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 PAGE NO.
EXECUTIVE SUMMARY 5
OBJECTIVE 6
CHAPTER. 1. INTRODUCTION
1.1 BACKGROUND 7
1.2 GROWTH 8
1.3 GROWTH GLOBALLY 9
CHAPTER. 2. PRODUCTS 10
CHAPTER. 3. SWOT ANALYSIS
3.1 STRENGTHS 11
3.2 WEAKNESSES 11
3.3 OPPORTUNITIES 12
3.4 WEAKNESSES 12
CHAPTER. 4. FINANCE
4.1 FINDINGS 13
4.2 RECOMMENDATION 14
CHAPTER. 5. MARKETING
5.1 FINDINGS 15
CHAPTER. 6. PRODUCTION
6.1 FINDINGS 17
CHAPTER. 7. ORGANIZATION STRUCTURE
7.1 FINDINGS 19
CHAPTER. 8. CONCLUSION
RESULT OF STUDY 21
BIBLOGRAPHY 22
ANNEXURE .1.
(MILESTONE ALONG OUR ROAD TO SUCCESS) 1 TO 5
ANNEXURE .2.
(HERSHEY MERGERS & ACQUISITIONS LIST) 1 TO 3
TABLE OF PLATES
S.NO. TOPICS PAGE N.
PLATE NO.1 HERSHEY’S GROWTH CHART 8

Source: www.hersheys.com
PLATE NO.2 GLOBALLY GROWTH CHART 9

Source: Global Market Review Report
PLATE NO.3 MAJOR BRANDS AND PRODUCT LINES 10

PLATE NO.4 HERSHEY’S INCOME CHART 13

Source: Case -5 Hershey Foods Corporation
PLATE NO.5 2004 SALES CHART 13

Source: Balance Sheets of Nestle, Mars etc.
PLATE NO.6 CHART OF HERSHEY’S EXPENSES 15

PLATE NO.7 MARKET SHARE OF DIFFERENT PRODUCTS 17

Source: www.investis.com
PLATE NO.8 ORGANIZATION STRUCTURE (FINDINGS) 19

PLATE NO.9 ORGANIZATION STRUCTURE (RECOMMENDATION) 20

Source: Self
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
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 few 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.
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)

500
400
300
200
100
0
1998 1999 2000 2001 2002 2003 2004 2005
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)
Growth
16
14 2015, 14
12
10
8
6
4
2
0
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: Global Market Review Report
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 Major Kit Kat

Breakers Barnds
Jolly
Rancher
Kisses
Twizzlers
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$)
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 M&M Mars
3%
22%
75%
Source: Balance sheet of 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)
Expense Chart
900
800
Expense in million $
700
600
500
400
300
200
100
0
1998
1.00 2002
2.00 2003
3.00 2004
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
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.
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)
Market Share (in US $ Share)
Kraft
Ferrero
Hershey
Nestle
Mars
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
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%
Source: www.investis.com
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
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
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 President in President in President in

United State of Asia- Pacific Europe Russia
America
VP for Senior Senior Chief Chief Senior

Strategy VP for VP for Marketi Custom VP and
and Business General ng er Presiden
Innovate Planning Counsel Officer Officer t
Chief Chief Chief Chief

Accounti Informat People Financial
ng ion Officer Officer
Officer 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.

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“FOSTIIMA Business School, New Delhi”

“HERSHEY FOODS CORPORATION”

S.NO. TOPICS PAGE NO.

CHAPTER. 3. SWOT ANALYSIS

(MILESTONE ALONG OUR ROAD TO SUCCESS) 1 TO 5

(HERSHEY MERGERS & ACQUISITIONS LIST) 1 TO 3

S.NO. TOPICS PAGE N.

PLATE NO.1 HERSHEY’S GROWTH CHART 8

PLATE NO.2 GLOBALLY GROWTH CHART 9

PLATE NO.3 MAJOR BRANDS AND PRODUCT LINES 10

PLATE NO.4 HERSHEY’S INCOME CHART 13

PLATE NO.5 2004 SALES CHART 13

PLATE NO.6 CHART OF HERSHEY’S EXPENSES 15

PLATE NO.7 MARKET SHARE OF DIFFERENT PRODUCTS 17

PLATE NO.8 ORGANIZATION STRUCTURE (FINDINGS) 19

PLATE NO.9 ORGANIZATION STRUCTURE (RECOMMENDATION) 20

Hershey, Pennsylvania the home of Hershey Foods Corporation known as

SWOT Analysis to define the Hershey Strengths, Weaknesses, Opportunities and

department wise to overcome from the main threat i.e. competitor.

Milton Hershey’s love for candy making began with a

Mr. Milton S. Hershey

By 1901, the chocolate industry in America was

1. HERSHEY GROWTH CHART (in $ million)

Growth (in million)

Premium chocolate represents a fast-growing and dynamic market in many parts of

2 GLOBALLY GROWTH CHART (IN $ BILLION)

Source: Global Market Review Report

MAJOR BRANDS AND PRODUCT LINES

Ice Major Kit Kat

 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.

 Increasing sales 3 to 4 percent annually.

 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”.

 Lack of experience of International Market.

 Emergence of International Market.

 Innovation in the product.

 Innovation in low fat and functional candy category.

 They can adopt “Global Channels of Distribution”.

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

 Hershey should go globally.

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

Source: Case 5 – Hershey Foods Corporation 2005

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

Market Share (in US $ Share)

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

Mars Nestle Hershey Ferrero Kraft

 Increase the production capacity of Chocolate and Candy.

Senior VP for Business

Senior VP and General

Chief Marketing Officer

Chief Customer Office

Chairman of the Board

Chief Accounting Officer

Chief Information Officer

Chief People Officer

Chief Financial Officer