The Hershey Company 1. History and Overview The first Hershey’s Chocolate Bar was produced in 1900, six years after the firm that would become The Hershey Company (“Hershey”) was founded by candy-manufacturer Milton S. Hershey. 2. Strategic Planning, Corporate Vision Until late last year when Hershey announced plans to revamp how it organizes its business with two new strategic business units—one for chocolate and the other for sugar confectionery—the company’s marketing organization was comprised of five primary product groups and three divisions: Hershey North America, Hershey International and the Global Marketing Group.
According to their 2009 Annual Financial Report, this organization structure allowed Hershey to capitalize on unique customer and consumer trends, leverage marketing and sales leadership in the US and Canada, and focus on key growth areas in global markets (Annual Report p. 2). As indicated by a November 2nd, 2010 press release, the new structure is meant to leverage competencies for global growth, strengthen regional focus with additional resources, and augment confectionery consumer insights and innovation capabilities. (http://www. hehersheycompany. com/newsroom/news-release-1490640. aspx) In 2009, Hershey put forth their first Corporate Social Responsibility Report. In the opening paragraphs of this report they call Corporate Social Responsibility integral to their mission of “Bringing sweet moments of Hershey happiness to the world every day. ” Kotler and Keller (27) contend that not only should a mission statement be short, memorable, meaningful, and enduring, it should provide employees with a shared sense of purpose, direction, and opportunity.
Hershey is attuned to these needs. The report elaborates, “Our employees are committed to our mission…In all of our efforts, we are guided by our values, which have enabled our company to succeed over the long term. ” Hershey’s internal marketing strategy is driven by their stated corporate values—“One Hershey: A global and diverse team, operating with integrity, working together, determined to make a difference (Hershey Our Values). Kotler and Keller (29) identify the importance of utilizing three specific nternal groups toward the goal of successful strategy making: employees with youthful perspectives; employees far removed from company headquarters; and employees new to the industry. In a concerted effort to encourage ideas from the younger generation, Hershey has implemented an innovative approach by putting in place an R&D mentoring program where new Millennial employees are paired with experienced Boomers. Hershey recognizes that Millennials have categorically received greater support from their schools and families and expect it from their employers as well.
Hershey also has a program called Quality Through Excellence that engages “the most committed and energetic thought leaders from all over the company and from different functional areas. ” Among other things, these employees are charged with the duty of provided feedback to the company about what’s going well and what needs to be changed. Further, they have redesigned their performance management system to reward employees for their contributions to the success of the company. Attracting, Developing and Retaining Talent p11) A superior value chain incorporates a high level of product quality, service, and speed (Kotler and Keller 23). The conjunction of these components allows marketers to achieve profitable growth by, among other things, building loyalty and capturing customer lifetime value. Hershey has an ongoing commitment to deal fairly and ethically with all parties in its global value chain which extends from the farmers who supply raw materials for ingredients to consumers all over the world.
They are dedicated to conserving energy and reducing emissions throughout their value chain, beginning with a company-wide initiative in 2007 to reduce greenhouse gas emissions in both their facilities and their transport operations. (CSR Report 26) 3. Strategic Planning-Business Vision Hershey relies on strong R&D efforts to continue making progress in the areas of cost reduction, quality assurance, and process improvement. Their research and development initiatives are centered on the creation/ improvement of new/existing manufacturing methods.
Recent R&D activities have enabled Hershey to offer customized products which have turned out to be a major growth driver (SWOT 2). Hershey’s ability to capitalize on its internal strength in manufacturing continues to benefit the company. Another strength the company boasts is a robust and diverse product portfolio. However, though the company does not demonstrate an overdependence on a particular product segment, it does face the threat of dependence on a single customer.
Hershey sells its products to various wholesale distributors, department stores and grocery stores, however, in 2009 more than a quarter of the company’s net sales were derived from sales to McLane Company, Inc. (SWOT 4). While Hershey has huge opportunities to expand in the emerging markets, specifically in India and China where disposable income continues to steadily rise, the company also faces the threat of a growing counterfeit goods market. This threat not only affects sales, it affects the image of established brands (SWOT 4). Underperformance of counterfeit products will have a significant negative impact on consumer confidence.
In addition to the added competition the counterfeit market brings, Hershey will also continue to see new players enter the market. This will create a still greater challenge to keep costs down in order to stay competitive. When the company began more than one hundred years ago, it was granted immediate success with its low-cost, high quality milk chocolate. Though one of Milton Hershey’s founding principles that has persisted over the years is to “make and sell a high-quality product at a fair price” (CSR Report 7), another threat Hershey contends with is changing consumer preference. The company is experiencing changing consumer trends toward premium and trade-up product segments (SWOT 4). ” In order to adapt to the changing marketplace, Hershey will have to continue to constantly develop, produce and market new products. 4. Marketing Strategies In 1963 Hershey acquired H. B. “Harry” Reese’s Candy Company which had been making chocolate-covered peanut butter cups since 1928. In the early 1980s Hollywood producer Steven Spielberg met with Hershey executive Jack Dowd.
The two struck a deal and the newly developed Reeses’s Pieces appeared in the legendary box office hit, E. T. : The Extraterrestrial. Fortunately for Hershey, the candy shared in the success. (thehersheycompany. com) Early this year in Las Vegas, NV, at the 2011 Consumer Electronics Show, Hershey unveiled Reese’s Minis—smaller unwrapped versions of Reese’s Peanut Butter Cups. According to Anna Lingeris, spokesperson for Reese’s, “Techies at CES seek out cool innovations like min-tuners, mini-cams, nano-mice, mini-keyboards, and gotta-have gadgets so small you could fit a fistful in our pocket, so who says the next, big mini innovation can’t come from a candy company? (Business Wire 1/6/2011)” It remains to be seen whether this latest Reese’s marketing blitz is a success, however, the videos which spoof the “unboxing” trend in the tech world have had widespread play on YouTube and across a number of social networks (Business Wire 1/6/2011). This product falls in the popular hand-to-mouth category that, according to a recent Hershey presentation, presently makes up 16% of chocolate sales (adage. com 10/21/10).
Erin Swanson, a Morningstar analyst, points out that this product is lower risk because it is an extension of an existing brand instead of an entirely new one. Hershey has tried its luck with some recent similar brand extensions. Modeled after Reese’s Pieces, early last year Hershey launched Almond Joy Pieces, York Pieces and Hershey’s Special Dark Pieces. According to a Hershey spokeswoman, Jody Cook, they launched these new products in hopes they would “entice consumers who eat the traditional form in a private setting to share a bag of Pieces in a social setting (nytimes. om 2/17/10)”. In 2005 the company introduced cookies by each of these three brands which were all discontinued a few years later. Hershey promoted the new product launch with a “wrapper reward program” which encouraged consumers to be one of the first 25,000 to mail in a wrapper from the full-size version of one of these candies. In turn, participants received a coupon for a free bag of the smaller product. Hershey relies on promotional programs like this one as a marketing strategy to stimulate sales of certain products at various times throughout the year (2009 Annual Report p 5).
We have a variety of promotional programs for our customers as well as advertising and promotional programsfor consumers of our products. We use our promotional programs to stimulate sales of certain products at various times throughout the year. Our sales are typically higher during the third and fourth quarters of the year, representing seasonal and holiday-related sales patterns. In late 2010 Hershey revealed plans to launch TV ads for PayDay and Hershey’s Syrup—two products that haven’t been promoted on television for a decade—alongside the new campaign for Reese’s Minis and Hershey’s Drops.
According to CEO David West, this decision was made in response to the positive results from a pledge in 2008 to increase ad spending by 20% for two years. “Sales analysis consists of measuring and evaluating actual sales in relation to goals (Kotler and Keller 34). For the most part, the spending on these recent brands has exceeded expectations. Effective sales analysis highlighted the strong results Hershey won from their amped up efforts at promoting core brands like Kisses and Reese’s and caused them to later extend this effort to Twizzlers and Kit Kat.
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