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The Hershey Company was incorporated under the laws of the State of Delaware on
October 24, 1927 as a successor to a business founded in 1894 by Milton S. Hershey. In this report,
the terms “Hershey,” “Company,” “we,” “us” or “their” mean The Hershey Company and its
wholly-owned subsidiaries and entities in which it has a controlling financial interest, unless the
context indicates otherwise.

Hershey is a global confectionery leader known for bringing goodness to the world through
chocolate, sweets, mints and other great tasting snacks. We are the largest producer of quality
chocolate in North America, a leading snack maker in the United States and a global leader in
chocolate and non-chocolate confectionery. We market, sell and distribute their products under
more than 80 brand names in approximately 80 countries worldwide.

The Hershey Company structure is designed to ensure continued focus on North America,
coupled with an emphasis on profitable growth in their focus international markets. Their business
is organized around geographic regions, which enables us to build processes for repeatable success
in their global markets. As a result, we have defined their operating segments on a geographic
basis, as this aligns with how their Chief Operating Decision Maker (“CODM”) manages their
business, including allocation and performance assessment. Their North America business, which
generates approximately 88% of their consolidated revenue, is their only reportable segment. None
of their other operating segments meet the quantitative thresholds to qualify as reportable
segments; therefore, these operating segments are combined and disclosed below as International
and Other.

North America - This segment is responsible for their traditional chocolate and non-
chocolate confectionery market position, as well as their grocery and growing snacks market
positions, in the United States and Canada. This includes developing and growing their business
in chocolate and non-chocolate confectionery, pantry, food service and other snacking product

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International and Other - International and Other is a combination of all other operating
segments that are not individually material, including those geographic regions where we operate
outside of North America. We currently have operations and manufacture product in China,
Mexico, Brazil, India and Malaysia, primarily for consumers in these regions, and also distribute
and sell confectionery products in export markets of Asia, Latin America, Middle East, Europe,
Africa and other regions. This segment also includes their global retail operations, including
Hershey's Chocolate World stores in Hershey, Pennsylvania, New York City, Las Vegas, Niagara
Falls (Ontario), Dubai, and Singapore, as well as operations associated with licensing the use of
certain of the Company's trademarks and products to third parties around the world.

In January 2018, we completed the acquisition of all of the outstanding shares of Amplify
Snack Brands, Inc. ("Amplify"), a publicly traded company based in Austin, Texas that owns
several popular better-for-you snack brands such as SkinnyPop, Oatmega, Paqui and Tyrrells. The
acquisition enables us to capture more consumer snacking occasions by creating a broader
portfolio of brands. In April 2016, we completed the acquisition of all of the outstanding shares of
Ripple Brand Collective, LLC, a privately held company based in Congers, New York that owns
the bark THINS mass premium chocolate snacking brand.

The acquisition was undertaken in order to broaden their product offerings in the premium
and portable snacking categories. In March 2015, we completed the acquisition of all of the
outstanding shares of KRAVE Pure Foods, Inc. (“Krave”), the Sonoma, California based
manufacturer of Krave, a leading all-natural brand of premium meat snack products. The
transaction was undertaken to enable us to tap into the rapidly growing meat snacks category and
further expand into the broader snacks space.

Their principal product offerings include chocolate and non-chocolate confectionery

products; gum and mint refreshment products; pantry items, such as baking ingredients, toppings
and beverages; and snack items such as spreads, meat snacks, bars and snack bites and mixes,
popcorn and protein bars and cookies. • Within their North America markets, their product
portfolio includes a wide variety of chocolate offerings marketed and sold under the renowned
brands of Hershey’s, Reese’s and Kisses, along with other popular chocolate and non-chocolate
confectionery brands such as Jolly Rancher, Almond Joy, Brookside, bark THINS, Cadbury, Good
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& Plenty, Heath, Kit Kat®, Lancaster, Payday, Rolo®, Twizzlers, Whoppers and York. We also
offer premium chocolate products, primarily in the United States, through the Scharffen Berger
and Dagoba brands. Their gum and mint products include Ice Breakers mints and chewing gum,
Breathsavers mints and Bubble Yum bubble gum. Their pantry and snack items that are principally
sold in North America include baking products, toppings and sundae syrups sold under the
Hershey’s, Reese’s and Heath brands, as well as Hershey’s and Reese’s chocolate spreads, snack
bites and mixes, Krave meat snack products, Popwell half-popped corn snacks, ready-to-eat
SkinnyPop popcorn and other better-for-you snack brands such as Oatmega, Paqui and Tyrrells.
Within their International and Other markets, we manufacture, market and sell many of these same
brands, as well as other brands that are marketed regionally, such as Golden Monkey confectionery
and Munching Monkey snack products in China, Pelon Pelo Rico confectionery products in
Mexico, IO-IO snack products in Brazil, and Nutrine and Maha Lacto confectionery products and
Jumpin and Sofit beverage products in India.

The Hershey Company customers are mainly wholesale distributors, chain grocery stores,
mass merchandisers, chain drug stores, vending companies, wholesale clubs, convenience stores,
dollar stores, concessionaires and department stores. The majority of their customers, with the
exception of wholesale distributors, resell their products to end-consumers in retail outlets in North
America and other locations worldwide. In 2017, approximately 29% of their consolidated net
sales were made to McLane Company, Inc., one of the largest wholesale distributors in the United
States to convenience stores, drug stores, wholesale clubs and mass merchandisers and the primary
distributor of their products to Wal-Mart Stores, Inc.

The foundation of their marketing strategy is their strong brand equities, product innovation
and the consistently superior quality of their products. We devote considerable restheirces to the
identification, development, testing, manufacturing and marketing of new products. We utilize a
variety of promotional programs directed towards their customers, as well as advertising and
promotional programs for consumers of their products, to stimulate sales of certain products at
various times throughout the year. In conjunction with their sales and marketing efforts, their
efficient product distribution network helps us maintain sales growth and provide superior
customer service by facilitating the shipment of their products from their manufacturing plants to

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strategically located distribution centers. We primarily use common carriers to deliver their
products from these distribution points to their customers.

Cocoa products, including cocoa liquor, cocoa butter and cocoa powder processed from
cocoa beans, are the most significant raw materials we use to produce their chocolate products.
These cocoa products are purchased directly from third-party suppliers, who stheirce cocoa beans
that are grown principally in Far Eastern, West African, Central and South American regions. West
Africa accounts for approximately 70% of the world’s supply of cocoa beans. Adverse weather,
crop disease, political unrest and other problems in cocoa-producing countries have caused price
fluctuations in the past, but have never resulted in the total loss of a particular producing country’s
cocoa crop and/or exports. In the event that a significant disruption occurs in any given country,
we believe cocoa from other producing countries and from current physical cocoa stocks in
consuming countries would provide a significant supply buffer.

In 2016, we established a trading company in Switzerland that performs all aspects of cocoa
procurement, including price risk management, physical supply procurement and sustainable
oversight. The trading company was implemented to optimize the supply chain for their cocoa
requirements, with a strategic focus on gaining real time access to cocoa market intelligence. It
also provides us with the ability to recruit and retain world class commodities traders and
procurement professionals and enables enhanced collaboration with commodities trade groups, the
global cocoa community and sustainable community.

They also use substantial quantities of sugar, Class II and IV dairy products, peanuts,
almonds and energy in their production process. Most of these inputs for their domestic and
Canadian operations are purchased from suppliers in the United States. For their international
operations, inputs not locally available may be imported from other countries. We change prices
and weights of their products when necessary to accommodate changes in input costs, the
competitive environment and profit objectives, while at the same time maintaining consumer
value. Price increases and weight changes help to offset increases in their input costs, including
raw and packaging materials, fuel, utilities, transportation costs and employee benefits.

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When they implement price increases, there is usually a time lag between the effective date
of the list price increases and the impact of the price increases on net sales, in part because we
typically honor previous commitments to planned consumer and customer promotions and
merchandising events subsequent to the effective date of the price increases. In addition,
promotional allowances may be increased subsequent to the effective date, delaying or partially
offsetting the impact of price increases on net sales.

The manufacture and sale of consumer food products is highly regulated. In the United
States, their activities are subject to regulation by various government agencies, including the Food
and Drug Administration, the Department of Agriculture, the Federal Trade Commission, the
Department of Commerce and the Environmental Protection Agency, as well as various state and
local agencies. Similar agencies also regulate their businesses outside of the United States. We
believe their Product Excellence Program provides us with an effective product quality and safety
program. This program is integral to their global supply chain platform and is intended to ensure
that all products we purchase, manufacture and distribute are safe, are of high quality and comply
with applicable laws and regulations.

Through their Product Excellence Program, we evaluate their supply chain including
ingredients, packaging, processes, products, distribution and the environment to determine where
product quality and safety controls are necessary. We identify risks and establish controls intended
to ensure product quality and safety. Various government agencies and third-party firms as well
as their quality assurance staff conduct audits of all facilities that manufacture their products to
assure effectiveness and compliance with their program and applicable laws and regulations.

Hazard and Operability (HAZOP) useful to identify hazards as a preliminary risk

analysis in a systematic and comprehensive manner. The problems of interest are analyzed in an
attempt to determine the potential causes and their consequence able to bring serious damage. The
problem is investigated based on the main component of the system. The purpose of this
assignment is to investigate the hazard of chocolate factory failure include their potential causes
of failure, the consequences and the safeguard action. The investigation contains a review of each
system operation, determining each of the potential causes of system failure, their consequences
and how to handle it daily.
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This assignment used chocolate factory as a case study. The HAZOP result is gathered
from the brainstorming with the chocolate engineer. The HAZOP results are qualitative risk
assessment based on the experience and knowledge of the experts involved in the chocolate
factory. It is as a preliminary study to identify the potential causes of chocolate factory and their
consequence. The importance of performing HAZOP analysis as discussed by are as the following:

 HAZOP defines possible hazards, failure and operational issues.

 HAZOP has been used for over 40 years by professional institutions and legislators.
 HAZOP methods are used by the majority companies handling and processing hazardous
material especially oil and gas production, flammable and toxic chemicals and
pharmaceuticals etc.
 HAZOP results are integral elements of plant and safety records and also appropriate to
plant modifications.

The HAZOP need brainstorming with the expert in order to enlighten the method to
identify and discuss which hazards or operational issues in the chocolate factory might occur.
HAZOP is a preliminary risk analysis study to investigate the problems related to chocolate
factory. Expert opinion survey and direct interview with many people during offshore seminars,
offshore exhibition and workshops that include consultant, supplier, engineers, managers involved
in chocolate factory are conducted in order to get an idea and shaping the idea of the common
issues and problems related to chocolate factory failure.

The first task to develop HAZOP analysis is through brainstorming session with the people
involved in the system. The brainstorming session is involving nine experts that balance in terms
of experience, knowledge and disciplines. The HAZOP teams generally consist of four to eight
people to achieve comprehensive results. For this study, those nine experts remain to be the main
respondents. All of the experts are recognized professionals in the chocolate factory with
experience more than 10 years, therefore their combined knowledge and experience are sufficient
to develop the framework of risk assessment of the chocolate factory.

These numbers are kept to ensure the maximum quality and effectiveness during the
brainstorming session. The HAZOP study is developed through the following procedure: (i) the
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experts outline the specific objective of the vessel under study and describe the general
arrangements of the chocolate factories. This procedure contains the design arrangement,
operational procedure, and weather condition specification, description of equipment and system
descriptions. (ii) Any related questions to the scope and concept of the system are discussed. (iii)

The main components of chocolate factory consisting of chocolate line, anchor failure,
anchor handling failure and appurtenances connection failure are highlighted due to their main
contribution in chocolate factory. (iv) Any related issues about these components are then
discussed and answered by the experts. (v) The specific components are studied from this point
using the HAZOP guide words. Every guide word is a systematic list of deviation perspectives to
describe certain conditions that may lead to operational problems and even causes an accident.

Then continued to investigate the potential causes and the consequence of an undesired
event. When the safeguards are considered inadequate by the experts because of high contribution
of likelihood and consequences then an action should be taken. The HAZOP is developed in a
systematic method using the guidewords and deviation to consider each component of chocolate
factories, their potential causes of failure, the consequences and the safeguard action.

The HAZOP result recorded in this study are generally in the operational and maintainable
categories. Formerly there are no significant records of potential causes that may lead to an
accident. Detailed HAZOP actions must be reviewed and recorded by the project manager to
ensure that all system are fit for purpose. The application of HAZOP can be seen in another paper
namely HAZOP as one of the risk assessment method.

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HAZOP as preliminary hazard approach is used to identify and define the potential hazards
or problems of a system that may lead to an accident. The HAZOP result can be implemented as
suggestion action to reduce the risk and operational matters. The summary of HAZOP Step is
described in Fig. 1:

The few Steps in order to carry out HAZOP are as follows:

1. Step 1: Define the system/activity Identify and examine the system/activity that is going to be

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2. Step 2: Define the problems of interest for the analysis Define the potential hazards and
significant impact on the system by using guideword and deviation parameters.

3. Step 3: Record outcome and causes and suggest action Analyze the findings that focus on the
critical hazards as well as critical operational problems.

4. Step 4: HAZOP record The results of HAZOP are recorded using HAZOP spreadsheets which
generally include the guideword, deviation, possible causes, outcome, safeguards and suggestion
action, etc.

HAZOP analysis tabulate the results into systematic worksheets. The HAZOP worksheet
consists of the components under study, guideword, deviation, potential causes, possible
consequence, safeguard and suggested actions in order to minimize the failure. Table 2 shows the
HAZOP result of a mobile mooring system.

In order to implement HAZOP techniques, the brainstorming and discussion with the
experts need to be carried out and formulated into systematic record. The HAZOP records
generally consist of guide word, deviation, possible causes, possible consequences, safeguards and
action to be taken as shown in Table 2.

The descriptions for each column of the presented worksheet are:

a. Guide word: A keyword to create the imagination of a deviation of the system.

b. Deviation: Description of a system in which the process condition may depart from their design.
c. Possible Causes: Description of the causes why the deviation could happen that may result in
the worst possible consequence.
d. Possible Consequence: Consequence of the occurrence of the failure or the results of the
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e. Safeguards: A facilities that either prevent the cause or safeguard against the consequence such
as regular plant inspections.
f. Action: description of the action that should be taken when the consequence occur. It can remove
the cause and mitigate or eliminate the consequences.


Once the HAZOP analysis is complete, the study outputs and conclusions should be
documented commensurate with the nature of risks assessed in the study and per individual
company documentation policies. As part of closure for the HAZOP analysis, it should be verified
that a process exists to ensure that assigned actions are closed in a satisfactory manner.

On a long-term basis, operational feedback should confirm that the assessment and control
steps are adequately addressing the risk question. If this is not the case, it may be necessary to
review all assumptions. Feedback should correspond to ensuring that assumptions made about the
level of residual risks are still valid. Residual risks are risks that are expected to remain after risk
control strategies have been exercised. It is also important to note that new risks may arise from
risk control practices. Sometimes risks that were not originally identified or may have been filtered
out during the initial risk assessment can become aggravating factors due to the implementation of
risk control measures.

HAZOP is a powerful communication tool. The output of the tool should always be
presented at a level of detail appropriate for the various stakeholders. This is important not just for
presenting results, but also for obtaining early buy-in on the approach. In cases where HAZOP is
used as the basis for a “GxP” decision or some other regulated authorization, the approach should
be documented in a Standard Operating Procedure. It may not be necessary to include detailed
scoring steps or algorithms in the procedure, but they should be documented in a controlled report.
Updates to the portfolio should also be controlled.
(3093 words)

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Ahmad, A. Hazard and Operability (HAZOP). 2010. 5.

Balchin, K. Process Safety Management (PSM). Mahshahr, Iran: Haward Technology Middle
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Dhillon, B.S. 2003. Methods for Performing Human Reliability and Error Analysis in Health Care.
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Maragakis, I., Clark, S., Piers, M., Prior, D., Tripaldi, C., Masson, M., Audard, C. Guidance on
Hazard Identification. Safety Management System and Safety Culture Working Group
(SMSWG). 2009.

Rausand, M. Hazard and Operability Study. System Reliability Theory. Second Edition ed.: Wiley.

Shewring, D. HAZOP Study Report, Ammonia Plant Uprate Project, Orica Australia PTY LTD.
Australia: Pinnacle Risk Management Pty Limited. 2010.

Silvianita, Khamid, M. F., Kurian, V J. Critical Review of a Risk Assessments Method and its
Applications. In: International Conference on Strategy Management and Research
(ICSMR), July 2-3 2011 Hongkong. 2011. pp 83-87.

Silvianita, Khamid, M. F., Kurian, V.J. Operational Risk Assessment Framework of Mobile
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