I.

Introduction

After an apprenticeship to a confectioner in 1873, Milton S. Hershey founded a candy shop

in Philadelphia. This candy shop was only open for six years, after which Hershey apprenticed
with another confectioner in Denver, where he learned to make caramel.[12] After another failed
business attempt in New York, Hershey returned to Pennsylvania, where in 1886 he founded
the Lancaster Caramel Company. The use of fresh milk in caramels proved successful,[13] and
in 1900, after seeing chocolate-making machines for the first time at the 1893 World's
Columbian Exposition in Chicago, Hershey sold his caramel company for $1,000,000[13] (equal
to $30,116,000 today), and began to concentrate on chocolate manufacturing, stating to people
who questioned him, "Caramels are just a fad, but chocolate is a permanent thing."
In 1896, Milton built a milk-processing plant so he could create and refine a recipe for milk
chocolate candies. In 1899, he developed the Hershey process, which is less sensitive to milk
quality than traditional methods. In 1900, he began manufacturing Hershey's Milk Chocolate
Bars, also called Hershey's Bars or Hershey Bars.

Mission & Vision Statement

Mission Statement

The Hershey mission statement in its entirety is “At the Hershey Company, we make chocolate
brands that people love. Hershey’s mission statement, bringing sweet moments of Hershey
happiness to the world every day, summarizes our company, our people, our past and future. Our
history of producing the world’s best treats goes back more than 100 years. We take great pride
in our brands and in the fun and enjoyment our products add to the lives of our customers”

Vision Statement

Hershey’s vision is “We not only offer the best merchandise at the best prices, but we’re always
working to make your shopping experience enjoyable.” The company aim at delivering the best
services to its customers at affordable prices. Hershey is not only committed to offering healthy
products but also changing the perceptions that people have about chocolate brands being
unhealthy (Hershey Company, 2019).
 II. EXTERNAL ANALYSIS
 General Environment

Political Factors

Political factors play a significant role in determining the factors that can impact The Hershey
Company's long term profitability in a certain country or market. The Hershey Company is
operating in Confectioners in more than dozen countries and expose itself to different types of
political environment and political system risks. The achieve success in such a dynamic
Confectioners industry across various countries is to diversify the systematic risks of political
environment. The Hershey Company can closely analyze the following factors before entering or
investing in a certain market-
 Political stability and importance of Confectioners sector in the country's economy.
 Risk of military invasion
 Level of corruption - especially levels of regulation in Consumer Goods sector.
 Bureaucracy and interference in Confectioners industry by government.
 Legal framework for contract enforcement
 Intellectual property protection
 Trade regulations & tariffs related to Consumer Goods
 Favored trading partners
 Anti-trust laws related to Confectioners
 Pricing regulations – Are there any pricing regulatory mechanism for Consumer Goods
 Taxation - tax rates and incentives
 Wage legislation - minimum wage and overtime
 Work week regulations in Confectioners
 Mandatory employee benefits
 Industrial safety regulations in the Consumer Goods sector.

 Product labeling and other requirements in Confectioners

Economic Development
The Macro environment factors such as – inflation rate, savings rate, interest rate, foreign
exchange rate and economic cycle determine the aggregate demand and aggregate investment in
an economy. While micro environment factors such as competition norms impact the
competitive advantage of the firm. The Hershey Company can use country’s economic factor
such as growth rate, inflation & industry’s economic indicators such as Confectioners industry
growth rate, consumer spending etc to forecast the growth trajectory of not only --sectoryname--
sector but also that of the organization. Economic factors that The Hershey Company should
consider while conducting PESTEL analysis are -
 Type of economic system in countries of operation – what type of economic system there is
and how stable it is.
 Government intervention in the free market and related Consumer Goods
 Exchange rates & stability of host country currency.
 Efficiency of financial markets – Does The Hershey Company needs to raise capital in local
market?
 Infrastructure quality in Confectioners industry
 Comparative advantages of host country and Consumer Goods sector in the particular
country.
 Skill level of workforce in Confectioners industry.
 Education level in the economy
 Labor costs and productivity in the economy
 Business cycle stage (e.g. prosperity, recession, recovery)
 Economic growth rate
 Discretionary income
 Unemployment rate
 Inflation rate
 Interest rates

Socio Cultural

Society’s culture and way of doing things impact the culture of an organization in an
environment. Shared beliefs and attitudes of the population play a great role in how marketers at
The Hershey Company will understand the customers of a given market and how they design the
marketing message for Confectioners industry consumers. Social factors that leadership of The
Hershey Company should analyze for PESTEL analysis are

 Demographics and skill level of the population

 Class structure, hierarchy and power structure in the society.
 Education level as well as education standard in the The Hershey Company ’s industry
 Culture (gender roles, social conventions etc.)
 Entrepreneurial spirit and broader nature of the society. Some societies encourage
entrepreneurship while some don’t.
 Attitudes (health, environmental consciousness, etc.)
 Leisure interests

Technological Development

Technology is fast disrupting various industries across the board. Transportation industry is a
good case to illustrate this point. Over the last 5 years the industry has been transforming really
fast, not even giving chance to the established players to cope with the changes. Taxi industry is
now dominated by players like Uber and Lyft. Car industry is fast moving toward automation led
by technology firm such as Google & manufacturing is disrupted by Tesla, which has stated an
electronic car revolution.
A firm should not only do technological analysis of the industry but also the speed at which
technology disrupts that industry. Slow speed will give more time while fast speed of
technological disruption may give a firm little time to cope and be profitable. Technology
analysis involves understanding the following impacts -
 Recent technological developments by The Hershey Company competitors
 Technology's impact on product offering
 Impact on cost structure in Confectioners industry
 Impact on value chain structure in Consumer Goods sector
 Rate of technological diffusion

Environmental Factor

Different markets have different norms or environmental standards which can impact the
profitability of an organization in those markets. Even within a country often states can have
different environmental laws and liability laws. For example in United States – Texas and
Florida have different liability clauses in case of mishaps or environmental disaster. Similarly a
lot of European countries give healthy tax breaks to companies that operate in the renewable
sector.
Before entering new markets or starting a new business in existing market the firm should
carefully evaluate the environmental standards that are required to operate in those markets.
Some of the environmental factors that a firm should consider beforehand are -
 Weather
 Climate change
 Laws regulating environment pollution
 Air and water pollution regulations in Confectioners industry
 Recycling
 Waste management in Consumer Goods sector
 Attitudes toward “green” or ecological products
 Endangered species
 Attitudes toward and support for renewable energy

Legal Factors

In number of countries, the legal framework and institutions are not robust enough to protect the
intellectual property rights of an organization. A firm should carefully evaluate before entering
such markets as it can lead to theft of organization’s secret sauce thus the overall competitive
edge. Some of the legal factors that The Hershey Company leadership should consider while
entering a new market are -
 Anti-trust law in Confectioners industry and overall in the country.
 Discrimination law
 Copyright, patents / Intellectual property law
 Consumer protection and e-commerce
 Employment law
 Health and safety law
 Data Protection

 Market Demand and Opportunities

Types of Product

Hershey Company, also known as (1894–1927) Hershey Chocolate Co., (1927–68) Hershey
Chocolate Corporation, and (1968–2005) Hershey Foods Corporation, American
manufacturer of food products, chiefly chocolate and sugar-based confections. Hershey’s Milk
Chocolate, in its brown-and-silver wrapper, was perhaps the best-known American candy bar of
the 20th century. Company headquarters are in Hershey, Pennsylvania.

The Hershey Company traces its origins to the 1880s, when Milton S. Hershey founded the
Lancaster Caramel Company in Lancaster, Pennsylvania. After seeing German-made chocolate-
processing machinery at the World’s Columbian Exposition of 1893 in Chicago, Hershey
decided to go into the chocolate business. In 1894 he started a chocolate company that had
various confections on the market by the following year. In 1900 he sold the caramel company to
a competitor and began the manufacture and sale of milk chocolate bars. Business was so
successful that in 1903 Hershey started work on a new factory in Derry Township, Pennsylvania.
It eventually became the world’s largest chocolate-manufacturing plant. An
unincorporated community called Hershey developed around the factory.

In 1908 the Hershey Chocolate Co. was incorporated, and in 1927 it was reorganized as the
Hershey Chocolate Corporation, a publicly traded company. Under the guidance of Milton
Hershey—who remained with the company until shortly before his death in 1945—the product
line steadily expanded, with the introduction of Kisses (large morsels) in 1907, Milk Chocolate
with Almonds in 1908, Mr. Goodbar (with peanuts) in 1925, and Krackel (with crisped rice) in
1938. Hershey contributed to the World War II war effort with Field Ration D, an emergency
nutrition bar that did not melt in tropical heat and was intentionally not tasty enough to tempt
soldiers to eat it as a snack.

During the 1960s Hershey bought the manufacturer of Reese’s Peanut Butter Cups and
two pasta businesses. In recognition of its diversification, the company was renamed Hershey
Foods Corporation in 1968. Two notable changes came shortly afterward. After many decades at
5 cents, the price of the standard milk chocolate bar went up to 10 cents (bar size had diminished
over the years). And in 1970 the company responded to increased competition—most notably
from Mars, Inc.—by advertising to consumers for the first time.

Hershey had offered tours of its factory to the public since 1915. In 1973, however, the factory
tours ended and Hershey’s Chocolate World, a kind of museum with interactive exhibits, opened
as a replacement. (Additional Hershey’s Chocolate Worlds were later established in other cities.)
During the 1980s the company purchased the American operations of Cadbury Schweppes,
thereby becoming the manufacturer of Cadbury and Peter Paul products in the United States.

Hershey made a major expansion into non-chocolate candies in 1996 when it acquired
Leaf North America, owner of the Jolly Rancher and Payday brands. In 1998 the company sold
off its pasta operations. Hershey Foods Corporation was renamed Hershey Company in 2005.
In 1905 Milton S. Hershey established the Hershey Trust Company for the upkeep of a school
for underprivileged children; the facility eventually became known as the Milton Hershey
School. He later donated most of his Hershey stock to the trust company, which by the early 21st
century was the largest shareholder in the Hershey Company.

Intensity Competition

Mars is seen as one of Hershey's top competitors. Mars was founded in McLean, Virginia} in
1911. Mars is in the Food Processing industry. Compared to Hershey, Mars generates $27.1B
more revenue.

Mondelez International is Hershey's #2 competitor. Mondelez International was founded in 1903,

and its headquarters is in East Hanover, New Jersey. Mondelez International competes in the
Food Processing industry. Mondelez International has 64,640 more employees than Hershey.

Nestle is Hershey's #3 rival. Nestle is headquartered in Vevey, Vaud, and was founded in 1866.
Like Hershey, Nestle also competes in the Food Processing industry. Nestle generates 1,174%
the revenue of Hershey.
Supplies & Distribution

Hershey is a global confectionery leader known for bringing goodness to the

world through chocolate, sweets, mints, gum and other great tasting snacks. We
are the largest producer of quality chocolate in North America, a leading snack
maker in the United States and a global leader in chocolate and non-chocolate
confectionery. We market, sell and distribute our products under more than 80
brand names in approximately 90 countries worldwide.
Our principal product offerings include chocolate and non-chocolate
confectionery products; gum and mint refreshment products; pantry items, such as
baking ingredients, toppings and beverages; and snack items such as spreads,
meat snacks, bars and snack bites and mixes, popcorn and protein bars and
cookies. Business Acquisitions In September 2019, we completed the acquisition of ONE
Brands, LLC ("ONE Brands"), previously a privately held company that sells proprietary
nutritional supplement products to retailers and distributors in the United States, with the
ONE Bar as its primary product. ONE Brands is expected to generate annualized
net sales of approximately $100 million and complements our existing snacking
businesses acquired in 2018.
In October 2018, we completed the acquisition of Pirate Brands, which includes
the Pirate's Booty, Smart Puffs and Original Tings brands, from B&G Foods, Inc.
Pirate Brands offers baked, trans fat free and gluten free snacks and is
available in a wide range of food distribution channels in the United States.
In January 2018, we completed the acquisition of all of the outstanding shares
of Amplify Snack Brands, Inc. ("Amplify"), a publicly traded company based in
Austin, Texas that owns several popular better-for-you snack brands such
as SkinnyPop, Oatmega and Paqui. The acquisition enables us to capture more
consumer snacking occasions by creating a broader portfolio of brands.

Cost of Doing Business

The Hershey Company - commonly called Hershey’s - is the leading manufacturer of
chocolates in the United States. Focused on the production of chocolate, sweet and mints,
the company was founded in 1894 by Milton S. Hershey in his hometown of Derry
Church in Pennsylvania. Derry Church was renamed Hershey in 1906 following the
growing popularity of the company’s brand products. Hershey, PA remains the
company’s headquarters.

Ever since its inception, the company has grown to become one of the leading
confectionery companies in the world. With annual net sales of over 7.5 billion U.S.
dollars worldwide, the company is currently staffed with over 15,000 full-time
 employees globally.

The company’s product portfolio includes some of the most popular chocolate candy
brands such as Hershey's chocolate bar or Hershey's Kisses. Its iconic brands Reese’s
Peanut Butter Cup and Hershey's Kisses were amongst the widely consumed chocolate or
candy brands in the U.S. in 2017 — overtaking Snickers and Twix. According to a 2017
survey, 32 million Americans treated themselves to one or two servings of Hershey’s
Kisses in the past 30 days, approximately 10 percent of the population. Hershey’s
chocolate is also a favorite among bakers, with nearly 46 million U.S. consumers
choosing Hershey’s Chips as their preferred brand of baking chips.

The Hershey Company also produces non-chocolate or candy-based products like

chewing gums, ice cream and milk drinks. Hershey’s is also licensed to produce Cadbury
products as well as the Kit Kat bar and Rolo candies.

 Industry and Competition Analysis

Market Information
The Hershey Company is a spearhead in the US confectionery market with a marketing approach
dedicated to strong brand equity, product originality, and constantly superior product quality.

Hershey has been increasing its advertising budget to make its product innovations public. In
2016, Hershey invested 20% of its total media on digital media – 3 times more than the previous
year.

Hershey’s main strengths in marketing are brand awareness and brand reliability. Its core brands
-Kisses, Twizzlers, Reese’s, Kit-Kat, and the Hershey Bar.

Hershey applies a micro-marketing concept to its businesses, which means that it markets precise
products to small target audiences, modifying its products to meet these audiences’ specific
demands. Hershey aims to give its customers a larger range option by branding their products at
higher prices. The Company also has pre-designed provisions for weddings, baby shower,
birthdays, and holidays.

Hershey counts on a range of advertising practices during the holiday season. Every holiday, it
designs a special theme for chocolates and candies. It also makes sure that Hershey products
everywhere are presented with the apt holiday theme.

Operation Product/Aspects

Hershey's operations consist of two business segments, North America, 90% of revenue, and
International and Other, 10% of revenue. The company makes and sells more than 80 name
brands led by Hershey's and Reese's, as well as Krackle, Kit Kat, and York. Other popular brand
franchises are Twizzlers, Mounds, York, Ice Breakers, and Bubble Yum, which fall within the
company's sweets and refreshment business unit. Through acquisitions, Hershey has added snack
brands such as Skinny Pop popcorn and other "better-for-you" snacks and Krave meat snacks
(jerky).

Hershey’s North America segment accounts for 90% of revenue, and it caters to the traditional
chocolate and non-chocolate confectionery market, as well as grocery and growing snacks
markets, in the US and Canada.
International and Other (10% of revenue) has operations in China, Mexico, Brazil, India, and
Malaysia, primarily for consumers in these regions. The segment also distributes and sells
confectionery products in export markets within Asia, Latin America, Middle East, Europe,
Africa and other regions. It also includes global retail operations, including Hershey's Chocolate
World stores in Hershey, Pennsylvania; New York; Las Vegas; Niagara Falls (Ontario); Dubai;
and Singapore, as well as operations associated with licensing the use of certain of Hershey's
trademarks and products to third parties around the world
 Competitor Analysis

Major Competitor

Competitors Profile

1. MARS Incorporated

Mars is engaged in the production and sale of confectionery, pet food, and other food products to
customers worldwide. It offers chocolate products, confectionery items, pet food products for
dogs and cats, single-serve drinks, including coffees, teas, and hot chocolate drinks. The
Company is also involved in operating pet hospitals, developing DNA tests for dogs, and
conducting fundamental scientific research on cocoa flavanols.

2. Mondelez International

Mondelēz International is a multinational confectionery, food, and beverage company. The

Company manufactures chocolate, biscuits, gum, confectionery, and powdered beverages.
Mondelez International's portfolio includes various brands such as Belvita, Chips Ahoy!,
Nabisco, Oreo, Ritz, TUC, Triscuit, LU, Club Social, Barni, and Peek Freans (cookies and
crackers), Milka, Terry's, Côte d'Or, Toblerone, Cadbury, Freia, Marabou, Fry's, Lacta
(chocolate), Trident, Dentyne, Chiclets, Halls, Stride (gum and cough drops) and Tang
(powderedbeverages).

3. Nestle

Nestle is a global food and beverage company. The company offers products and services across
a wide range of categories, including powdered and liquid beverages, nutrition and health
science, milk products and ice cream, petcare, prepared dishes and cooking aids, confectionery,
and water. Its main brands include Nescafé, KitKat, Nespresso, Maggi, Toll House, and Milo.
.

Summary & Conclusion

External Factor Evaluation (EFE) Matrix

External Opportunities

 Lower inflation rate – The low inflation rate bring more stability in the market, enable
credit at lower interest rate to the customers of The Hershey Company.
 The market development will lead to dilution of competitor’s advantage and enable The
Hershey Company to increase its competitiveness compare to the other competitors.
 New customers from online channel – Over the past few years the company has invested
vast sum of money into the online platform. This investment has opened new sales
channel for The Hershey Company. In the next few years the company can leverage this
opportunity by knowing its customer better and serving their needs using big data
analytics.
 New environmental policies – The new opportunities will create a level playing field for
all the players in the industry. It represent a great opportunity for The Hershey Company
to drive home its advantage in new technology and gain market share in the new product
category.
 New trends in the consumer behavior can open up new market for the The Hershey
Company . It provides a great opportunity for the organization to build new revenue
streams and diversify into new product categories too.
 The new technology provides an opportunity to The Hershey Company to practices
differentiated pricing strategy in the new market. It will enable the firm to maintain its
loyal customers with great service and lure new customers through other value oriented
propositions.
 Stable free cash flow provides opportunities to invest in adjacent product segments. With
more cash in bank the company can invest in new technologies as well as in new products
segments. This should open a window of opportunity for The Hershey Company in other
product categories.
 The new taxation policy can significantly impact the way of doing business and can open
new opportunity for established players such as The Hershey Company to increase its
profitability.

External Threats

 New environment regulations under Paris agreement (2016) could be a threat to certain
existing product categories .
 The demand of the highly profitable products is seasonal in nature and any unlikely event
during the peak season may impact the profitability of the company in short to medium
term.
 Imitation of the counterfeit and low quality product is also a threat to The Hershey
Company’s product especially in the emerging markets and low income markets.
 Liability laws in different countries are different and The Hershey Company may be
exposed to various liability claims given change in policies in those markets.
 Rising raw material can pose a threat to the The Hershey Company profitability.
  The company can face lawsuits in various markets given - different laws and continuous
fluctuations regarding product standards in those markets.
 Intense competition – Stable profitability has increased the number of players in the
industry over last two years which has put downward pressure on not only profitability
but also on overall sales.
 Changing consumer buying behavior from online channel could be a threat to the existing
physical infrastructure driven supply chain model.

III. INTERNAL ANALYSIS

Revenue Sales for Past 3years

Company’s Growth

Hershey is capturing the opportunity for planned and unplanned purchases as digital shopping
grows.
The company provided an unprecedented glimpse into how its digital growth strategies are fully
integrated with its in-store retailing programs, at an Analyst Event at its Global Customer
Innovation Center (GCIC) in Hershey, Penn.
“While the retail environment continues to change how our products are purchased, consumer
desire for our brands remains,” said Michele Buck, Chief Executive Officer of The Hershey
Company. “We have the right vision, strategies, organization and talent to drive commercial
advantage and our far-reaching digital transformation efforts are an important element to win in
the fast-changing retail landscape.”
In April, the company announced its plans to become more than a chocolate company, by
rebranding itself as a snacking company. The U.S. is being overtaken by one-handed eaters and
Hershey wants a much bigger bite of the $88 billion snacking industry.U.S. chocolate this year
grew at a rate of only 0.7 percent, according to Nielsen. Hershey has been losing market share
and there are now emboldened, deep-pocketed competitors attacking its core. It's lowered its
long-term sales growth targets twice in two years. Cocoa prices are rising. It's in need of growth.
Key insights shared with the analyst community include:
 How digital transformation fits into Hershey’s innovative snacking powerhouse vision
 Detail around Hershey’s “5C” digital strategy, including the company’s emphasis on its
consumer-first orientation to deliver on their needs and expectations
 An overview of snack shopping behavior, the retail models that exist today and how
Hershey is deploying its portfolio to win against each model and trip mission
 Hershey’s strategy to win search with thumb-stopping, mobile-first content
 How Hershey is capturing the opportunity for planned and unplanned purchases as digital
shopping grows
 The role data plays in developing one-to-one connections with its consumers

Profitability, other relevant performance Indicator

2018 compared with 2017 Net sales increased 3.7% in 2018 compared with 2017, reflecting a
benefit from the recent Amplify and Pirate Brands acquisitions of 3.6% and a volume increase of
1.3%, partially offset by unfavorable price realization of 1.0% and an unfavorable impact from
foreign currency exchange rates of 0.2%. Excluding the unfavorable impact from foreign
currency exchange rates, our net sales increased 3.9%. Consolidated volumes increased due to
the acquisitions of Amplify and Pirate Brands, as well as solid performance in select
international markets, which more than offset the volume reduction resulting from the sale of
SGM in July 2018. The net increase in volume was partially offset by unfavorable net price
realization, which was primarily attributed to incremental trade promotional expense in the North
America segment in support of 2018 programming.

2017 compared with 2016 Net sales increased 1.0% in 2017 compared with 2016, reflecting
favorable price realization of 0.7%, a benefit from acquisitions of 0.3%, and a favorable impact
from foreign currency exchange rates of 0.2%, partially offset by a volume decrease of 0.2%.
Excluding foreign currency, our net sales increased 0.8% in 2017. The favorable net price
realization was attributed to lower levels of trade promotional spending in both the North
America and International and Other segments versus the prior year. Consolidated volume
decreased as a result of lower sales volume in the International and Other segment, primarily
attributed to our China business and the softness in the modern trade channel coupled with a
focus on optimizing our product offerings. These volume decreases were partially offset by

Strength and Weaknesses

Strengths :

 Strong Brand Portfolio – Over the years The Hershey Company has invested in building a
strong brand portfolio. The SWOT analysis of The Hershey Company just underlines this
fact. This brand portfolio can be extremely useful if the organization wants to expand into
new product categories.
 Good Returns on Capital Expenditure – The Hershey Company is relatively successful at
execution of new projects and generated good returns on capital expenditure by building new
revenue streams.
 Strong dealer community – It has built a culture among distributor & dealers where the
dealers not only promote company’s products but also invest in training the sales team to
explain to the customer how he/she can extract the maximum benefits out of the products.
 Strong Free Cash Flow – The Hershey Company has strong free cash flows that provide
resources in the hand of the company to expand into new projects.
 High level of customer satisfaction – the company with its dedicated customer relationship
management department has able to achieve a high level of customer satisfaction among
present customers and good brand equity among the potential customers.
 Superb Performance in New Markets – The Hershey Company has built expertise at entering
new markets and making success of them. The expansion has helped the organization to
build new revenue stream and diversify the economic cycle risk in the markets it operates in.
 Successful track record of integrating complimentary firms through mergers & acquisition. It
has successfully integrated number of technology companies in the past few years to
streamline its operations and to build a reliable supply chain.
 Highly skilled workforce through successful training and learning programs. The Hershey
Company is investing huge resources in training and development of its employees resulting
in a workforce that is not only highly skilled but also motivated to achieve more.

Weaknesses

 The profitability ratio and Net Contribution % of The Hershey Company are below the
industry average.
 The company has not being able to tackle the challenges present by the new entrants in
the segment and has lost small market share in the niche categories. The Hershey
Company has to build internal feedback mechanism directly from sales team on ground
to counter these challenges.
 Not very good at product demand forecasting leading to higher rate of missed
opportunities compare to its competitors. One of the reason why the days inventory is
high compare to its competitors is that The Hershey Company is not very good at demand
forecasting thus end up keeping higher inventory both in-house and in channel.
 Not highly successful at integrating firms with different work culture. As mentioned
earlier even though The Hershey Company is successful at integrating small companies it
has its share of failure to merge firms that have different work culture.
 Need more investment in new technologies. Given the scale of expansion and different
geographies the company is planning to expand into, The Hershey Company needs to put
more money in technology to integrate the processes across the board. Right now the
investment in technologies is not at par with the vision of the company.
 There are gaps in the product range sold by the company. This lack of choice can give a
new competitor a foothold in the market.
 The marketing of the products left a lot to be desired. Even though the product is a
success in terms of sale but its positioning and unique selling proposition is not clearly
defined which can lead to the attacks in this segment from the competitors.
Internal Factor Evaluation (IFE) Matrix
Summary and Conclusion

 Strategy Formulation

SWOT Matrix
Space Matrix
Hershey Co.
 Objectives Strategies Recommendation and Plans

Strategic and Financial Objectives

Hershey plans to continue to make investments to grow its core confectionery business and
expand its breadth across the snackwheel by capturing new usage occasions and participating
in on-trend categories. The “Margin for Growth” multiyear program is designed to improve
overall operating profit margin through supply chain optimization, a streamlined operating
model and reduced administrative expenses, with savings primarily being achieved in 2018
and 2019. These actions are intended to increase efficiency, leverage global shared services
and common processes and increase capacity utilization.
The company anticipates that the program will result in total cumulative pre-tax charges of
$375 million to $425 million, including one-time employee separation benefits of $80
million to $100 million. The company estimates that implementation of the program will
reduce its global workforce by approximately 15% driven primarily by its hourly headcount
outside of the United States. The portion of non-cash program costs, included in the
aforementioned total, are expected to be between $200 million to $225 million. Cash savings
are expected to reach an annual run-rate of between $150 million to $175 million by year end
2019.
Over the long term, the company expects annual constant currency net sales growth of 2% to
4%, driven primarily by its North America business. This update, versus the previous
outlook, reflects changes in U.S. shopping habits and continued macroeconomic challenges
impacting growth in international markets. Given the scale advantages of the company’s
North America business and the “Margin for Growth” related initiatives, the company
expects to generate long-term adjusted earnings per share-diluted growth of 6% to 8%.
In 2017, the company expects reported earnings per share-diluted of $3.19 to $3.45,
including items impacting comparability of approximately $1.36 to $1.53 per share-diluted.
This projection, prepared in accordance with U.S. generally accepted accounting principles
(GAAP), assumes business realignment costs of $0.10 to $0.12 per share-diluted, non-service
related pension expense (NSRPE) of $0.06 per share-diluted and estimated costs related to
the “Margin for Growth” program of $1.20 to $1.35 per share-diluted.
The company reaffirms its outlook for full-year 2017 net sales growth of about 2% to 3%
percent, including a net benefit from acquisitions of about 0.5 points and unfavorable foreign
currency exchange rates of about 0.25 points, and full-year adjusted earnings per share-diluted
growth of 7% to 9%. See the Note at the end of this press release for a reconciliation of projected
2017 and full-year 2016 earnings per share-diluted calculated in accordance with GAAP to non-
GAAP adjusted earnings per share-diluted.
Recommendation Business Strategy

According to industry reports, sugar prices will decline this year, but then increase in the next
few years . Since sugar is the key ingredient in most candies, and a huge ingredient in 18
chocolate, it affects Hershey’s immensely. Additionally, there are health concerns with sugar and
fat that are threatening future sales. Due due to this, Hershey’s needs to change its pricing
strategy to sell less sugary goods and more sugar free goods. First, Hershey’s needs to raise its
prices in high sugar products. The company will not suffer greatly in sales, even with a price
raise, because of its customer loyalty. The customers Hershey’s looses to competitors will be
made up for by the marginal price revenues made on the price increase. There may be fewer
sales, but revenue should remain roughly the same.

Next, Hershey’s needs to decrease the price of healthier products and low sugar products.
Making this step means implementing the high/low pricing strategy. Taking all of Hershey’s
brands that have both high and low sugar products, and splitting price based on health benefits,
will change the buying patters. Customers who previously preferred high sugar products might
switch to the cheaper, but healthier, choice. The high/low pricing strategy works because when
customers see that low sugar candies are cheaper, customers will compare the price to the high
sugar candies and reason with themselves to buy more. Even if customers are not attracted to the
cheaper products, sales signs or price announcements will draw the customer into Hershey’s
products. After this step, revenue will fall from the high sugar products to the dark chocolate and
low sugar candies. Fewer sales in high sugar candies will lower Hershey’s costs, saving it an
increasing amount of money as sugar prices rise. Demand for dark chocolate has increased in the
past few years due to health concerns, and with a price decrease from Hershey’s, the company
will become even more popular. Industry reports expect the price of cocoa to fall this year then
gradually rise in subsequent years, just like sugar. Hershey’s 2013 annual reports suggest that
cocoa is a tricky 19 product because it is unpredictable with how well it grows or if it gets dies.
If there is crop decease or failure, the price of cocoa will rise. When cocoa prices rise, all
chocolate producers 20 will be forced to raise their prices for all their chocolates, milk or dark.
Therefore, cocoa price changes should not effect the competition. As long as dark chocolate is
cheaper by comparison to milk, and low sugar candy is cheaper than high sugar candy, the price
of cocoa will not greatly effect Hershey’s. Hershey’s does not need to implement this strategy in
all of the countries it sells in, or in all of its brands. Hershey’s should only implement the
strategy in the top health concerned countries where low sugar candies and dark chocolate’s
demand is increasing. The USA is one of them, which is most of Hershey’s business, but even in
the states, Hershey’s does not need to implement the strategy everywhere. The US is a big
country, and Hershey’s will need to follow trends and make test price changes around the states
to see where there is most success. Not all products will be able to use the high/low pricing
method in this way. The brands need to be priced on their sugar and fat content, and some brands
can be priced against another brand. For example, if Almond Joys appear healthier in the eyes of
the consumer, then Hershey’s can price Almond Joy’s cheaper and Kit Kat’s higher. However, it
will be more practical to price Kit Kat Dark and Kit Kat Milk Chocolate with the high/low
strategy. Health concerns are likely to stay the same or get worse, due to the trends in the past
two decades and in scientific research that is bringing light to the health problems of sugar.
Therefore, Hershey’s can wait to implement the pricing strategy till right before sugar prices are
expected to rise in 2015. Hershey’s will be taking advantage of cheap sugar, then take advantage
of consumer trends.

Recommended Organizational Strategies

The Hershey Company Marketing and Selling organisation consists of the Hershey International
and the global Marketing Group as well as the Hershey North America. The organization is
intended to; leverage the company’s sales and marketing control in the United States as well as
Canada, lay an emphasis on the major strategic and development areas in the international
market as well as construct capabilities benefit on the exceptional consumer and customer trends.

Hershey North America

It is the exclusive duty of Hershey North America to continue building the company’s chocolate
and confectionary market spot, while at the same time taking advantage of the economy of scale
present in the U.S. and Canada. The Organization has been able to control the company’s ability
to capitalize on exceptional consumer and customer trends within each country. This is inclusive
of the sustained growth and development of the business as far as chocolate refreshment, sugar
confectionary, pantry, as well as food service product are concerned. The Hershey North
America Has a subsidiary known as The Hershey Experience and which is endowed with the
management of retail operations in the United States.

Hershey International

The Hershey worldwide markets products worldwide and has duty for trailing down gainful
development prospects in key markets, principally in Latin America and Asia. This group is
liable for worldwide subsidiaries that produce, trade in, promote, sell or distribute chocolate,
confectionery and drink products in India, Brazil as well as Mexico. Hershey International
produces confectionery commodities for the marketplace in Asia, predominantly in China, under
a manufacturing accord with Lotte Confectionery Co., Ltd. A constituent of Hershey
International, International Marketing and Innovation, runs the Hershey’s Shanghai vending
attraction store in Shanghai, China.
 Strategy Implementation

Department Action Plans and Programs

HERSHEY, Pa., March 13, 2019 (GLOBE NEWSWIRE) -- The Hershey Company (NYSE:
HSY) is taking action to protect forests and restore forest cover in the cocoa growing regions in
West Africa. The company today released action plans that are part of the company’s
commitments as a founding member of the Cocoa & Forest Initiative (CFI).

In February 2018, Hershey publicly committed to no new deforestation in its cocoa supply chain,
effective immediately, and to implementing agroforestry tree planting programs. The new CFI
forest protection plans for the two largest cocoa-producing countries in West Africa – Ghana and
Cote d’Ivoire – step up Hershey’s forestry commitments with specific actions to end
deforestation and to begin restoring forests.

Hershey’s CFI action plans will be delivered through its Cocoa For Good sustainable cocoa
strategy, announced in April 2018. The plans focus on sensitive forest areas and are designed to
inhibit encroachment on these protected areas by implementing locally tailored development
programs.

“Cocoa, the key ingredient in chocolate, is beloved by people around the world,” said Beatrice
Moulianitaki, Head of Sustainable Sourcing. “We want to ensure that this cherished product
continues to be available for a growing number of consumers worldwide without damaging the
forests close to where most of the world’s cocoa is grown. With the proper care and resources,
we are confident that cocoa can continue to grow while protecting sensitive forests and habitats
in the region.”

Hershey’s CFI action plans are organized under three strategic pillars:

 Forest Protection and Restoration

 Sustainable Production and Farmers’ Livelihood

 Community Engagement and Social Inclusion

Hershey has created specific goals, actions and timebound targets for both Ghana and Cote
d’Ivoire under each of the three pillars. The three pillars are designed to work together to ensure
a holistic approach to protecting forests while taking into consideration the human impact. This
approach ensures that communities are fully engaged in these efforts and the actions benefit both
the people and the surrounding ecosystem.

Plans include:
  Distributing 900,000 multi-purpose trees to farms in Ghana and Cote d’Ivoire by 2022

 Distributing more than 2.5 million improved cocoa seedlings to farmers in Ghana and
Cote d’Ivoire by 2022

 Satellite mapping of 50,000 farms across Ghana and Cote d’Ivoire in the Hershey supply
chain by 2019

For the past several years under its Cocoa For Good program, Hershey has been implementing
programs that meet the CFI commitments. The company’s agroforestry programs have already
distributed more than 3.5 million cocoa trees and about 320,000 shade trees in West Africa
between 2013 and 2017. Hershey will continue to review, expand and improve current programs
to meet its CFI 2022 goals.
  Financial Projection and Over All Evaluation of the Strategies

Strategic Alternatives
create fast track
programs for
new partnerships with non-profit
Key Internal Factors Weight developing new
organisation sales
products from
employee ideas
(AS) (TAS) (AS) (TAS)
Strengths
Brand recognition
- Largest producer of chocolate in North America. 0.10 1 0.10 2 0.20
- Consumer good will
2. Strategic Acquisitions 0.05 2 0.10 2 0.10
3. Human Resources
- Employee empowerment 0.07 4 0.28 1 0.07
- increase in employee benefits
4. Research and development
- expand product line.
0.04 4 0.16 0 0
- Premium line with high quality of dark chocolate.
- Antioxidant will be emphasis in Hershey’s product.
5. Hershey’s involved actively in organization that
0.04 2 0.08 4 0.16
involved environmental and charity.
6. Reduction of cost due to Hershey’s closed their
Reading Pennsylvania, plant in 2009, eliminating 300 0.06 0 0 0 0
jobs.
7. Reduction of 1,500 positions over next three-year
0.05 3 0.15 0 0
period due to the global supply initiatives.
8. changing in product packaging have showed that
0.05 3 0.15 1 0.05
lighter material and less waste.
9. Hershey’s plant to close online gift business which
featured seasonal products and gifts that could be 0.04 4 0.16 0 0
personalized by consumer.
Weaknesses
1. Diversity among the suppliers and shippers. 0.12 0 0 4 0.48
2. Advertising expenses increased 0.05 0 0 0 0
3. Hershey plan to discontinue their Cacao Reserve as
0.11 1 0.11 3 0.33
Starbucks.
4. Declined of Hershey other assets due to the
unfavorable in economy to $151,561 in 2008 from 0.08 2 0.16 2 0.16
$540,249 in 2007.
5. Switch of consumer to lower price products. 0.04 1 0.04 1 0.04
6. The company long term debt increased from
0.07 0 0 0 0
$1,279,965 in 2007 to $1,505,954 in 2008.
7. Total charges to Hershey’s Global Program have been
0.03 1 0.03 1 0.03
forecasted downward from $665 million to $640 million.
Subtotal 1.00 1.52 1.62
Opportunities
1. Increase demand from the market 0.05 4 0.20 2 0.10
2. Ethics and Sustainability labor and environmental of 0.05 4 0.20 1 0.05
organizations
3. new opportunities for marketing in media 0.06 2 0.12 1 0.06
4. Confectionery industry that will diversify consumers 0.10 0 0 0 0
taste which will from gums and jelly beans to chocolate
product.
5. global market expands in value which approximately 0.05 0 0 0 0
at $17.4 billion by 2010.
6. Chocolate had coverage for 55.8 percent of the 0.06 0 0 2 0.12
market overall global value.
7. Product’s price point had caused the recession does 0.04 1 0.04 1 0.04
not impact confectionary products drastically.
8. The major 50 firms in the industry had control less 0.03 1 0.03 2 0.06
than 40 percent of the market.
9. Mergers and acquisitions influenced market share and 0.07 1 0.07 3 0.21
product portfolio in global firms especially in
confectionary industry
10. The drastic growth of organic foods products had 0.05 0 0 1 0.05
become one of the fastest growing sectors in United
States with a projected value of $26.3billion by 2011
Threats
1. Slow on economic growth- high unemployment 0.07 4 0.28 1 0.07
caused consumer cutting budget on those unnecessary
things.
2. Price fluctuations of cost in main ingredients such as 0.10 0 0 0 0
Sugar. In U.S 2009, the wholesaler sugar had increase up
to 70percent.
3. Higher manufacturing cost due to increase in healthy 0.08 2 0.16 1 0.08
food. More consumers demand on that organic healthy
food.
4. Obesity is increasing gradually and consumer aware 0.04 0 0 0 0
about it.
5. Increase in fuel cost impact the shipping and 0.07 1 0.07 3 0.21
distribution cost.
6. International wholesale sugar prices may reach 40 0.08 0 0 0 0
cents a pound.
Subtotal 1.0 1.17 1.05
Grand Total 2.0 2.69 2.67

Based on the matrix above, we can note that the sum total attractiveness scores of 2.69 versus 2.67 which
is very close indicator. The higher number indicates that the business should create fast track
programs for developing new products from employee’s ideas.
Stragic Marketing
Hershey Company

Submitted to:
Mr. Roy Valencia
Submitted by:
Medenilla, Carlo M.
BSBA – MKMGT 4A