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Introduction
The Hershey Company is famously known for being the biggest manufacturer of chocolates and
confectionery products in USA, having hired over 15,000 employees worldwide and exporting their
products to ninety different countries over the world.
The Hershey Company has several popular brands, some of most notable ones being Hersheys
Chocolate Bar, Kit Kat, Hersheys Kisses, Reeses, York Peppermint Pattie, Rolo and Krackle Bar.
With the help of these brands, Hershey gained success and popularity, making the companys net
worth over $4 billion dollars.
Hersheys products include chocolates, confectioneries, food and beverage related products such as
baking ingredients, toppings etc.
The company lives by its mission statement, Undisputed Marketplace Leadership
(www.hersheys.com). Hershey continues to preserve a higher position by successfully converting
consumer desires into reality.
2. Brand Research
2.1 Detailed History
Milton Hershey was fascinated with the process of making chocolate, and his interest began at an
early age under candy maker Joe Royer of Lancaster, Pennsylvania. Milton was an entrepreneur
who was keen to own a candy-making business. His first successful business was the Lancaster
Caramel company and it was only in 1893 that Milton expressed interest in making Chocolates.
Soon after, Milton began producing chocolate coated caramels that eventually led to the founding of
Hershey Chocolate Company in 1894. After much experimentation, Milton discovered the famous
Hersheys Chocolate recipe and sold his caramel business in 1900 for the sum of $1 million.
In 1903, Milton built his company at a place called Derry Township in Pennsylvania, which was later
renamed Hershey, Pennsylvania in 1906. This was the first step towards the companys expansion
since this city had a large population, was easily accessible to ports that would supply sugar, cocoa
beans etc, and had a vast amount of dairy farms.
As quoted on the corporate website, In a long and useful life, Milton S. Hershey proved himself to
be a courageous entrepreneur, a determined builder and a compassionate humanitarian
(www.thehersheycompany.com)
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3. P.E.S.T. Analysis
3.1 Political/Legal Analysis
- Chocolate producers unable to distribute products to certain countries.
- Major issue is child labour in cocoa farms
- Mostly affected areas in Africa where child labour runs rampant.
- The Chocolate Manufacturers Association (CMA) and the World Cocoa Foundation (WCF)
created the Harkin-Engel Protocol, which is an agreement that focuses on child labour
practices on cocoa farms in West Africa (U.S. Labour, 2006).
- Result opened new channels to export and distribute cocoa to international countries.
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4. Target Audience
The primary consumers of Hershey Chocolates include a vast audience ranging from children,
teenagers and adults. But mostly, Hershey targets its consumers ranging from age 13-30 years old.
The chocolate bar is considered a snack or is part of a daily diet in case of some athletes. The
chocolates are available in most grocery stores, gas stations, malls etc.
Consumers primarily buy chocolates according to their price. They also prefer if the chocolates fit
their health and nutritional requirements, although there is a very low margin of difference between
selecting according to price and according to health.
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5.2 Weaknesses
- Hersheys Global market share is very low, around 10%
- Concern for natural environment needs to be expressed.
- Cocoa production rates are rising, and even a small price increase at retail level affects
consumer buying.
- Poor decision making as company relies on brand loyalty and has reduced advertising
expenditure.
5.3 Opportunities
- Potential to expand range of Dark/Sugarfree products for health benefits.
- Use partnership ventures to create chocolate flavoured coffee products.
- Produce cocoa in new areas other than Africa
- Produce bio-fuel from the chocolate by-products
- Develop environment friendly packaging, recycling industrial waste
- China, India and majority of SouthEast Asia are untapped markets.
5.4 Threats
- Consumer demanding healthier substitutes.
- Steady rise in prices of cocoa, milk and sugar.
- Main competitors are Mars and Nestle.
- 25% of Nestle revenues profits come from coffee. Nestle plays its strengths in international
markets. Hershey is more focused on just local markets.
- Mars uses extensive marketing and advertising expenditures to gain market share. Hershey
just uses product innovations
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6. Five forces
6.1 Threat for new entrants
There is very little threat for new entrants in the chocolate industry because of the current economy,
the various differences in products, and the constant need for large capital requirements. Also, since
there is a lack of distribution channels and with the strict FDA regulations kept in place for food
manufacturers, the threat for new entrants is almost non-existent (Michael et al, 2007)
6.2 Bargaining powers of buyers
As stated by Michael et al, 2007, the bargaining powers of buyers increase by two factors: a number
of large volume buyers and the buyers relatively low profits from the product.
But since the industry as so many different products, the presence of different costs, the bargaining
power of the buyers is low to moderate at best.
6.3 Bargaining power of suppliers
The bargaining power of suppliers has decreased since the chocolate industry is an important
customer for the suppliers. But the power is moderate to high since the suppliers are concentrated;
there are no substitute products available.
6.4 Pressures from substitute products
The chocolate companies compete with various substitutes that threaten the industry. There are
various flavours that are used as a substitute for chocolate. These include vanilla, butter, mint, rose,
lemon, etc. Many consumers readily switch to these as they also consider chocolate to be unhealthy.
6.5 Rivalries amongst competitors
Among the chocolate industry, there are intense rivalries amongst the highest competitors. There
are numerous strong chocolate manufacturers giving out various varieties of chocolates at different
prices, resorting to creative advertising schemes, constantly giving out new products and high
quality chocolates to satisfy the consumer needs.
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7. Marketing mix
7.1 Product
- The new Hershey Slim dark chocolates will have a flavonoid substance added which helps
protect the cardiovascular system and is efficient until three hours upon consumption
(Chocolate Trading Co., 2005)
- Produced for health conscious consumers to ensure that Hershey favours healthier
alternatives. Hershey will also assure people with health issues such as diabetics, that their
chocolates are a safe and healthy alternative.
- The core strategy is to reinvent the image of chocolates from being a source of a lot of sugar
and calories therefore making people fat and/or diabetic, to an image where chocolates are
considered an aid for protecting the consumers from heart disease and enhancing the rate
of metabolism, by using flavonoids in their products.
7.2 Price
-
To keep the chocolates reasonably affordable, keeping current financial trends in mind.
To have a promotion campaign in part with the contest
Currently chocolate bars are priced at $2.50 each. As part of the contest promotion, the
chocolate will be sold at $2.00 each.
7.3 People
- Target Audience would primarily be consumers from age range of 13-30 years, particularly
health conscious individuals.
- The most bought products are chocolate bars, which some consider as a snack, while others
as part of their daily diet.
7.4 Place
-
The chocolates will be available in grocery stores, malls, supermarkets, gas stations, coffee
shops, airports, and at the main outlets.
Major Channel Distributors
Supermarkets
Department Stores
Pharmacy
Duty Free Outlets
Grocery store
Gas Stations
Main outlet
Secondary Channels
Commercial stores (7-11, Cheers)
Amusement areas (cinemas, parks)
7.5 Promotion
- The chocolates will be marketed through an interactive contest. Also, some promotional
programs could be held under joint sponsorships through gyms/spas.
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3.
-
WrapperCash Strategy
Each Hershey Slim wrapper contains points
These points can be collected under an online account
Purchases can be made from the Hershey shop using these points.
There would be a limit to the number of points one can input per day, per account.
The more you save, the bigger better things you can buy.
Products would mostly include exercise equipment. Possible to buy products at half their
retail price using the point system.
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References
Books/Papers/ Journals
Chocolate is good for you Chocolate Trading Co. July 13th, 2005. Retrieved January 15th, 2011
Hershey Co. Form 10-K, The Hersheys Company, December 31st, 2009.
Retrieved January 14th, 2011.
http://www.thehersheycompany.com/assets/pdfs/hersheycompany/2009AnnualReport.pdf
Lovell, Jeremy. Eat More Chocolates and Help the Environment PlanetArk.com November 7th,
2007. Retrieved January 14th, 2011.
Michael et al. The Hershey Company Introduction the World of Chocolate, 2007. Retrieved
January 10th, 2011.
U.S. Labour Department Funds Project to Evaluate Effectiveness of Anti-Child-Labour Efforts in the
Cocoa Industry. Worlds Technology News. October 4th,2006. Retrieved January 14th, 2011.
Websites.
www.hersheys.com
www.thehersheycompany.com
Other
Lot of information received directly from Hershey Company via Student and Teacher Resources
http://www.hersheys.com/discover/resources.asp
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