Hershey Foods Corporation

History: Milton Hersheys love for candy making began with a childhood apprenticeship under candy maker Joe Royer of Lancaster, Pennsylvania. Mr. Hershey was eager to own a candy-making business. By 1901, the chocolate Industry in America was growing rapidly. Hersheys sales reached $662,000 that year, creating the need for a new factory. Mr. Hershey moved his company to Derry Church, Pennsylvania, a town that was renamed Hershey in 1906. The new Hershey factory provided a means of mass-producing a single chocolate product. In 1909 the Milton Hershey School for Orphans was founded. Mr. and Mrs. Hershey could not have children, so for years the Hershey chocolate Company operated mainly to provide funds for the orphanage. In the 1990s, Hershey acquired Ronzoni Foods Corporation from Kraft General Foods Corporation for $80 million. The purchase include the dry pasta, pasta sauces, and cheese business of Ronzoni Foods, which strengthened Hersheys position as a branded pasta supplier in the United States. The latest Mission Statement of Hershey Foods is: To be a focused food company in North America and selected International markets and a leader in every aspect of our business.

Hershey spent most of 1994 and 1995 reorganizing and today is comprised of Four Divisions: (1) Hershey chocolate North America, (2) Hershey Grocery, (3) Hershey International, and (4) Hershey Pasta Group.

Case SWOT Analysis

Strengths: Hershey Foods has grown from a one-product, one plant operation to a $4 billion company with many U.S. and international plants providing an array of quality chocolate and confectionery products and services. Hershey entered 1996 as the largest candy maker in the United States with 30.7 percent market share. Hershey is the largest pasta manufacturer in the United States with 28.4 percent market share. Hershey Foods Corporation is committed to the values of its founder Milton S. Hersheythe highest standard of quality, honesty, fairness, integrity, and respect. The firm makes annual distribution of cash, products, and services to a variety of national and local charitable organizations. The corporation operates the Milton Hershey School for socially disadvantaged children and is the sole sponsor of the Hershey National Track and Field Youth Program. Hershey also makes contributions to the Childrens Miracle Network, a national program benefiting childrens hospitals across the United States. Hersheys main chocolate factory, for example, occupies more than 2 million square feet, is highly automated, and contains much heavy equipment, vats, and containers. It is the largest chocolate plant in the world. Hershey is an exemplary organization in terms of business ethics and social responsibility; a significant part of Hershey Foods profits go toward operating the Milton Hershey School for Orphaned Children. Hershey is very cooperative with students and professors; Hershey has a toll-free number (1-800-468-1714) that students or professors can call to obtain additional information about the company.

Weaknesses: Hersheys global market share in the chocolate confectionary industry in only 10 percent, lowest among its competitors. Concern for the natural environment is an issue Hershey should address before competitors seize the initiative. The average price of Cocoa beans rose 25.8 percent in 1995, following a 28.9 percent rise in 1994. World production is not keeping pace with increased

consumption. The price per pound in 1995 was $0.72 and is expected to continue increasing. This is a major problem for Hershey because even a small price increase at the retail level severely restricts consumer buying. Some analysts contend that Hershey International as a separate division producing and selling diverse products is an ineffective organizational design.

Opportunities: China and India are huge untapped markets. Malaysia, Indonesia, Vietnam, and Thailand also are untapped, So, Hershey has the opportunity to gain a foothold in those Countries. There is another opportunity for Hershey to develop environmentally safe products and packages, reducing industrial waste, recycling, and establishing an environmental audit process are strategies that could benefit Hershey. Another opportunity is that Hershey diversifies more into non-chocolate candies because that segment is growing most rapidly in foreign countries like U.S & U.K.

Threats: The main competitors of Hershey Foods are Mars and Nestle. Mars is already a threat for Hershey, because Mars has a stronger presence than Hershey in Europe, Asia, Mexico, and Japan. Unlike Hershey, Mars has historically relied upon extensive marketing and advertising expenditures to gain market share, rather than on product innovation. 25 percent of Nestls revenues and profits come from coffee, and adverse economic occurrences in South America, particularly Brazil, affect the company. Nestle plans to continue to play to its strengths, international markets outside the United States, to combat Hershey.