hershey foods corporation

Case Analysis – Hershey Food Corporation by Atul Jain [FOSTIIMA Business School]

“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)


TABLE OF CONTENTS

S.NO.

TOPICS

PAGE NO.

EXECUTIVE SUMMARY

OBJECTIVE

5

6

CHAPTER. 1.

INTRODUCTION

1.1 BACKGROUND

1.2 GROWTH

1.3 GROWTH GLOBALLY

7

8

9

CHAPTER. 2.

PRODUCTS

10

CHAPTER. 3.

SWOT ANALYSIS

3.1 STRENGTHS

3.2 WEAKNESSES

3.3 OPPORTUNITIES

3.4 WEAKNESSES

11

11

12

12

CHAPTER. 4.

FINANCE

4.1 FINDINGS

4.2 RECOMMENDATION

13

14

CHAPTER. 5.

MARKETING

5.1 FINDINGS

5.2 RECOMMENDATION

15

16

CHAPTER. 6.

PRODUCTION

6.1 FINDINGS

6.2 RECOMMENDATION

17

18


CHAPTER. 7.

ORGANIZATION STRUCTURE

7.1 FINDINGS

7.2 RECOMMENDATION

19

20

CHAPTER. 8.

CONCLUSION

RESULT OF STUDY

21

BIBLOGRAPHY

22

ANNEXURE .1.

(MILESTONE ALONG OUR ROAD TO SUCCESS)

ANNEXURE .2.

(HERSHEY MERGERS & ACQUISITIONS LIST)

1 TO 5

1 TO 3


TABLE OF PLATES

S.NO.

TOPICS

PAGE N.

PLATE NO.1

PLATE NO.2

PLATE NO.3

PLATE NO.4

PLATE NO.5

PLATE NO.6

PLATE NO.7

PLATE NO.8

PLATE NO.9

HERSHEY’S GROWTH CHART

Source: www.hersheys.com

GLOBALLY GROWTH CHART

Source: Global Market Review Report

MAJOR BRANDS AND PRODUCT LINES


HERSHEY’S INCOME CHART

Source: Case -5 Hershey Foods Corporation

2004 SALES CHART

Source: Balance Sheets of Nestle, Mars etc.

CHART OF HERSHEY’S EXPENSES


MARKET SHARE OF DIFFERENT PRODUCTS

Source: www.investis.com

ORGANIZATION STRUCTURE (FINDINGS)


ORGANIZATION STRUCTURE (RECOMMENDATION)

Source: Self

8

9

10

13

13

15

17

19

20

http://www.hersheys.com/


http://www.investis.com/


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.


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.


1.1 BACKGROUND

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 few years ago.

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.

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.

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.


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)


0

100

200

300

400

500

1998 1999 2000 2001 2002 2003 2004 2005

Growth (in million)



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.

2 GLOBALLY GROWTH CHART (IN $ BILLION)

Source: Global Market Review Report

2015, 14

0

2

4

6

8

10

12

14

16

2000 2002 2004 2006 2008 2010 2012 2014 2016

Growth


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

Major Barnds

Hershey's

Reese's

Kit Kat

Kisses

Twizzlers

Jolly

Rancher

Ice

Breakers

Hershey's

Bliss


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.


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.


4. FINANCE

4.1 FINDINGS

3. HERSHEY’S INCOME CHART (IN US$)

Source: Case 5 – Hershey Foods Corporation -2005& www.hersheys.com

4. 2004 SALES CHART (IN BILLION)

Source: Balance sheet of Hershey, Nestle & M&M Mars

0

100000

200000

300000

400000

500000

600000

700000

1998 1999 2000 2001 2002 2003 2004 2005

Income

3%

75%

22%

Sales

Hershey Nestle M&M Mars


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 $590.9

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.

4.2 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.


5. MARKETING

5.1 FINDINGS

5. Chart of Hershey’s Expenses (in millions)

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.

0100200300400500600700800900

1.00 2.00 3.00 4.00

Advertisement 187.5 162.9 145.4 137.9

Selling, Marketing Expenses 868.7 833.4 816.4 847.5

Income 410.2 403.5 457.5 590.8

Exp

en

se in

mill

ion

$

Expense Chart

1998 2002 2003 2004


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.

5.2 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.


6. PRODUCTION

6.1 FINDINGS

6. MARKET SHARE OF DIFFERENT PRODUCT (IN US$SHARE)

Source: www.investis.com

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Mars

Nestle

Hershey

Ferrero

Kraft

Mars Nestle Hershey Ferrero Kraft

Confectionery Market 9.0% 7.8% 5.5% 4.4% 4.3%

Chocolate 14.8% 12.6% 8.2% 7.3% 7.7%

Gum 1.0% 1.1% 1.0%

Candy 3.0% 3.2% 2.7% 1.5% 1.0%

Market Share (in US $ Share)


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.


7. OGANIZATION STRUCTURE

7.1 FINDINGS

Chairman of the Board

President and CEO

R.H.Lenny

VP for Strategy and

Innovation

Senior VP for Business

Planning and Development

Senior VP and General

Counsel

Chief Marketing Officer

Chief Customer Office

Senior VP and President

Hershey International

Chief Accounting Officer

Chief Information Officer

Chief People Officer

Chief Financial Officer


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

Financial

Officer

Chief

People

Officer

Chief

Informat

ion

Officer

Chief

Accounti

ng

Officer


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.


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&M Mars Website – www.mars.com

5. Search Engine – www.google.co.in

6. Hershey Annual Report

7. Nestle Annual Report

8. M&M Mars Annual Report

9. Hindu Business Line article dated 19th

April 2007.

10. Indian Express article dated 9th

September 2009.


http://www.nestle.in/

http://www.mars.com/

http://www.google.co.in/

hershey foods corporation

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