age | 1

EXECUTIVE SUMMARY
ershey ennsylvanla Lhe home of ershey loods CorporaLlon known as ChocolaLe 1own uSA Lhe
alr ln Lhls clLy acLually smells llke chocolaLe ershey has grown from a one producL one planL
operaLlon ln 1894 Lo a $ 44 bllllon company produclng as array of quallLy chocolaLe nonchocolaLe
and grocer y producLs SWC1 Analysls Lo deflne Lhe ershey SLrengLhs Weaknesses CpporLunlLles
and 1hreaLs ershey markeL share ls less Lhan 10 percenL lowesL among lLs compeLlLor So ershey
should come up wlLh new sLraLegles ln flnance markeLlng producLlon deparLmenL and ln
organlzaLlon sLrucLure Lo lncrease Lhe markeL share and compeLe globally
ECTIVE THE STUDY
1o analyze Lhe ershey lood CorporaLlon slLuaLlon and suggesL cerLaln sLraLegles deparLmenL wlse
Lo overcome from Lhe maln LhreaL le compeLlLor SuggesL Lhe cerLaln Lechnlques and sLraLegles Lo
lncrease Lhe markeL share and L o compeLe globally

INTRDUCTIN
1he ershey Company ls famously known for belng Lhe blggesL manufacLurer of chocolaLes and
confecLlonery producLs ln uSA havlng hlred over 12000 employees worldwlde and exporLlng Lhelr
producLs Lo slxLy dlfferenL counLrles over Lhe world
8rands 1he ershey Company offers such lconlc brands as nershey's Choco|ate 8ar k|t kat
nershey's k|sses keese's 1w|zz|ers Ice breakers ork epperm|nt att|e ko|o and krack|e 8ar as
well as Lhe smooLh creamy lndulgence of nershey's 8||ss choco|ates
WlLh Lhe help of Lhese brands ershey galned success and popularlLy maklng Lhe company's neL
worLh over $44 bllllon dollars
nershey's pr|nc|pa| product group |nc|udes chocolaLes confecLlonery producLs sold ln Lhe form of
bar goods bagged |tems and boxed |tems grocery producLs ln Lhe form of bak|ng |ngred|ents
choco|ate dr|nk m|xes peanut butter dessert topp|ngs and beverages
1he company llves by lLs mlsslon sLaLemenL undlspuLed MarkeLplace Leadershlp" ershey
conLlnues Lo preserve a hlgher poslLlon by successfully converLlng consumer deslres lnLo reallLy

RAND RESEARCH
1Deta||ed n|story
MllLon ershey was fasclnaLed wlLh Lhe process of maklng chocolaLe and hls lnLeresL began aL an
early age under candy maker !oe 8oyer of LancasLer ennsylvanla MllLon was an enLrepreneur
who was keen Lo own a candymaklng buslness ls flrsL successful buslness was Lhe LancasLer
Caramel company and lL was only ln 1893 LhaL MllLon expressed lnLeresL ln maklng ChocolaLes

age | 2

Soon afLer MllLon began produclng chocolaLe coaLed caramels LhaL evenLually led Lo Lhe foundlng of
ershey ChocolaLe Company ln 1894 AfLer much experlmenLaLlon MllLon dlscovered Lhe famous
ershey's ChocolaLe reclpe and sold hls caramel buslness ln 1900 for Lhe sum of $1 mllllon

8y 1901 ershey's sale reached $662000 Lhus creaLlng Lhe need for a new facLory ln 1903 MllLon
bullL hls company aL a place called uerry 1ownshlp ln ennsylvanla whlch was laLer renamed
ershey ennsylvanla ln 1906 1hls was Lhe flrsL sLep Lowards Lhe company's expanslon slnce Lhls
clLy had a large populaLlon was easlly accesslble Lo porLs LhaL would supply sugar cocoa beans eLc
and had a vasL amounL of dalry farms

ln 1927 Lhe ershey ChocolaLe Company was lncorporaLed under Lhe laws of Lhe sLaLe of uelaware
and llsLed on Lhe new ?ork SLock Lxchange wlLh 20sLock sold Lo publlc 8eLween 1930 1960
ershey wenL Lhrough rapld growLh

Corporate Lxpans|on
ln Lhe year of 1901 Lhe ershey company sales were only $662000 and wlLhln Lhe span of 10 years
Lhe ershey sales reached $ 3 mllllon ln 1911 1hereafLer ershey's sales lncreased 4 Lo 3 percenL
annually

ln 1968 Lhe company was renamed as ershey loods CorporaLlon uurlng Lhls Llme ershey soughL
Lo expand lLs producL llne by parLnerlng up wlLh several relaLed companles and even creaLed
dlfferenL brands for Lhelr own producLs

Some famous parLnershlps lnclude 8 8eese Candy Company (1960) San Clorglo Macaronl
loods(1966) ?S Candles makers of 1wlzzlers llquorlce(1977) eLer aul/Cadbury's uS
ConfecLlonery operaLlons(1988) and 8onzonl loods(1990) ershey Mexlco Leaf norLh
Amerlca(1996) nablsco's gum buslnesses(2000) and Crupo Lorena Mauna Loa(2004) ershey
loods CorporaLlon became Lhe lndusLry leader by Lhe end of Lhe 20
Lh
cenLury

1he company conLlnued dlverslfylng and soon acqulred !oseph SchmldL confecLlons ln 2003 and a
year laLer ln 2006 acqulred uagoba Crganlc ChocolaLes
1hls malnLalns ershey's Lop poslLlon ln Lhe norLh Amerlcan markeL

INTERNAL AAIRS- RCANIZATIN STRUCTURE
ershey operaLes from a cenLrallzed funcLlonal sLrucLure wlLh no dlvlslonal presldenLs a Lype of
sLrucLure unusual for an organlzaLlon of ershey's slze slnce Lhe more common deslgn would be
decenLrallzed
Mr 8 Lenny ls servlng as a CLC of ershey
ln laLe 1990s ershey had operaLed wlLh Lwo dlvlslons ershey norLh Amerlca and ershey
lnLernaLlonal
ershey has approxlmaLely 13700 fullLlme and 2300 parLLlme employees
age | 3

Company's sLaLed ob[ecLlves lnclude
O Annual lncrease of 3 Lo 4 ln sales
O Annual lncrease of 70 Lo 80 basls polnLs ln gross margln
O Annual lncrease of 7 Lo 9 ln L8l1
O Annual lncrease of 9 Lo 11 ln LS
ershey's producLs are markeLed under more Lhan 30 brands names and sold ln over 2 mllllon reLall
ouLleLs ln norLh Amerlca lncludlng grocery wholesalers chaln sLores mass merchandlsers drug
sLores and food dlsLrlbuLors
SCIAL RESPNSIILITY
8ulldlng on MllLon ersheys legacy of commlLmenL Lo consumers communlLy and chlldren Lhe flrm
makes an annual conLrlbuLlon of cash producLs and servlces Lo varlous charlLable organlzaLlons
lncludlng ershey naLlonal 1rack lleld ?ouLh rogram Chlldren's mlracle neLwork
1he flrm operaLes MllLon ershey School where fullLlme care and educaLlon ls provlded Lo chlldren
malnly orphans 1he ershey School 1rusL owns over 73 of company's sLock
RESEARCH AND DEVELPMENT
ershey performs varlous research and developmenL acLlvlLles Lo develop new producLs and
lmprove and modernlze exlsLlng producLs and producLlon processes
Company's 8u expenses have decllned from Lhe level of $286m (1998) Lo $232m (2004)
ln 2004 ershey lnLroduced Lhe followlng new producLs nershey's k|sses f|||ed w|th carame| m||k
choco|ates Ice 8reakers L|qu|d Ice m|nts nershey's Snack 8arz r|ce and marshma||ow bars
nershey's Smart 2one nutr|t|on bars 1akeS candy bars nershey's A|mond Ioy ork and keese's
cook|es keese's |ece candy w|th peanuts and keese's 8|g Cup
INANCE
1here has been a vlLal growLh ln lncome of ershey's lood afLer 2001 ershey's neL lncome was
$390 9 mllllon ln 2004 compared Lo $4376 mllllon ln 2003
Company's sales lncreased abouL 6 and gross margln lncreased Lo 393 ln 2004 from 39 ln 2003
Company purchased 1128m shares from MllLon ershey School 1rusL ln 2004 currenLly lL has a
$900m revolvlng llne of credlL and has Lhe opLlon Lo borrow Lo an addlLlonal $600m lf requlred
MARKETINC
ershey has a wellesLabllshed dlsLrlbuLlon neLwork from lLs manufacLurlng planLs Lo dlsLrlbuLlon
cenLres and Lo warehouses LhroughouL Lhe unlLed SLaLes Canada Mexlco
ershey has sLeadlly decreased lLs adverLlslng expenses ln Lhe year of 1998 ershey lnvesLed
$1873 mllllon on adverLlsemenLs buL ln 2004 ershey lnvesLed only $ 1379m on adverLlsemenLs
1hough Lhe selllng markeLlng and admlnlsLraLlve expenses lncreased by 4 ln 2004 Lhey decreased
Lo 191 from 196 (ln 2003) as a percenLage of sales
age | 4

ershey uses neLwork Lelevlslon syndlcaLed Lelevlslon spoL Lelevlslon magazlnes and spoL radlo as
lLs adverLlslng medla
ershey generaLes abouL 20 of annual sales durlng Lhe 2
nd
quarLer and 30 durlng Lhe 4
Lh
quarLer
of each year due Lo hollday seasons
% CLAL ISSUES
ershey exporLs lLs food producLs worldwlde buL noL vlgorously as lL has no plans Lo overLake or
LhreaLen nesLle or Mars ln Luropewhere Lhe per caplLa chocolaLe consumpLlon ls hlghesL ln Lhe
world
ershey has lnLroduced lLs producLs lnLo 8ussla hlllpplnes and 1alwan however lL has falled Lo Lap
Lhe overall lar LasL markeL due Lo hlgh pollLlcal and economlc rlsks coupled wlLh company's lack of
experlence
Cocoa beans are Lhe mosL slgnlflcanL raw maLerlal of ershey's chocolaLe buL cocoa prlces are
geLLlng hlgh 1he prlces hlL an 18year hlgh ln lebruary 2003 and slnce Lhen have remalned hlgh
averaglng 677cenLs per pound ln 2004
Sugar ls Lhe second mosL lmporLanL commodlLy for ershey's chocolaLe and confecLlonery producLs
8uL due Lo lmporL quoLas and duLles sugar prlces are hlgher ln unlLed SaLes Lhan ln world sugar
markeL
Almonds prlces also rose from $2 per pound durlng 1
sL
half of 2004 Lo $3 per pound durlng Lhe 2
nd

half Mllk prlces were also on hype ln same year
1oday global channels of dlsLrlbuLlon are avallable for chocolaLe manufacLurers and global
markeLlng unlformlLy ls prevalllng ln Lhe lndusLry ershey's compeLlLors are Laklng advanLage of Lhls
globallzaLlon Lrend
1he confecLlonery lndusLry ls characLerlzed by hlgh manufacLurlng economles of scale ershey has
Lhe largesL and hlghly auLomaLed chocolaLe planL ln Lhe world as lL occuples more Lhan 2m square
feeL lgh manufacLurlng cosLs encourage global markeL expanslon globally sLandardlzed producLs
and cenLrallzed producLlon
1he lndusLry ls also characLerlzed by hlgh LransporLaLlon cosLs for movlng prlmary raw maLerlals le
mllk and sugar
Moreover candy lndusLry ls sub[ecL Lo grow Candy consumpLlon varles ln dlfferenL markeLs of
world norLhern Luropeans consume Lwlce as much chocolaLe per caplLa as Amerlcans whlle Aslans
and SouLh Luropeans prefer Lypes of sweeLs oLher Lhan chocolaLes
% CMPETITRS
1here are slx ma[or compeLlLors ln Lhe $10bllllon uS confecLlonery lndusLry who conLrlbuLe 70 of
Lhe markeL
O nershey
O ,, ,ars
age | 3

O 8rack 8rock
O -est|e of Sw|tzer|and
O kIk -ab|sco
O Leaf Inc

ershey's Lwo ma[or compeLlLors are Mars and nesLle
,AkS
Mars en[oys a sLronger presence Lhan ershey ln Lurope Asla Mexlco and !apan Whlle
Mars obLalns 30 from lnLernaLlonal sales ershey obLalns Lhe leasL wlLh 10
Worldwlde sales and proflLs are esLlmaLed aL over $7b and $1b respecLlvely
unllke ershey Mars globally uses unlform markeLlng lLs MM candles slogan lL melLs ln
your mouLh noL ln your hands" ls used worldwlde Cn conLrary ershey's 8arnone candy
ls named 1empLaLlon" ln Canada
unllke ershey Mars has also hlsLorlcally relled upon exLenslve markeLlng and adverLlslng
expenses Lo galn markeL share raLher Lhan on producL lnnovaLlon
Mars has been repackaglng resLyllng and reformulaLlng lLs leadlng brands Snlckers 8ounLy
8allsLo Mllkyway MM's and 3 MuskeLeers
Mars also successfully developed and markeLed frozen Snlckers lcecream bars lL has world
class producLlon faclllLles ln new !ersey and has manufacLurlng planLs ln several Luropean
locaLlons
-LS1LL
nesLle ls Lhe largesL food company ln Lhe world wlLh annual sales of more Lhan $9bllllon ln
uS havlng an edge lnLernaLlonally
avlng corporaLe headquarLers ln several sLaLes nesLle ls a ma[or compeLlLor ln Lurope lar
LasL and SouLh Amerlca
nesLle sells producLs ln over 360 counLrles on all seven conLlnenLs malnly ln 1hlrd World
nesLle ls Lhe world's largesL lnsLanL coffee manufacLurer wlLh nescafe Lhe domlnanL
producL and ls Lhe largesL producer of mllk powder and condensed mllk Also produces
chocolaLes and malL drlnks
nesLle manufacLures chocolaLe ln 23 counLrles parLlcularly ln SwlLzerland and LaLln Amerlca
Lach facLory ls hlghly auLomaLed employlng an average of 230 people
nesLle's popular brands are Calller Crunch ?es SmarLles and 8uLLerflnger
age | 6

ST Analysis for Hersbey ood Corporation

101 Strengths
ershey has grown from one producL one planL Lo a $4 bllllon company wlLh varlous quallLy
chocolaLes
lL's a sLrong brand name and has a sLrong lmage
8y 1996 ershey was largesL candy maker ln uS wlLh 307 markeL share
lL ls also Lhe largesL pasLa manufacLurer ln uS wlLh 284 markeL share
World's largesL chocolaLe planL ln uS wlLh more Lhan 2 mllllon sq feeL
MarkeLed under more Lhan 30 brand names
owerful parLnershlps (SLarbucks krafL CocaCola eLc)
uge man power approx 13700 fullLlme and 2300 parLLlme employees
lncreaslng sales 3 Lo 4 percenL annually
Ma[or proflLs go Lo MllLon ershey School for Crphans Also donaLes Lo 8ed Cross unlCLl
and ablLaL for umanlLy eLc

10 Jeaknesses
ershey's Clobal markeL share ls very low around 10
ershey operaLes from a cenLrallzed funcLlonal sLrucLure wlLh no dlvlslonal presldenL
very few mulLlnaLlonal dlsLrlbuLors
Concern for naLural envlronmenL needs Lo be expressed
Cocoa producLlon raLes are rlslng and even a small prlce lncrease aL reLall level affecLs
consumer buylng
unable Lo adopL Clobal Channels of ulsLrlbuLlon"
oor declslon maklng as company relles on brand loyalLy and has reduced adverLlslng
expendlLure
Lack of experlence of lnLernaLlonal MarkeL

103 Cpportun|t|es
oLenLlal Lo expand range of uark/Sugar free producLs for healLh beneflLs
use parLnershlp venLures Lo creaLe chocolaLe flavoured coffee producLs
roduce cocoa ln new areas oLher Lhan Afrlca
1hey can adopL Clobal Channels of ulsLrlbuLlon"
uevelop envlronmenL frlendly packaglng recycllng lndusLrlal wasLe
Chlna lndla and ma[orlLy of SouLheasL Asla are unLapped markeLs

104 1hreats
Consumer demandlng healLhler subsLlLuLes
SLeady rlse ln prlces of cocoa mllk and sugar
Maln compeLlLors are Mars and nesLle
23 of nesLle revenues proflLs come from coffee nesLle plays lLs sLrengLhs ln lnLernaLlonal
markeLs ershey ls more focused on [usL local markeLs
Mars uses exLenslve markeLlng and adverLlslng expendlLures Lo galn markeL share ershey
[usL uses producL lnnovaLlons
age | 7

CNCLUSIN AND RECMMENDATINS

1o overcome from Lhe problems means Lo lncrease Lhe sales ershey should adopL cerLaln
sLraLegles llke ershey should go globally 1hey have Lo Lake experlence of ouLslde markeL
(unLapped markeL)

1hey have Lo come up wlLh new candles llke faL less candles because consumers are golng Lo
be healLh nuLrlLlon and welghL consclous ershey should adopL Lhe Clobal Channels of
ulsLrlbuLlon" Lo lncrease Lhe sales worldwlde
1hey have Lo lnvesL ln adverLlsemenL lf Lhey have Lo have Lo malnLaln Lhe markeL
share/lncrease Lhe markeL share

1hey have Lo flnd ouL Lhe new channels of dlsLrlbuLlon and adopL Lhe new channels Lo
lncrease Lhe sales Co lnLernaLlonal adverLlsemenL Lo promoLe Lhe producL and use
MulLlnaLlonal channel Lo lncrease Lhe sales


lncrease Lhe producLlon capaclLy of ChocolaLe and Candy Come up wlLh dlfferenL Lypes of
candles and chocolaLe because people wanL varleLy ln producLs whlch ls cruclal Lo success

Should deslgn new organlzaLlon sLrucLure and go for decenLrallzaLlon 1here musL be
conLlnenLal presldenLs who wlll help Lo compeLe globally or Lo lncrease Lhe markeL share
globally because Lhey wlll have Lhe experlence of Lhe parLlcular conLlnenLs and Lhey wlll
work accordlng Lo markeL condlLlons

ILCRAPHY
Case ershey loods CorporaLlon 2003 lred 8 uavld (lrancls Marlon unlverslLy)
ershey WebslLe wwwhersheyscom