMMENDATION 19 20 CHAPTER. 8. CONCLUSION RESULT OF STUDY 21 BIBLOGRAPHY ANNEXURE . 1. (MILESTONE ALONG OUR ROAD TO SUCCESS) ANNEXURE . 2. (HERSHEY MERGERS & ACQUISITIONS LIST) 22 1 TO 5 1 TO 3 Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 3 TABLE OF PLATES S. NO. TOPICS PAGE N. PLATE NO. 1

HERSHEY’S GROWTH CHART Source: www. hersheys. com 8 PLATE NO. 2 GLOBALLY GROWTH CHART Source: Global Market Review Report 9 PLATE NO. 3 MAJOR BRANDS AND PRODUCT LINES Source: www. hersheys. com 10 PLATE NO. 4 HERSHEY’S INCOME CHART Source: Case -5 Hershey Foods Corporation 13 PLATE NO. 5 2004 SALES CHART Source: Balance Sheets of Nestle, Mars etc. 13 PLATE NO. 6 CHART OF HERSHEY’S EXPENSES Source: Case -5 Hershey Foods Corporation 15 PLATE NO. 7 MARKET SHARE OF DIFFERENT PRODUCTS Source: www. investis. com 17 PLATE NO. 8 ORGANIZATION STRUCTURE (FINDINGS) Source: Case -5 Hershey Foods Corporation 19 PLATE NO. 9

ORGANIZATION STRUCTURE (RECOMMENDATION) Source: Self 20 Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 4 EXECUTIVE SUMMARY Hershey, Pennsylvania the home of Hershey Foods Corporation known as Chocolate Town, USA, the air in this city actually smells like chocolate. Hershey has grown from a one product, one plant operation in 1894 to a $ 4. 4 billion company producing as array of quality chocolate, nonchocolate and grocery products. SWOT Analysis to define the Hershey Strengths, Weaknesses, Opportunities and Threats. Hershey market share is less than 10 percent, lowest among its competitor.

So, Hershey should come up with new strategies in finance, marketing, production department and in organization structure to increase the market share and compete globally. Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 5 OBJECTIVE OF THE STUDY To Analysis the Hershey Food Corporation situation and suggest certain strategies department wise to overcome from the main threat i. e. competitor. Suggest the certain techniques and strategies to increase the market share and to compete globally. Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School]

Page 6 1. 1 BACKGROUND Milton Hershey’s love for candy making began with a childhood apprenticeship under candy maker Joe Royer of Lancaster, Pennsylvania. Mr. Hershey was eager to own a candy-making business. After numerous attempts and even bankruptcy, he finally gained success in the caramel business. Mr. Milton S. Hershey Hershey has grown from a one-product, one plant operation in 1894 to a $4. 4. Billion company producing as array of quality chocolate, non chocolate, and grocery products. The company markets confectionery and grocery products in over 60 countries worldwide, down from 90 countries a ew years ago. By 1901, the chocolate industry in America was growing rapidly. Hershey’s sales reached $662,000 that year, creating the need for a new factory. Mr. Hershey’ moved his company to Derry Church, Pennsylvania, a town that was renamed Hershey in 1906. In 1909, the Milton Hershey School for Orphans was founded. Mr. and Mrs. Hershey could not have children, so for years the Hershey Chocolate Company operated mainly to provide funds for the orphanages. In 1927, the Hershey Chocolate Company was incorporated under the laws of the state of Delaware and listed on the New York Stock Exchange.

That same year, 20 percent of Hershey’s stock was sold to the public. Between 1930 and 1960, Hershey went through rapid growth; the name “Hershey” became a household word. The legendary Milton Hershey died in 1945. Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 7 1. 2 GROWTH In the year of 1901, the Hershey company sales were only $662,000 and within the span of 10 years the Hershey sales reached $ 5 million in 1911. Thereafter Hershey’s sales increased 4 to 5 percent annually as we can see in the Figure . 1. 1. HERSHEY GROWTH CHART (in $ million) Growth (in million) 00 400 300 200 100 0 1998 1999 2000 2001 2002 2003 2004 2005 Source: www. hersheys. com Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 8 1. 3 GROWTH GLOBALLY Premium chocolate represents a fast-growing and dynamic market in many parts of the world, with global sales having risen by over 18% within the last year. The global chocolate market is forecast to reach a value of US$12. 9bn by 2011. This represents an increase of more than 85% in value terms compared with present levels, and provides an indication that the market in many parts of the world has only just started to develop towards its potential. GLOBALLY GROWTH CHART (IN $ BILLION) Growth 16 14 12 10 8 6 4 2 0 2000 2002 2004 2006 2008 2010 2012 2014 2015, 14 2016 Source: Global Market Review Report Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 9 2. PRODUCTS Hershey’s North America operations produce an extensive line of chocolate and non chocolate products sold in the form of single bars, bagged goods, and boxed items. These products are marketed under more than 50 brands names and sold in over 2 million retail outlets in North America.

In 2004; Hershey introduced the following new products: Hershey’s Kisses filled with caramel milk chocolates; Ice Breakers Liquid Ice mints; Hershey’s Snack Barz rice and marshmallow bars; Hershey’s Smart Zone nutrition bars; Take5 candy bars; Hershey’s Almond Joy, York, and Reese’s cookies; Reese’s Piece candy with peanuts; and Reese’s Big Cup, etc. MAJOR BRANDS AND PRODUCT LINES Hershey’s Hershey’s Bliss Reese’s Ice Breakers Major Barnds Kit Kat Jolly Rancher Twizzlers Kisses Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 10 3. SWOT ANALYSIS 3. 1 STRENGTHS: ? ? ? ? ? ? ?

Huge Market Share in North America. Marketed under more than 50 brand names. Derry Church, Pennsylvania, a town that was renamed Hershey in 1906. The name “Hershey” became a household word. Hershey acquired or purchased many corporations in America. Annexure . 1. (Hershey Mergers & Acquisitions list) Huge man power approx. 13,700 full-time and 2,300 part-time employees. Increasing sales 3 to 4 percent annually. 3. 2 WEAKNESSES: ? ? ? ? ? Hershey operates from a centralized, functional structure with no divisional president. Very few multinational distributors. They are not able to adopt “Global Channels of Distribution”.

Less than 10 percent of Hershey’s sales are generated outside the United States. Lack of experience of International Market. Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 11 3. 3 OPPORTUNITIES: ? ? ? ? Emergence of International Market. Innovation in the product. Innovation in low fat and functional candy category. They can adopt “Global Channels of Distribution”. 3. 4 THREATS: ? ? International Competitors. Change in Consumer’s life style towards low fat and healthy food. Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 12 4.

FINANCE 4. 1 FINDINGS 3. HERSHEY’S INCOME CHART (IN US$) Income 700000 600000 500000 400000 300000 200000 100000 0 1998 1999 2000 2001 2002 2003 2004 2005 Source: Case 5 – Hershey Foods Corporation -2005& www. hersheys. com 4. 2004 SALES CHART (IN BILLION) Sales Hershey Nestle 3% 22% M Mars 75% Source: Balance sheet of Hershey, Nestle & M Mars Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 13 Figure No. 3, is defining the income of Hershey’s food, the figure is clearly showing the growth of Income in Hershey’s Food after 2001. Hershey’s net income was $590. million in 2004 compared to $457. 6 million in 2003. Now from the Figure No. 4, we can easily identify the Nestle is leading with 75 percent of sales from its competitors because it is the largest food company in the world. Nestle sells products in over 360 countries on all seven continents. But if we talk about Hershey Food Corporation, it has the minimum percentage of sales i. e. 3 percent which is very low comparatively other two competitors because it has only limited branches worldwide, the company markets its products in over 60 countries worldwide and it generates only 10 percent sales from outside the United states. . 2 RECOMMENDATIONS To overcome from the problem means to increase the sales Hershey should adopt certain strategies like, ? ? ? ? Hershey should go globally. They have to take experience of outside market (untapped market). They have to come up with new candies like fat less candies because consumers are going to be health, nutrition and weight conscious. Hershey should adopt the “Global Channels of Distribution” to increase the sales worldwide. Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 14 5. MARKETING 5. 1 FINDINGS 5. Chart of Hershey’s Expenses (in millions)

Expense Chart 900 800 700 600 500 400 300 200 100 0 Expense in million $ 1998 1. 00 Advertisement Selling, Marketing Expenses Income 187. 5 868. 7 410. 2 2002 2. 00 162. 9 833. 4 403. 5 2003 3. 00 145. 4 816. 4 457. 5 2004 4. 00 137. 9 847. 5 590. 8 Source: Case 5 – Hershey Foods Corporation 2005 This Figure is indicating the Expense of Hershey Food Corporation and Income also, by the help of this figure we can identify that in which year Hershey invested more amount on Advertisement and Other Expenses then we can relate with the Income and find out the Expenses was worthwhile or not.

Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 15 As per the figure Hershey decreased its expenses, in the year of 1998, Hershey invested $ 187. 5 million on Advertisements and $ 868. 7 million in Selling, Marketing and other expenses, total $ 1056. 2 million in 1998. But in 2004, Hershey invested only $ 137. 9 on Advertisements and $ 847. 5 million in Selling, Marketing and other expenses, total $ 985. 4 million in 2002. But on the other hand Income is increasing. In 1998, Hershey income was 410. 2 million and it increased about 44 percent in 2004. . 2 RECOMMENDATIONS ? ? ? ? They have to invest in advertisement, if they have to have to maintain the market share/increase the market share. They have to find out the new channels of distribution and adopt the new channels to increase the sales. Go international advertisement to promote the product. Use Multinational channel to increase the sales. Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 16 6. PRODUCTION 6. 1 FINDINGS 6. MARKET SHARE OF DIFFERENT PRODUCT (IN US$SHARE) Market Share (in US $ Share) Kraft Ferrero Hershey Nestle Mars 0. 0% 5. % Mars 10. 0% Nestle 7. 8% 12. 6% 1. 0% 3. 2% 15. 0% Hershey 5. 5% 8. 2% 1. 1% 2. 7% 20. 0% 25. 0% Ferrero 4. 4% 7. 3% 1. 5% 30. 0% Kraft 4. 3% 7. 7% 1. 0% 1. 0% Confectionery Market Chocolate Gum Candy 9. 0% 14. 8% 3. 0% Source: www. investis. com Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 17 6. 2 RECOMMENDATIONS ? ? ? ? Increase the production capacity of Chocolate and Candy. Come up with different types of candies and chocolate because people rarely select the same candy bar twice in a row; consequently, product variety is crucial to success.

Should increase the production of candies to be the market leader. Company can come up with variety of Gum product to increase the market share. Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 18 7. OGANIZATION STRUCTURE 7. 1 FINDINGS VP for Strategy and Innovation Senior VP for Business Planning and Development Senior VP and General Counsel Chief Marketing Officer Chief Customer Office Chairman of the Board President and CEO R. H. Lenny Senior VP and President Hershey International Chief Accounting Officer Chief Information Officer

Chief People Officer Chief Financial Officer Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 19 Hershey does not make public an organization chart, but titles of executives suggest that Hershey operates from a centralized, functional structure with no divisional presidents. This type of structure would be somewhat unusual for an organization of Hershey’s size, since the more common design would be decentralized in some manner. 7. 2 RECOMMENDATION I am suggesting the new organization structure to Hershey Food Corporation.

In this structure, I have suggested continental president, which will help to complete globally or to increase the market share globally because they will have the experience of the particular continents and they will work according to market conditions. Chairman of the Board President in United State of America President in Asia- Pacific President in Europe President in Russia VP for Strategy and Innovate Senior VP for Business Planning Senior VP for General Counsel Chief Marketi ng Officer Chief Custom er Officer Senior VP and Presiden t Chief Accounti ng Officer Chief Informat ion Officer

Chief People Officer Chief Financial Officer Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 20 RESULT OF THE STUDY This study used Hershey Food Corporation as a case to demonstrate how to formulate global product strategy to penetrate growing international markets. The results from the SWOT analysis indicate that Hershey Foods Corporation has great strengths and opportunities but also has significant weaknesses and faces potential threats. This study focused on the formulation of global product strategies for Hershey’s future expansion.

Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 21 BIBLOGRAPHY 1. Case: Hershey Foods Corporation – 2005 Fred R. David (Francis Marion University). 2. Hershey Website – www. hersheys. com 3. Nestle Website – www. nestle. in 4. M Mars Website – www. mars. com 5. Search Engine – www. google. co. in 6. Hershey Annual Report 7. Nestle Annual Report 8. M Mars Annual Report 9. Hindu Business Line article dated 19th April 2007. 10. Indian Express article dated 9th September 2009. Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School] Page 22