Hershey Report

THE HERSHEY CHOCOLATE ships connection INTRODUCTION The Hershey beau monde was origin solelyy a purely umber manu situationuring production line still extended to wafers and opposite products, some(prenominal) even up non- java. Now, the Hershey confederacy has vainglorious to become a broadener when it comes to sick drinking chocolate and premium chocolate. Hersheys Mission Statement is Bringing sweet moments of Hershey happiness to the world all sidereal day (www. thehershey ph starr. com).This means delivering quality confectionary to consumer for all occasion, existence a preponderating and fun organization for the employees, having good business relationships for growth with customers, suppliers and business partners, creating value for sh atomic number 18holders and philanthropic activities for society as a whole. The company, adhering to its Mission from the founding day till today, strives to continuously create value by acquireing a number of products to c ater to frequently changing consumers disposition.Hence by creating a diverse portfolio which trans organize customer desires to reality, and by maintaining its quality The Hershey confederacy has managed to become adept of the top chocolate ticks in the merchandise. HISTORY Hersheys derived from a bingle decision- the decision of mickledy bring to passr Milton Hershey. In 1894 he decided to perplex sweet chocolate which would coat caramels. He started off an enterprise and called it The Hershey drinking chocolate Company, located in Lancaster, Pennsylvania. In 1900, the Hershey Chocolate Company started the production of take by chocolate bars, chocolate wafers and more than than.Hershey was the company which made the once a extravagance item affordable to the common public by choosing to produce at a hand take aim. By using mass production the company had lowered its per unit cost and hence was able to sell it at a lower cost than other chocolates. The success of high gross revenue led to Hersheys elaborateness of juvenile chocolate factories, one of them creation in south-central Pennsylvania in Derry Township, close to the ports of New York and Philadelphia which supplied the import sugar and cocoa beans needed, surrounded by dairy farms that provided the milk required, and with a local labor supply of honest, hard-working people.By 1905 the production of chocolate in this mill was flourishing. Today, the Hershey Company operates all over the world, employs more than 12,000 people and generates revenues of more than $5 billion. (www. thehersheycompany. com) ENVIRONMENTAL ANALYSIS Sales of chocolate depend majorly on the take in 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 simply summer day, gross revenue being lower in the latter.It has been noned that gross gross sales of Hersheys or any cho colate print for that matter, augments during the third and stern quarter of the year, that is, the holiday seasons. For Hersheys, the difference in the give the sack sales of the firstly quarter of 2009 and the third quarter of 2009 was $248,087,000. (www. thehersheyco more. com). Judging from this, we crowd out safely deduct that chocolate sales, on a large part, depends on the environment. If we look at the social environment, in that respect be all miscellaneas of consumers with different demands. approximately would prefer cheaper chocolate and would be more than ready to compromise on quality and guide it middling a snack epoch others demand a wealthy taste making chocolate more of a luxurious item. This requires the industry to produce a variety of products to meet the inevitably of as legion(predicate) customers to ensure greater sales. unless there is as head as the issue of brand image. If a company produces both rich and cheap quality products, it doe s not develop a specific image of the brand. Hence the business needs to identify what demographics they want to cater to. The Hershey Company has a number of competitors.The company itself has an average of 5 billion dollar sales annually, 5132. 8 one million million dollars in 2008 (thehersheycompany. com) and employs 14,400 employees which is quite a large number yet there be other interchangeable brands in the market. Major competitors of Hersheys atomic number 18 Cadbury, with a sale of 7,792. 3 million dollars and 45,000 employees in 2008. Mars, with sales scope 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 cardinal forces we erect analyze the industry and subsequently to develop business strategy. These five forces present in the marketing environment pay back out help determine the inte nsity of competition intensity and hence magnet of a market. In the marketing context, attractiveness refers to the overall returnsability of the industry. A profitable business is an attractive industry wherein the combination of these forces acts to pull up the overall profitability. Bar strikeing Power of Suppliers The supply of Cocoa is particular.Since it is produced in aras with tropical weather, a smoke of chocholate manufacturers open to import the cocoa. Suppliers have more talk terms 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 demoralise in large volumes, their bargaining power increases. This is specifically applicable to retailers, more specifically to retailers like Wal-Mart.Wal-Mart and other retailers who purch ase large volumes of chocolate can bargain for lower harms and the industrys profits can slack. scourge of New Entrants Threat of naked starting motors is not a major bring up 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 accordingly have to be a mass level manufacturer. Also, there are factors much(prenominal)(prenominal) as capital 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 existing 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 ther e are many people who deem chocolate as unhealthy and plump and are ready to substitute it with other products. Competitive Rivalry deep down n Industry Hershey is not the only chocolate company around. in that location are a crowd more chocolate brands which are as established as Hershey. Consumers have a choice of grease ones palmsing Hershey or Cadbury or Mars or other more generic chocolates, and this provides a significant amount of competition. Hersheys has to compete against other chocolate brands and absorb out for substitute products which makes competition intense. However, this analysis looks at the forces closely affecting the business i. e. the micro environment.Hence the Porters Analysis is not a hundred portion useful on its own. For most marketing experts, porters five forces analysis is only a starting point or sort of a checklist and therefore the benefit of this analysis can be interpreted only when used in conjunction with other analysis techniques. swot Analysis STRENGTHS Rich history full of tradition, originality and philanthropic service The Hershey Company produced Hersheys Tropical Chocolate bars and Field Ration D bars for the troops at war giving it points for both originality and patriotism.Milton Hershey has in any case opened the Hershey Park in 1907 (www. hersheypa. com) Strong Brand Name and get wind Hershey has been in the market since 1894 and since then it has created a strong brand wee-wee and image. Diverse Product Portfolio Hersheys Chocolate Bar, Almond Joy, getup Kat, Hersheys Kisses, Mounds, Reeses, Payday, York Peppermint Pattie, draw Duds, Mr. Goodbar, Rolo, Skor, Whatchamacallit, Whoppers and Krackle Bar are only a some of Hersheys products amongst many more. Having a huge variety of products increases chances of high sales for the company. Strong Alliances apart(predicate) from acquiring a number of popular chocolate/candy manufacturing companies and has acquired licenses for producing and selli ng Cadbury and Nestle products, it has in any case, recently allied with Starbucks, which lead to a 30% increase in profits for Hershey. (MarketWatch) OPPORTUNITIES A number of consumers desire and demand richer products and this gives Hershey to gain more of the upper strata of society The Hershey Company conjugate up with Starbucks, which was a wise move as it contributed to a 30% growth in Hersheys profit (MarketWatch).More joint ventures with, for instance, Dunkin Donuts 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 higher in the holiday seasons. Hershey can use this to focus more on chocolates as gifts. scathe decline of sugar Outsourcing of labor to cheaper areas WEAKNESSES Hershey is northeastern the Statess largest chocolate producer (The Hershey Company) but the same cannot be said when it comes to the international market. Currently, the companys presence is limited to Brazil, Canada, Mexico, and the unite States. www. investopedia. com) A key weakness of Hershey is that it does not have very much sales in the Asian markets and since Asia is the largest continent and a huge population, it is missing out on a lot. Price inflation is also an issue. As worths are relent littlely increasing, consumers think twice before purchasing a lot of things and Hershey products are no longer item that once can bargain with the loose change in their pocket. Less people are voluntary 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 corpulency. In 2008, only one put up 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 habitual conception and heatlh conscious people tend to buy little or no chocolate. If the health swerve rises chocolate sales provide gradually decrease. Technology is becoming more and more travel every day, and in order to be retain its economies of scale and to bear on competent, Hershey has to keep up with technological progress in manufacturing and this will automatically increase cost.. A recent issue has been minimum wage for labourers. good July 24, 2009, the federal minimum wage increases to $7. 25 per hour. (Labour Law Center) Price of milk has been on a steady 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 due to change magnitude be of production hence sales could plummet really low. There has also been a steady price increa se in gasoline. In the Clayton watchword Daily, The annual average price of regular unleaded gas is evaluate to increase from $2. 35 per gallon in 2009, to $2. 83 in 2010, with similar price hikes on heating oil and diesel fuel. In this case production costs of running the heavy machinery in factories will increase significantly, making it demanding for Hershey to maintain reasonable price of its products. trick up of CompetitorsAmongst Hersheys competitors, Cadbury is one of the major ones. Below is a brief wonk 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 wave into new markets another(prenominal) established brands in the market Should produce new products Diversification of other brands into th e market MARKETING STRATEGY PRODUCTThe Hershey Company has a number of products, the main categories being as follows 1. Chocolate candy This embarrasss Hersheys Kisses, Hersheys Bliss, and Hersheys Milk Chocolate amongst a lot of others. 2. Pantry Items This stratum 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 cumulation 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 Jolly Rancher, Bubble Yum, Mauna Loa, Reeses, Whoppers, Twizzlers and tender & 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 priced at $1. 49. Toblerone is 50% more big-ticket(prenominal) 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 ballock (1. 1 oz) priced at $0. 99 Cadbury Caramel Eggs (1. 2 oz) priced at $0. 99 Black 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 tail end Hershey sells its products at a wide array of places. It sells to wholesale distributors, wholesale clubs, mass merchandisers, g rocery 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 North America and worldwide. (The Hershey Company)One of the largest distributors of Hershey products is the Mc highroad 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 publicize and promotion. isolated from regular mediums such as Billboard advertisement, Newspaper and magazine advertisements and telecasting commercials, it uses other techniques like using movies and Box Office 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 (ComicBo okMovie. 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 promoting Hershey. (The Hershey Company) ADVERTISEMENT CRITIQUE FINANCIAL ANALYSIS feel at the financial statement of the last five years (www. thehersheycompany. om) has given over the following results profits Profit 10. 1% of Sales in 2005. moolah 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 precept 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, mainly in North American. Hershey tried to gain momentum again and succeeded with time but at a price. Apart from the increased interest costs for that year there were increased expenditure 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 incurre d 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 investment 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 invalidating 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. prox TRENDS Health Awareness Many people take for grantedt use chocolate for fear of become fat, getting 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 d ecrease 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 commodities 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 travel to improve their chances of turning unfavorable situations into ones that will actually benefit the company. A lot of people think of chocolate and think of one of these dustup 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 paediatric Infectious Disease Journal).In layman terms this means it prevents t he 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 trouble But with careful and well defined 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 hypersensitive 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 closure 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 crank 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 spheric deficit of 145,000 tonnes of cocoa in the 2007-2008 season (confectionarynews. com). To reduce this cost, Hershey has two options. both 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 gold coast where cocoa production is the largest (BBC News). CONCLUSION Hershey is a company which is already popular, but with a few well planned strategic decisions has the potential to be much more successful.They can do this by a decrease 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 manufacturer s. 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 active The Hershey Company. (www. thehersheycompany. com) http//www. thehersheycompany. com/about/ Asthma and Allergy Information and Research. Nut Allergy- The Basics http//www. sers. globalnet. co. uk/aair/nuts. htm BBC News. monkey nut 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 achievement Groovy Candies. Hoovers. Labour Law Center.Federal Minimum 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 Issue 10. p A7