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The Hershey Company

The Hershey Company

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Published by judith matienzo
The Hershey Company, Hershey, Hershey's
The Hershey Company, Hershey, Hershey's

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Published by: judith matienzo on Oct 03, 2010
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The Hershey Company - Introducing the World of Chocolate
Thu, May 22, 2008Business, Politics
The Hershey CompanyIntroducing the World of Chocolate
 
The Hershey Company Introducing the World of Chocolate
examines the remarkable successes and failures of TheHershey Company, the largest North American manufacturer of chocolate and sugar confectionery products, in itsconstant pursuit to maintain growth and profitability in a competitive industry dominated by only a few giantconfectionery corporations. Through careful analysis and thorough research, The Hershey Company Introducing theWorld of Chocolate will provide a clear and concise assessment of how The Hershey Company came to be a globalcorporate giant, how it has maintained its dominant position in the industry, and where the company is going in thenear future.Copyright © 2007 by the authors of this book Michael Ellis, Markesha McCants, Nicole Frye, Jessica Miller, ManonPolk, and George Rogers.The book authors retain sole copyright to his or her contributions to this book.ISBN 978-1-60585-999-6This report is in association to the capstone project issued by The University of Tennessee¶s MBA program satisfyingcredit for the Management/Accounting 790, Strategic Management & Business Policy course.The Hershey Company- Introducing the World of Chocolate
Table of Contents
IntroductionHistoryMicroenvironmentMacroenvironmentSWOT BulletIndustry AnalysisStrategySocial ResponsibilityEthicsCultureLeadershipFinancial AnalysisRecommendationsReferencesStudent Biographies Appendices A-E
INTRODUCTION
 The Hershey Company prides itself as being the largest manufacturer of chocolate and confectionery products inNorth America. Hershey employs over 15,000 employees worldwide. Hershey also exports to ninety differentcountries. Below are some of the company¶s popular brands.* Hershey¶s Chocolate Bar * Almond Joy* Kit Kat* Hershey¶s Kisses* Mounds* Reese¶s* Payday* York Peppermint Pattie* Milk Duds* Mr. Goodbar * Rolo* Skor * Whatchamacallit* Whoppers* Krackle Bar 
 
These legendary brands have contributed to the success of having sales that reach well over four billion dollars. TheHershey Company also enjoys being the leader of the dark and premium chocolate segment. The top brands in thiscategory include Hershey¶s Special Dark, Hershey¶s Extra Dark, and Cacao Reserve. Expansion has also lead to thedevelopment of different snacks.Hershey¶s chocolate has been used to enhance cookies, brownies, and cakes.The Hershey Company lives by their mission statement: ³Undisputed Marketplace Leadership´ (www.hersheys.com).They strive to maintain a superior standing by having continual creation of value, developing a diverse portfolio of brands, and by successfully transforming consumer and customer desires into reality. Today, the Hershey Companyremains committed to fulfilling the mission of Milton Hershey, the founder who started it all.
HISTORY
 
Founder History:
 Milton Hershey grew up in rural Pennsylvania and left his legacy as Hershey¶s chocolate. Milton was an entrepreneur who completed a four-year apprenticeship with a candy maker prior to venturing out to start his own business.Hershey made three attempts at starting his own company before successfully starting the Lancaster CaramelCompany. It wasn¶t until 1893 that Milton Hershey became interested in the art of chocolate making. While attendingthe World¶s Columbian Exposition, Hershey purchased machinery and thus began producing chocolate that coveredhis caramel creations. Soon after this discovery, Hershey started the Hershey Chocolate Company in 1894. After many trials and errors, he finally stumbled upon the famous recipe that would become his legacy.In 1900, Milton Hershey sold his caramel business for one million dollars. He then focused solely on makingchocolate. In 1903, Hershey decided to build his company at a new location in Derry Township. This location had alarger population, easy access to port cities that would supply sugar and cocoa beans, and plenty of dairy farms.Milton Hershey sought not only to build a company, but also to build a community. He believed that workers workedbetter under pleasant working conditions and pleasant surroundings. For this reason, Hershey built an infrastructureto take care of his workers. This infrastructure was accompanied with a department store, convention hall, and lots of schools. ³In a long and useful life, Milton S. Hershey proved himself to be a courageous entrepreneur, a determinedbuilder and a compassionate humanitarian´ (www.hersheys.com).
Chocolate and Cocoa Industry History / Development:
 The chocolate industry relies heavily on fluctuations in demand. The demand for these products increases drasticallyduring the holiday season. For this reason, sales increase during the third and fourth quarters of the calendar year.Several consumer trends such as the rising sales of premium-priced chocolates and the growing concern about thehealth risks associated with the consumption of such high-fat foods affect the chocolate industry (www.answers.com).There were 995 establishments that produced chocolate in 2000 (www.answers.com). California and Pennsylvaniawere the two states that had the majority of these establishments. The total consumption of chocolate in a year isabout 3.1 billion pounds with a total of retails sales reaching about $13 billion.The chocolate industry dates back to 1765. At that time, growers in the West Indies supplied cocoa. The firstchocolate factory was established in England. During the First World War, chocolate was used as a morale booster and for nourishment. From 1989 to 1991 the chocolate/cocoa industry experienced 50 acquisitions, mergers,licensing agreements, or joint ventures (www.answers.com).During the mid 1990¶s, the industry catered toward new consumer trends. The development of lite chocolate and litedesserts increased drastically with the creation of fat-free chocolate items.
Manufacturing Process:
 In order for U.S. manufacturers to use cocoa beans, the beans must be imported by direct purchase or through abroker. The growers of these beans are paid market price. Once the beans are obtained, they are then processed tomake chocolate liquor. This liquor is then used to manufacture cocoa, syrup, and solid chocolate chips. It can also beused to enhance confections, bakery items, and other dairy products.The manufacturing process includes roasting, shelling, and grinding of the beans to produce the unsweetenedchocolate liquor. Additional processing will yield one of two products, cocoa or chocolate. Cocoa is produced byextracting fat from the liquor. The remaining cocoa cake is crushed to form a powder and may be sweetened or leftunsweetened. The fat that is extracted is known ascocoa butter which can be used in sweetened chocolate or as moisturizers. The production of chocolate requires theaddition of sugar and cocoa butter to the liquor. Milk solids are also needed when manufacturing milk chocolate.Chocolate manufacturers typically sell the semi-processed products to other firms that use them when producingconfectionery goods. ³Exports of chocolate products consist of confectionery items rather than semi-processedchocolate´(www.answers.com).
Hershey¶s Mission
 
Company Mission Statement/ Corporate Philosophy:
 The Hershey Company¶s mission statement reads as follows, ³Our mission is to be a focused food company in North America and selected international markets and a leader in every aspect of our business. Our goal is to enhance our 
 
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1 position in the North American confectionery market, be the leader in U.S. chocolate-related grocery products, andto build leadership positions in selected international markets´ (www.answers.com).The company further breaks this statement down into five categories that will ensure leadership in the marketplace.Hershey would like to have value creation from the top tier throughout the entire business system. The company alsostrives to have organizational capabilities that not only compete in the present but are also able to build on in thefuture. The Hershey Company also encourages and promotes healthy living. Keeping a diverse portfolio of brandsthat delight and deliver superior growth worldwide is also important in sustaining leadership. Hershey must alsocontinuously transform consumer desires into a product that they would want to purchase time and time again.Corporately, The Hershey Company strives to maintain a high level of ethics and conduct. It is also important that thecompany develops a strong ³people´ orientation and has employees genuinely care about each other. Hershey willalso advance only if they are able to attract customers and consumers with products of high quality and excellence.Lastly, Hershey has pledged to, ³Sustain a strong µresults¶ orientation coupled with a prudent approach to business´(www.hersheys.com).
Hershey¶s Expansion
 
Sales and Acquisitions:
 In 1968, the company was renamed Hershey Foods Corporation. At this time, the company expanded itsconfectionery product lines, acquired related companies and even diversified into other food products(www.hersheys.com). Some of the several acquisitions included: San Giorgio Macaroni and Delmonico Foods (1966);manufacturing and marketing rights to English candy company Rowntree MacKintosh¶s products (1970); Y&SCandies, makers of Twizzlers licorice (1977); Dietrich Corp.¶s confectionery operations (1986); Peter Paul/Cadbury¶sU.S. confectionery operations (1988); and Ronzoni Foods (1990) (www.hersheys.com). Hershey Foods was theindustry leader at the end of the twentieth century.The company continued to expand and diversify. In 1986, Hershey acquiredLuden¶s cough drop brand. In 2001, Hershey sold this brand to Pharmacia. Remaining in the same industry, Hersheyacquired Cadbury-branded products in the United States in 1988. Hershey acquired Scharffen Berger out of Berkeley, California in July of 2005. In November of the same year, Hershey acquired Joseph Schmidt Confections.One year later in November of 2006, Hershey acquired Dagoba Organic Chocolate.
Hershey¶s Timeline
 
Hershey¶s Timeline:
(Information retrieved from www.hersheys.com)1887: Milton Hershey establishes the Lancaster Caramel Company.1895: The Company begins to sell chocolate.1900: Hershey sells his caramel company to focus on chocolate1905: Milton Hershey established an independent trust company to provide the town¶s financial services and managethe assets that were to fund his many philanthropic endeavors.1906: The Village of Derry Church is renamed Hershey1907: Hershey Kiss was introduced.1927: The firm incorporates as Hershey Chocolate Company and is listed on the New York Stock Exchange.1940: Hershey¶s chocolate plant is unionized.1963: H.B. Reese Candy Company is acquired.1968: The firm adopts the name Hershey Foods Corporation.1970: Hershey¶s first consumer advertisement appears in 114 newspapers.1988: Hershey Purchases the operating assets and manufacturing assets of Peter Paul/ Cadbury brands.1996: Hershey launches its first hard candy line, TasteTations, and the reduced-fat Sweet Escapes Line.1999: The firm sells its pasta business to New World Pasta, LLC.2002: The Milton Hershey Trust School announces plans to sell Hershey, but withdraws offer.
MICROENVIRONMENT
 
Strengths
 The Hershey Company has many positive attributes that solidify the company as a powerhouse among chocolateproducing companies in the world. Hershey has a rich history full of tradition, philanthropic service, brand innovation,mass-production technology, customer service, and strategic alliances. Hershey¶s organizational capabilities andpassion for premier chocolates enables the company to offer top-tier value creation and undisputed marketplaceleadership (www.thehersheycompany.com). These superior traits combine to give The Hershey Company a winningedge and provide a strong tradition for the company to grow and expand well into the future.
The Hershey Tradition
The Hershey Company is one of the oldest chocolate companies in the United States and has become an Americanicon. The company, which was founded in 1894, has been in business for over a hundred years and has built its base

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