Hershey Report

THE HERSHEY CHOCOLATE COMPANY entrance The Hershey confederacy was originally a purely deep brown manufacturer exactly extended to wafers and early(a) products, whatsoever notwithstanding non- java. Now, the Hershey Company has grown to become a leader when it comes to dark umber and premium burnt umber. Hersheys Mission Statement is Bringing sweet moments of Hershey happiness to the world every day (www. thehershey party. com).This means delivering tonus confectionary to consumer for all occasion, being a dominant and fun organization for the employees, having good tune enterprise relationships for growth with customers, suppliers and business partners, creating value for shareholders and philanthropic activities for society as a whole. The company, adhering to its Mission from the founding day till today, strives to incessantly create value by developing a number of products to cater to frequently changing consumers desire.Hence by creating a diverse portfolio which tr ansformed customer desires to reality, and by maintaining its quality The Hershey Company has managed to become superstar of the straighten out deep brown trademarks in the grocery store. HISTORY Hersheys derived from a single decision- the decision of postdy manufacturer Milton Hershey. In 1894 he decided to bugger off sweet deep brown which would coat caramels. He started off an enterprise and called it The Hershey coffee tree Company, located in Lancaster, Pennsylvania. In 1900, the Hershey Chocolate Company started the production of milk chocolate bars, chocolate wafers and more(prenominal).Hershey was the company which made the at once a luxury item affordable to the common public by choosing to produce at a mass level. By using mass production the company had lowered its per unit of measurement cost and hence was able to sell it at a lower cost than other chocolates. The mastery of high gross revenue led to Hersheys expansion of new chocolate factories, one of the m being in south-central Pennsylvania in Derry Township, close to the ports of new-fangled York and Philadelphia which supplied the imported sugar and burnt umber beans needed, surrounded by dairy farms that provided the milk required, and with a local labor supply of honest, hard-working bulk.By 1905 the production of chocolate in this factory was flourishing. Today, the Hershey Company operates all everywhere the world, employs more than 12,000 people and generates revenues of more than $5 billion. (www. thehersheycompany. com) ENVIRONMENTAL ANALYSIS gross gross gross sales of chocolate depend majorly on the demand of chocolate, and these demands fluctuate heavily. And hence the success of a chocolate fabrication relies heavily on whether its the Easter, Halloween or Christmas season or a plain summer day, sales being lower in the latter.It has been noted that sales of Hersheys or any chocolate brand for that matter, pluss during the third and fourth tie of the year, t hat is, the holiday seasons. For Hersheys, the struggle in the net sales of the premiere quarter of 2009 and the third quarter of 2009 was $248,087,000. (www. thehersheycomany. com). Judging from this, we can safely deduce that chocolate sales, on a over bulky part, depends on the environment. If we look at the social environment, in that respect are all sorts of consumers with different demands. rough would prefer brazen-faceder chocolate and would be more than ready to compromise on quality and visit it just a eat while others demand a rich taste making chocolate more of a elevated item. This requires the sedulousness to produce a variety of products to meet the needs of as many customers to ensure greater sales. But at that place is also the emersion of brand image. If a company produces both rich and cheap quality products, it does not develop a specific image of the brand. Hence the business needs to site what demographics they want to cater to. The Hershey Company has a number of competitors.The company itself has an average of 5 billion one dollar bill sales annually, 5132. 8 million dollars in 2008 (thehersheycompany. com) and employs 14,400 employees which is quite a cock-a-hoop number but there are other similar brands in the mart. Major competitors of Hersheys are Cadbury, with a sale of 7,792. 3 million dollars and 45,000 employees in 2008. Mars, with sales reaching 30,000 million dollars and a total of 70,000 employees in 2008. Nestle with sales of 104,060. 9 million dollars and 283,000 employees in 2008. (www. hoovers. com) MARKET ENVIRONMENT ANALYSISPorters Analysis By using Porters phoebe bird forces we can analyze the industry and subsequently to develop business strategy. These five forces present in the marketing environment will help determine the intensity of competition intensity and hence attractiveness of a market. In the marketing context, attractiveness refers to the overall advantageousness of the industry. A get able business is an attractive industry wherein the combination of these forces acts to pull up the overall profitability. Bargaining Power of Suppliers The supply of Cocoa is limited.Since it is produced in areas with tropic weather, a dish of chocholate manufacturers have to import the coffee. Suppliers have more bargaining power over the chocolate industry since cocoa suppliers are limited (www. bpi. cam. ac. uk). Bargaining Power of Customers Bargaining power of customers of Hershey is moderately high. From Hersheys annual reports, we can see that sales volume is high for The Hershey Company and whenever consumers subvert in erect volumes, their bargaining power increases. This is specifically applicable to retailers, more specifically to retailers like Wal-Mart.Wal-Mart and other retailers who purchase large volumes of chocolate can bargain for lower impairments and the industrys profits can reduction. Threat of New Entrants Threat of new entrants is not a major concern for The Hershey Company as Hersheys uses the technique of mass production (Evan Carmichael) that is, produces on a mass level and has achieved economies of scale. A new entrant would therefore have to be a mass level manufacturer. Also, there are factors such as corking requirements and channels of distribution which make it harder for business to be set up on a large level and to get the sales going.And, of course, there has to be something that sets apart the new entrants products from the alert businesses products. Threat of Substitute Products Since chocolate is not a need-based product and a number of people consider in just a snack, they look to towards other products such as chips, ice-cream, other flavored products such as vanilla, orange etcetera as well. Also there are many people who deem chocolate as unwellnessy and fattening and are ready to substitute it with other products. Competitive Rivalry in spite of appearance n Industry Hershey is not the only chocolate c ompany around. There are a lot more chocolate brands which are as established as Hershey. Consumers have a choice of acquire Hershey or Cadbury or Mars or other more generic chocolates, and this provides a significant sum of money of competition. Hersheys has to compete once morest other chocolate brands and watch out for substitute products which makes competition intense. However, this analysis looks at the forces closely modify the business i. e. the micro environment.Hence the Porters Analysis is not a ampere-second percent useful on its own. For around marketing experts, porters five forces analysis is only a scratch line point or sort of a checklist and therefore the benefit of this analysis can be taken only when used in conjunction with other analysis techniques. hit the books Analysis STRENGTHS Rich biography full of tradition, originality and philanthropic service The Hershey Company produced Hersheys Tropical Chocolate bars and Field confine D bars for the troo ps at war giving it points for both originality and patriotism.Milton Hershey has also opened the Hershey jet in 1907 (www. hersheypa. com) Strong Brand Name and Image Hershey has been in the market since 1894 and since then it has created a unshakable brand name and image. Diverse Product Portfolio Hersheys Chocolate Bar, almond exuberate, Kit Kat, Hersheys Kisses, Mounds, Reeses, Payday, York peppermint gingiva Pattie, take out Duds, Mr. Goodbar, Rolo, Skor, Whatchamacallit, Whoppers and Krackle Bar are only a a couple of(prenominal) of Hersheys products amongst many more. Having a broad variety of products increases chances of high sales for the company. Strong Alliances Apart from acquiring a number of popular chocolate/candy manufacturing companies and has acquired licenses for producing and selling Cadbury and Nestle products, it has also, recently allied with Starbucks, which lead to a 30% increase in profits for Hershey. (MarketWatch) OPPORTUNITIES A number of con sumers desire and demand richer products and this gives Hershey to gain more of the upper strata of society The Hershey Company joined up with Starbucks, which was a wise move as it contributed to a 30% growth in Hersheys profit (MarketWatch). more than joint ventures with, for instance, Dunkin Do amiss(p) would boost sales of Hershey. In todays day and age, people have started giving more importance to holidays as noted in the Quarterly reports of Hershey sales were high in the holiday seasons. Hershey can use this to focus more on chocolates as gifts. impairment moderate of sugar Outsourcing of labor to cheaper areas WEAKNESSES Hershey is sum the Statess largest chocolate producer (The Hershey Company) but the same cannot be said when it comes to the external market. Currently, the companys presence is limited to Brazil, Canada, Mexico, and the United States. www. investopedia. com) A key impuissance of Hershey is that it does not have ofttimes sales in the Asian market s and since Asia is the largest continent and a huge population, it is miss out on a lot. Price inflation is also an issue. As prices are relentlessly increasing, consumers pretend twice before purchasing a lot of things and Hershey products are no longer item that once can buy with the loose change in their pocket. Less people are willing to buy chocolates frequently. THREATS There has been an increase in Nut allergies both in the UK and USA. ut allergies. (AAIR). A lot of Hershey products uses nuts and it has to consider this fact. Obesity is also on the rise and according to Centers for Disease Control and Prevention, there has been a massive increase in obesity. In 2008, only one state in the United States of America (Colorado) had a prevalence of obesity less than 20%. Though there is no proof that chocolate equals obesity but that is the everyday ideaion and heatlh conscious people tend to buy little or no chocolate. If the health trend rises chocolate sales will gradua lly decrease. Technology is becoming more and more advanced every day, and in order to be retain its economies of scale and to remain competent, Hershey has to happen up with technological progress in manufacturing and this will automatically increase cost.. A recent issue has been minimum wage for labourers. Effective July 24, 2009, the federal minimum wage increases to $7. 25 per hour. (Labour Law Center) Price of milk has been on a true stock tickered rise. Milk prices reached its peak in July 2007 and consumers paid .. an average $3. 80 a gallon, compared with $3. 29 in January (Vandore, 2007).If this trend continues in the future, Hershey will have to increase prices callable to increase costs of production hence sales could plummet really low. There has also been a steady price increase in gasoline. In the Clayton News Daily, The annual average price of regular nonleaded gas is expected to increase from $2. 35 per gallon in 2009, to $2. 83 in 2010, with similar price hi kes on heating oil and diesel fuel. In this case production costs of caterpillar tread the heavy machinery in factories will increase significantly, making it difficult for Hershey to maintain reasonable price of its products. SWOT of CompetitorsAmongst Hersheys competitors, Cadbury is one of the major ones. Below is a brief SWOT analysis for Cadbury. STRENGTHS WEAKNESSES Has been in the market for 200 years- well established brand name &image. Small product portfolio. Theres not much variety. Products sold in over 200 countries. Very few new products are created by own group. High profits Has been awarded Royalty. OPPORTUNITIES THREATS Can expand into new markets Other established brands in the market Should produce new products Diversification of other brands into the market MARKETING STRATEGY PRODUCTThe Hershey Company has a number of products, the main categories being as follows 1. Chocolate Candy This holds Hersheys Kisses, Hersheys Bliss, and Hersheys Milk Choc olate amongst a lot of others. 2. Pantry Items This category includes Hershey Syrup, Hershey Toppings and Hersheys Hot Cocoa mix etcetera. 3. Snacks Some products of this category are Canola Bars, Snacksters, 100 Calorie Bars and SnackBarz. 4. Gum and Mint BreathSavers mints, Bubble Yum bubble gum and Ice Breakers are the products of this category 5.Sugar Confectionary To capture the market who is sugar conscious or health conscious, Hersheys developed Hersheys Sugar Free Candy The Hershey Company has, in addition, acquired licenses to manufacture and sell chocolate and non-chocolate products of other brands such as Nestle Kit Kats, Rolos, and Cadbury. It also acquired a number of companies and now risible Rancher, Bubble Yum, Mauna Loa, Reeses, Whoppers, Twizzlers and Young & Smylie products are officially a part of the Hershey Company. PRICE Hersheys chocolates are priced at a moderate level.A plain Hershey bar of 1. 55 oz is priced at $0. 99 and a Toblerone, 1. 7 oz bar, is pric ed at $1. 49. Toblerone is 50% more expensive than Hershey, as we can see below. Following is a list of the general pricing of Hershey Products Hersheys Milk Chocolate (1. 55 oz) priced at $0. 99. Mr. GoodBar (1. 75 oz) priced at $0. 99 Almond Joy 8 Pack (0. 6 oz x 8 pieces) priced at $2. 45 Almond Joy Eggs (1. 1 oz) priced at $0. 99 Cadbury Caramel Eggs (1. 2 oz) priced at $0. 99 unappeasable Licorice from Y (8 oz bag, containing 55 pieces) priced at $4. 5 Bubble Yum (o. 17 oz oz x 5 pieces) priced at $0. 99 We can see the general pricing trend of Hershey, as almost all 1. 5 to 2 oz bars are priced at 0. 99 dollars PLACE Hershey sells its products at a wide legions of places. It sells to wholesale allocators, wholesale clubs, mass merchandisers, grocery stores, drug stores, vending companies, convenience stores, department stores, dollar stores and pictorial food stores. Then these customers of Hershey sell to end consumers in approximately 2 million outlets all over Nort h America and worldwide. (The Hershey Company)One of the largest distributors of Hershey products is the Mc Lane Company Inc. , which in turn sells to other stores. It is the main distributor for Wal-Mart which is one of the few places which sells products of the Hershey Company. (The Hershey Company) PROMOTION The Hershey Company uses a variety of mediums and techniques for advertising and promotion. Apart from regular mediums such as Billboard advertisement, Newspaper and magazine advertisements and Television commercials, it uses other techniques like using movies and Box function to promote their company.For instance, in Hersheys Hulked-Up promotion, you enter to win a Hulk Hummer and get a free T-Shirt by checking out featured products (ComicBookMovie. com). Other promotions include HERSHEYS Camaro Sweepstakes to win a 2010 Chevy Camaro, HERSHEYS KISSES Cookie and HERSHEYS and the Young Survival Coalition which was used to create breast genus Cancer awareness along with promo ting Hershey. (The Hershey Company) ADVERTISEMENT CRITIQUE FINANCIAL ANALYSIS Looking at the financial pedagogy of the last five years (www. thehersheycompany. om) has given the following results Net Profit 10. 1% of Sales in 2005. Net Profit 11. 3% of Sales in 2006. Net Profit 4. 32% of Sales in 2007. Net Profit 6. 06% of Sales in 2008. Net Profit 7. 94% of Sales in 2009. These profitability ratios show that while Hershey has performed better in 2009 than two of its preceding years, its profits have decreased considerably compared to 2006. 2006 By taking a closer look at the quarterly reports of Hershey for these years it is noted that the first half had strong but the second half of 2006 saw a slow-down in sales.The Hershey Companys long-term strategies seek to attain net sales growth of 3% to 4% annually (The Hershey Company) but results for 2006 did not meet their goals. Net sales growth was 2. 58% for 2006. There was a decline in market share during the second half, mainl y in North American. Hershey tried to gain momentum again and succeeded with time but at a price. Apart from the change magnitude interest costs for that year there were increased spending on advertising starting from the fourth quarter and continuing well into 2007, affecting the net profit for 2007 drastically. From a net profit percent of 11. % in 2006, it went down to 4. 32% in 2007. 2007 2007 was also a difficult year. Net sales growth in this year was 0. 05% which is not even close to the companys goal of 3%-4% per year, even with the increased sales from international business and sales from the Joint Venture formed with Godrej Beverages & Foods Limited formed that year (Wikipedia). Sales in North America was low, costs incurred were much higher than the previous year and the company saw a much lower profit in 2007. Business realignment and impairment costs rose from 14,576,000 to a whopping 276,868,000.The difference in net income percentage was -61. 7%. Increased investmen t spending for advertising and expansion of our international infrastructure also contributed to the lower income in 2007. 2008 Net sales growth increased from 0. 05% to 3. 8% in this year. The net income percentage which was negative in the previous year turned into a positive 45. 4%. Needless to say, Hershey gained momentum in the market again. Results for the 2008 up to mark and met the Hershey Companys goals and expectations. FUTURE TRENDS wellness Awareness Many people dont use chocolate for fear of become fat, acquire acne or other health reasons such as cholesterol. This may reduce sales. Allergies some children and adults have allergies, most commonly peanut allergies and other nut allergies. This, also, may decrease sales. High Class society gatherings/increased importance to holidays such as Halloween, Easter, Christmas which use a lot of chocolate and chocolate products. This could increase sales in the future. Price of cocoa and Price of fuel The price of these two c ommodities will effect sales negatively if they continue to rise.RECOMMENDATIONS FOR FUTURE Keeping in mind the factors and trends that may increase or decrease sales in the future, Hershey can take a number of steps to improve their chances of turning untoward situations into ones that will actually benefit the company. A lot of people think of chocolate and think of one of these words junk food, unhealthy, fattening and so on. But the fact is that chocolate can actually promote good health. Especially dark chocolate, which has anti-oxidant effects and generates antithrombotic mechanisms, can lead to better cardiovascular health (The Pediatric Infectious Disease Journal).In layman terms this means it prevents the blood in the heart from clotting up. Hersheys can use this knowledge for a different spin on their advertisements and removing the concept of unhealthy chocolate. Also many people and children have nut allergies, and since a lot of Hersheys products include hazel nut and peanuts, this can pose a problem But with careful and well be market research Hersheys can overcome the problem of its chocolate bars containing nut not being sold, by finding out approximately what population of chocolate lovers is allergic to nuts and other ingredients which prevent them from buying chocolate.Another trend which poses a problem is the economy. Prices are constantly on the rise and cocoa and fuel are the two major concerns. Increase in fuel prices may lead to village of a few plants to save on costs, or if the plants are not closed, prices of products may have to be raised to cover up the costs. Prices of cocoa are also on the rise, and an increase in this blunt material may lead to an increase in price of the end-products. Since cocoa is produced in a few countries with tropical climate, chocolate manufacturers in colder climates have to import cocoa. Hershey has to pay mport taxes on top of the increased prices due to the global deficit of 145,000 tonnes of co coa in the 2007-2008 season (confectionarynews. com). To reduce this cost, Hershey has two options. Either to buy as much cocoa in bulk as possible when prices are low and to buy as minimum as possible when the prices are high, or to outsource their manufacturing to places like Indonesia or Ghana where cocoa production is the largest (BBC News). CONCLUSION Hershey is a company which is already popular, but with a few well intend strategic decisions has the potential to be much more successful.They can do this by a lessen their costs, starting up new subsidiaries, perhaps even starting up production of their own cocoa beans instead of importing from Indonesia, Ghana and other cocoa manufacturers. The next thing they have to do is increase their advertising to countries Asia, as Asia has a large number of potential consumers.. APPENDIX REFERENCES About The Hershey Company. (www. thehersheycompany. com) http//www. thehersheycompany. com/about/ bronchial asthma and Allergy Informati on and Research. Nut Allergy- The Basics http//www. sers. globalnet. co. uk/aair/nuts. htm BBC News. Peanut allergy on the increase http//news. bbc. co. uk/2/hi/2487769. stm BBC News. BBC News. Cocoa price hits 14-year-high Clayton News Daily. Confectionerynews. com. Future of cocoa prices uncertain, says ICCO. ComicBookMovie. com. Centers for Disease Control and Prevention Emma Vandore. Got Milk? More People Want It Now. Contra Costa Times. Evan Carmichael. His Secret Recipe How Hershey Achieved Success Groovy Candies. Hoovers. Labour Law Center.Federal stripped Wage Increase for 2007, 2008, & 2009 Lundell, Dean Capitalizing on Our Candy Cravings (NSRGY, CSG, HSY). Investopedia. com. August 1st, 2007. November 13th, 2007. Investopedia website Investor Relations Annual and Quarterly Reports (www. thehersheycompany. com) MarketWatch. Hersheys 3rd-quarter profit rises 30% http//www. marketwatch. com/story/hersheys-third-quarter-profit-rises-30-2009-10-22 Products (www. hersheys. com) The Pediatric Infectious Disease Journal. Plasma antioxidants from chocolate Oct, 2003 . Volume 22 complete 10. p A7