Marvin Luis Montilla

2AOM

1. Introduction
The Hershey Company is famously known for being the biggest manufacturer of
chocolates and confectionery products in USA, having hired over 15,000 employees
worldwide and exporting their products to ninety different countries over the world.
The Hershey Company has several popular brands, some of most notable ones
being Hersheys Chocolate Bar, Kit Kat, Hersheys Kisses, Reeses, York Peppermint
Pattie, Rolo and Krackle Bar.
With the help of these brands, Hershey gained success and popularity, making the
companys net worth over $4 billion dollars.
Hersheys products include chocolates, confectioneries, food and beverage related
products such as baking ingredients, toppings etc.
The company lives by its mission statement, Undisputed Marketplace Leadership
(www.hersheys.com). Hershey continues to preserve a higher position by
successfully converting consumer desires into reality.

2. Brand Research
2.1 Detailed History
Milton Hershey was fascinated with the process of making chocolate, and his interest
began at an early age under candy maker Joe Royer of Lancaster, Pennsylvania.
Milton was an entrepreneur who was keen to own a candy-making business. His first
successful business was the Lancaster Caramel company and it was only in 1893
that Milton expressed interest in making Chocolates.
Soon after, Milton began producing chocolate coated caramels that eventually led to
the founding of Hershey Chocolate Company in 1894. After much experimentation,
Milton discovered the famous Hersheys Chocolate recipe and sold his caramel
business in 1900 for the sum of $1 million.
In 1903, Milton built his company at a place called Derry Township in Pennsylvania,
which was later renamed Hershey, Pennsylvania in 1906. This was the first step
towards the companys expansion 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.
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As quoted on the corporate website, In a long and useful life, Milton S. Hershey
proved himself to be a courageous entrepreneur, a determined builder and a
compassionate humanitarian (www.thehersheycompany.com)

2.2 Company Mission statement

The Hershey Companys mission statement, according to their corporate website,
read as follows, Our mission is to be a focused food company in North America and
selected international markets and a leader in every aspect of our business. Our goal
is to enhance our #1 position in the North American confectionery market, be the
leader in U.S. chocolate-related grocery products, and to build leadership positions
in selected international markets (www.hersheys.com)
This statement is further broken down into five categories to ensure leadership in the
marketplace.
1. Hershey values creation of their products.
2. Encourage and promote healthy living.
3. Continuously note consumer desires for their product.
4. Maintain high levels of ethics and conduct.
5. Sustain a strong result oriented approach to business.

2.3 Corporate Expansion

In 1968, the company was renamed as Hershey Foods Corporation. During this time,
Hershey sought to expand its product line by partnering up with several related
companies and even created different brands for their own products.
Some famous partnerships include San Giorgio Macaroni Foods(1966), Y&S
Candies, makers of Twizzlers liquorice(1977), Peter Paul/Cadburys U.S.
Confectionery operations(1988) and Ronzoni Foods(1990). Hershey Foods
Corporation became the industry leader by the end of the 20 th century.
The company continued diversifying and soon acquired Joseph Schmidt confections
in 2005 and a year later, in 2006, acquired Dagoba Organic Chocolates.
This maintains Hersheys top position in the North American market.
(www.hersheys.com)

3. P.E.S.T. Analysis

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3.1 Political/Legal Analysis

- Chocolate producers unable to distribute products to certain countries.
- Major issue is child labour in cocoa farms
- Mostly affected areas in Africa where child labour runs rampant.
- The Chocolate Manufacturers Association (CMA) and the World Cocoa
Foundation (WCF) created the Harkin-Engel Protocol, which is an agreement
that focuses on child labour practices on cocoa farms in West Africa (U.S.
Labour, 2006).
- Result opened new channels to export and distribute cocoa to international
countries.
3.2 Economic Analysis
- In 2006, due to hurricane impact, the price of refined sugar decreased from
$0.38 to $0.31 per pound (Hersheys 10-K, 2009).
- 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.
- Since 2007, Lovell discovered a new method of production that can use the
by-product of chocolate manufacturing companies.
3.3 Sociocultural Analysis
- Consumers want a larger variety of chocolates and healthier alternatives to
the traditional chocolates.
- Dark chocolates provided several health benefits by adding a flavonoid in the
chocolate that prevents various cardiovascular problems (Chocolate Trading
Co., 2005).

3.4 Technological Analysis

- The chocolate and cocoa industries lack supports of Non-Government
Organizations (NGO), which restrict the farmers access to business
guidance, funding, and continuing education.
- Farmers cant learn new technologies making them less efficient.
- This prevents the chocolate manufacturers from gaining cocoa efficiently to
create more chocolates for the consumer.
4. Target Audience

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The primary consumers of Hershey Chocolates include a vast audience ranging from
children, teenagers and adults. But mostly, Hershey targets its consumers ranging
from age 13-30 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 if the
chocolates fit their health and nutritional requirements, although there is a very low
margin of difference between selecting according to price and according to health.

5. S.W.O.T. Analysis for Hershey Food Corporation

5.1 Strengths
- Hershey has grown from one product one plant to a $4 billion company with
various quality chocolates.
- Its a strong brand name and has a strong image.
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By 1996, Hershey was largest candy maker in U.S. with 30.7% market share
It is also the largest pasta manufacturer in U.S. with 28.4% market share
Worlds largest chocolate plant in U.S., with more than 2 million sq. feet.
Powerful partnerships (Starbucks, Kraft, Coca-Cola etc)
Major profits go to Milton Hershey School for Orphans. Also donates to Red
Cross, UNICEF, and Habitat for Humanity etc.
Cooperative with students and professors. Toll free number 1800-468-1714, to
access additional information on request.

5.2 Weaknesses
- Hersheys Global market share is very low, around 10%
- Concern for natural environment needs to be expressed.
- Cocoa production rates are rising, and even a small price increase at retail
level affects consumer buying.
- Poor decision making as company relies on brand loyalty and has reduced
advertising expenditure.
5.3 Opportunities
- Potential to expand range of Dark/Sugarfree products for health benefits.
- Use partnership ventures to create chocolate flavoured coffee products.
- Produce cocoa in new areas other than Africa
- Produce bio-fuel from the chocolate by-products
- Develop environment friendly packaging, recycling industrial waste
- China, India and majority of SouthEast Asia are untapped markets.
5.4 Threats
- Consumer demanding healthier substitutes.
- Steady rise in prices of cocoa, milk and sugar.
- Main competitors are Mars and Nestle.
- 25% of Nestle revenues profits come from coffee. Nestle plays its strengths in
international markets. Hershey is more focused on just local markets.
- Mars uses extensive marketing and advertising expenditures to gain market
share. Hershey just uses product innovations
6. Five forces
6.1 Threat for new 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 requirements. Also, since there is a lack of distribution channels and with the
strict FDA regulations kept in place for food manufacturers, the threat for new
entrants is almost non-existent (Michael et al, 2007)

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6.2 Bargaining powers of buyers

As stated by Michael et al, 2007, the bargaining powers of buyers increase by two
factors: a number of large volume buyers and the buyers relatively low profits from
the product.
But 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.
6.3 Bargaining power of suppliers
The bargaining power of suppliers has decreased since the chocolate industry is an
important customer for the suppliers. But the power is moderate to high since the
suppliers are concentrated; there are no substitute products available.
6.4 Pressures from substitute 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.
6.5 Rivalries amongst 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 quality chocolates to satisfy the
consumer needs.

7. Marketing mix
7.1 Product

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The new Hershey Slim dark chocolates will have a flavonoid substance
added which helps protect the cardiovascular system and is efficient until
three hours upon consumption (Chocolate Trading Co., 2005)
Produced for health conscious consumers to ensure that Hershey favours
healthier alternatives. Hershey will also assure people with health issues 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 and/or 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.

7.2 Price
- 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 $2.50 each. As part of the contest
promotion, the chocolate will be sold at $2.00 each.
7.3 People
- Target Audience would primarily be consumers from age range of 13-30
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.
7.4 Place
- The chocolates will be available in grocery stores, malls, supermarkets, gas
stations, coffee shops, airports, and at the main outlets.
Major Channel Distributors
Supermarkets
Department Stores
Pharmacy
Duty Free Outlets
Grocery store
Gas Stations
Main outlet

Secondary Channels
Commercial stores (7-11, Cheers)
Amusement areas (cinemas, parks)

7.5 Promotion
- The chocolates will be marketed through an interactive contest. Also, some
promotional programs could be held under joint sponsorships through
gyms/spas.
8. Objectives and Strategies

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8.1 Product
- 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
8.2 Objectives
- To promote the health benefits of the new Hershey Dark Chocolate
- Help the consumers change their mind-set that chocolates are unhealthy.
- To spread awareness and increase sales of the product.
8.3 Strategy
- To increase sales using promotional materials such as an interactive contest.
We can use one of the three proposed strategies.
1. Hershey Dark Chocolate Mascot Strategy
- Each chocolate has a code which in the package
- Unlocks part of a character. A total of 25 unique parts allowing consumers to
create 120 variations of characters.
- Customers can go online and create the character of choice online and submit
to the contest
- Winning character will be the new mascot for the Hershey Slim. Winner will
also receive gift vouchers and a 1 month membership to California Fitness
Gym
2. Healthy mind, healthy body with Hershey Strategy
- In 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
- Winners who complete the final score under a specific time limit win a one day
all access pass to California Fitness Gym

3.
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WrapperCash Strategy
Each Hershey Slim wrapper contains points
These points can be collected under an online account
Purchases 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.
Products would mostly include exercise equipment. Possible to buy products
at half their retail price using the point system.

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References
Books/Papers/ Journals
Chocolate is good for you Chocolate Trading Co. July 13 th, 2005. Retrieved
January 15th, 2011
Hershey Co. Form 10-K, The Hersheys Company, December 31 st, 2009.
Retrieved January 14th, 2011.
http://www.thehersheycompany.com/assets/pdfs/hersheycompany/2009AnnualRepor
t.pdf
Lovell, Jeremy. Eat More Chocolates and Help the Environment PlanetArk.com
November 7th, 2007. Retrieved January 14th, 2011.
Michael et al. The Hershey Company Introduction the World of Chocolate, 2007.
Retrieved January 10th, 2011.
U.S. Labour Department Funds Project to Evaluate Effectiveness of Anti-ChildLabour Efforts in the Cocoa Industry. Worlds Technology News. October 4 th,2006.
Retrieved January 14th, 2011.

Websites.
www.hersheys.com
www.thehersheycompany.com

Other
Lot of information received directly from Hershey Company via Student and Teacher
Resources
http://www.hersheys.com/discover/resources.asp

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