The Hershey Company By Chelsea Boles Elizabeth Burrows

The Hershey Company By: Chelsea Boles, Elizabeth Burrows, Jessica Edwards, Melinda Nguyen, & Rachel Parrish

• The Hershey Company is the leading North American manufacturer of quality chocolate and candies. • Future Vision: To expand into more categories beyond candies, finding new ways to bring goodness to people everywhere.

Business Level Strategy Best-Cost Provider More Value for Money Satisfy Expectations Resources & Capabilities Value Conscious Buyers

Target Market & Demographics • Target Market: North America % of Consumption 18. 0% 16. 0% 14. 0% 12. 0% 10. 0% 8. 0% 6. 0% 4. 0% 2. 0% 0. 0% Household Income 16. 0% 14. 0% 12. 0% 10. 0% 8. 0% 6. 0% 4. 0% % of Consumption 2. 0% 20 0 - <$ $3 0, 00 0, $2 Age Age Age 18 -24 25 -34 35 -44 45 -54 55 -64 65+ , 0 $2 00 00 9, $4 0 - $ 999 0, 00 39, 9 $5 09 0, $4 9 00 9, $6 0 - 999 0, $5 0 9 $7 00 - , 99 9 5, 00 $74 0 - , 99 $1 49 9 $1 , 99 50 9 , 0 00 + 0. 0%

External Analysis: 5 Competitive Forces Overall – Moderately high Substitutes Moderate Suppliers Rivals Moderately High New Entrants Weak Buyers Moderate

External Analysis: Strategic Group Map

Financial Analysis Company Profitability Gross Profit Ratio 0. 6 0. 5 0. 4 Hershey's 0. 3 Mondelez 0. 2 Nestle 0. 1 0 2011 2012 2013 Current Ratio Company Liquidity 2 1. 8 1. 6 1. 4 1. 2 1 0. 8 0. 6 0. 4 0. 2 0 Hershey's Mondelez Nestle 2011 2012 2013

Financial Analysis Hershey's Leverage 4. 5 Debt-Equity Ratio 4 3. 5 3 2. 5 2 1. 5 1 0. 5 0 2011 2012 2013 Inventory Turnover Company Inventory 7 6 5 4 3 2 1 0 2011 2012 Hershey's Mondelez 2013 Nestle

SWOT Analysis

(IBISWORLD, 2014)

The Central Problem • The central issue is not maximizing available resources as a company as well as limited international involvement in the marketplace.

Competitors have at least 7 times the # of plants. (Hershey’s Food HSY) (Lawerence, 2013) Symptoms 90% of Hershey’s revenues/profits come from U. S. market. Major competitors control 70% of the chocolate market in China.

Potential Solutions Concentrate on growth in Chinese chocolate market Expand the number of Hershey plants and increase the number of employees

Rejected Solution: Expanding plants and increasing # of employees • Total of approximately $300 million to open a single manufacturing plant • Approximately 700 employees to run a single plant • Costs may outweigh the benefits

The Best Solution: Concentrate on growth in Chinese chocolate market How we get there: • Introduce 2 new products • Ongoing research for product innovation • Increase advertising budget • Expand availability of Hershey products in Asian market Results will include: • Competitive advantage • Heighten buyers interest in the new market • Increase market share in Asian market

Come out with 2 new products, catering to Asian market Start with 13% of net sales to advertising increase to 15% year 2 Every 1 year to 1 ½ years introduce new product attribute Implementation Increase retail presence & introduce Chocolate World Ongoing research for product innovation

Strategy Defense • Innovating and producing new candies that appeal to the Asian culture will ensure that Hershey can increase their market share to compete with their rivals (Murphy, 2013). • The timeline for this project would be within the next five years since Hershey plans to increase sales by a variable of seven in China during that time frame (Murphy, 2013).

Strategy Defense • The costs that are associated with this strategy would be the sunk cost of $250 million to complete the new plant in Johor, Malaysia, which is scheduled for completion in 2015 and any additional research costs that would be related to inventing new candies (Hershey expands, 2013). • This new plant’s vital geographic area empowers delivery access to over 25 markets across Asia where Hershey has assertively attempted to develop its presence in recent years (Hershey expands, 2013). • The only issue that we could potentially face would be overspending on additional production facilities and on research for the innovation of new candies in order to increase brand awareness and brand recognition.

Chinese Chocolate Industry 2013 8% increase = $1, 200, 000 Market Shares Mars 43. 30% $519, 600, 000 Nestle 12. 50% $150, 000 Mondelez 1. 00% $12, 000 Hershey’s 2. 20% $26, 400, 000 2015 8% increase = $1, 399, 680, 000 Market Shares Mars 52% $723, 634, 560 Nestle 15% $215, 550, 720 Mondelez 2% $21, 555, 072 Hershey’s 14% $195, 955, 200 2014 8% increase = $1, 296, 000 Market Shares Mars 47% $609, 120, 000 Nestle 14% $181, 440, 000 Mondelez 1% $18, 144, 000 Hershey’s 7% $90, 720, 000 Hershey’s wants to increase retail stores by 32% and sales force by 60%.

Projected Income Statement

References • Castner, H. (2012, December 7). Hershey’s Market and Competitors Analysis. http: //www. youradvantagemarketing. com/Hersheys. Marketand. Competitor. Analysis. pdf • Company Profile. (2014, May 19). In The Hershey Company. Retrieved July 23, 2014, from http: //www. thehersheycompany. com/investors/company-profile. aspx • Hershey. (2014, May 1). Forbes. Retrieved July 17, 2014, from http: //www. forbes. com/companies/hershey/ • Hershey's. (n. d. ). The Hershey Company. Retrieved July 20, 2014, from http: //www. thehersheycompany. com/newsroom/news-release. aspx? id=398319 • Hershey's Company. (2014, July 15). Newsroom. Retrieved July 20, 2014, from The Hershey's Company: http: //www. thehersheycompany. com/newsroom/news-release. aspx? id=1947687 • Hershey expands footprint in Asia. (2013, October 4) Baking Business. Retrieved July 23, 2014, from http: //www. bakingbusiness. com/articles/news_home/International/2013/10/Hershey_expands_footprint_in_ A. aspx? ID={9311187 A-EAE 1 -4443 -9 E 0 E-A 98 A 568 A 5 A 88}&cck=1 • Hershey Foods (HSY). (n. d. ). Stock: . Retrieved July 24, 2014, from http: //www. wikinvest. com/stock/Hershey_Foods_(HSY) • IBISWORLD. (2014). . Retrieved July 24, 2014, from http: //clients 1. ibisworld. com/reports/us/industry/default. aspx? entid=230 • Lawerence, S. (2013, December 22). Bar Wars: Hershey Bites Mars (Fortune, 1985). Fortune Bar Wars Hershey Bites Mars Fortune 1985 Comments. Retrieved July 19, 2014, from http: //fortune. com/2013/12/22/bar-wars-hershey-bites-mars-fortune-1985/

References • Market. Line. (2013, November 1). Chocolate Confectionary in the United States. Retrieved July 20, 2014, from Market. Line Industry Profile: www. advantage. marketline. com • Melby, C. (2012, September 25). Hershey Invests $300 Million In Future Of American Manufacturing. And Consumption. In Forbes. Retrieved July 23, 2014, from http: //www. forbes. com/sites/calebmelby/2012/09/25/hershey-invests-300 -million-in-future-of-americanmanufacturing-and-consumption/ • Murphy, C. , & Burkitt, L. (2013, May 20). Hershey Keen for Piece of China. The Wall Street Journal. Retrieved July 23, 2014, from http: //online. wsj. com/news/articles/SB 10001424127887323463704578495003498121378 • Nieburg, O. (2013, October 4). Hershey marks biggest outlay in Asia with $250 m Malaysia plant. Confectionery. News. com. Retrieved July 17, 2014, from http: //www. confectionerynews. com/Manufacturers/Hershey-marks-biggest-outlay-in-Asia-with-250 m. Malaysia-plant • Saleem, R. (2009, May 11). Hershey Foods Corporation Swot Analysis. Scribd. Retrieved July 17, 2014, from http: //www. scribd. com/doc/15196558/Hershey-Foods-Corporation-Swot-Analysi • Scully, C. Z. (2014, January 31). 2014 Global Top 100: Candy Industry's exclusive list of the Top 100 confectionery companies in the world!. In Candy Industry. Retrieved July 23, 2014, from http: //www. candyindustry. com/articles/86039 -global-top-100 -candy-industrys-exclusive-list-of-the-top-100 - confectionery-companies-in-the-world? page=5 • Thompson, A. T. (2014). Strategic Management. East Carolina University. • Yahoo! Finance. (2014, July 20). HSY Competitor's. Retrieved July 20, 2014, from Yahoo! Finance: