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The Hershey Company

Company Profile
Publication Date: 22 Jul 2011
Europe, Middle East & Africa 119 Farringdon Road London EC1R 3DA United Kingdom t: +44 20 7551 9000 f: +44 20 7551 9090 e: Americas 245 5th Avenue 4th Floor New York, NY 10016 USA t: +1 212 686 7400 f: +1 212 686 2626 e: Asia Pacific Level 46 2 Park Street Sydney, NSW 2000 Australia t: +61 2 8705 6900 f: +61 2 8088 7405 e:

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.......................................................................4 SWOT Analysis..........................The Hershey Company TABLE OF CONTENTS TABLE OF CONTENTS Company Overview.5 The Hershey Company © Datamonitor Page 3 .................................................................................4 Key Facts................................................................................................................................

671 million during the financial year ended December 2010 (FY2010).671.8 million in FY2010. KEY FACTS Head Office The Hershey Company 100 Crystal A Drive Hershey Pennsylvania 17033 USA 1 717 534 4200 Phone Fax Web Address http://www. Net sales increased due to an increase in sales volume by approximately 4%.200 are part time workers. The company's products are sold in more than 60 countries spread across the Americas and Asian regions. an increase of 7% over 2009. pantry items and gum and mint refreshment products under more than 80 brand names. The operating profit of the company was $ Revenue / turnover 5.The Hershey Company Company Overview COMPANY OVERVIEW The Hershey Company (Hershey or ‘the company’) is involved in the manufacturing.3 million in FY2010. selling and distribution of chocolate and confectionery products. The net profit was $509.500 people of whom 11.500 HSY The Hershey Company © Datamonitor Page 4 . The company recorded revenues of $5. It is headquartered in Hershey. primarily for core brands in the US and increased sales of new products. an increase of 18. Pennsylvania and employs about 13.hersheys.0 (USD Mn) Financial Year End Employees New York Ticker December 13.300 are full-time employees and 2.9% over 2009. an increase of 16.9% over 2009.

Hershey International and the Global Marketing Group. Strengths Leadership position in the US confectionery market due to well known product brands. sells and distributes various types of chocolate candy. selling and distribution of chocolate and confectionery products. The brands are also well supported by the company's planned The Hershey Company © Datamonitor Page 5 . Reese's. Hershey's marketing strategies have enabled it to create one of the strongest consumer brand franchises in the world. However. particularly Kisses. All these three organizations are responsible for strengthening marketing capabilities in various regions. sugar confectionery. backed by ample advertising investments The company markets. and food and beverage enhancers under more than 80 brand names. The company's brand portfolio includes iconic brands. Hershey's selling and marketing organization comprises of Hershey North America.The Hershey Company SWOT Analysis SWOT ANALYSIS The Hershey Company (Hershey or ‘the company’) is involved in the manufacturing. refreshment and snack products. Hershey's and Reese's. Hershey's Kisses. backed by ample advertising investments Broad product portfolio stabilizes the company’s earnings Focus on research and development (R&D). The company's products are sold worldwide and marketed under popular brand names such as Hershey's. helps Hershey to gauge the emerging market for healthier snacks options Opportunities Enhancing market presence through acquisitions and licensing agreements Growth in the global confectionery market Streamlining business through restructuring operations and supply chain management Weaknesses Excessive dependence on the US market. pantry items and gum and mint refreshment products under more than 80 brand names. intense competition and the ongoing consolidations in the global confectionery market could affect the company's business and its market share. Kit Kat and others. and a few distributors for revenue generation restricts Hershey's growth potential Threats Ongoing consolidation revamps the confectionery market by making it more competitive Rise in prices of major raw materials could increase operating expenses Strengths Leadership position in the US confectionery market due to well known product brands.

In FY2010. and pantry items.1 million on advertising.The Hershey Company SWOT Analysis advertising investments. refreshment products (including mints and chewing gum). such as baking ingredients. and India. which provide a competitive edge over the peer companies. toppings. Hershey incurred $391. Pennsylvania in 2006.7% share. helps Hershey to gauge the emerging market for healthier snacks options Hershey has a strong acumen with respect to judging the changing trend in the customers' requirements. As of 2010. the company established the Hershey Center for Health and Nutrition (HCHN or "the center") in Hershey. In addition. Apart from usual chocolate and sugar confectionaries. and mental and physical energy. Thus a strong brand portfolio gives Hershey a competitive edge over its peer companies. Broad product portfolio stabilizes the company’s earnings Hershey offers a range of products across many categories. increased emphasis on R&D enables the company to develop innovative products. merchandising and programming to drive profitable growth. and a few distributors for revenue generation restricts The Hershey Company © Datamonitor Page 6 . nuts and other natural ingredients. toppings and beverages. The extensive line of products provides a diversified source of revenue for the company and stabilizes its earnings. the company commanded 43% of the US chocolate market compared to its closest rival Mars’ 30. In spite of a weak economic environment.The company’s principal product category include chocolate and sugar confectionery products. and in order to gauge this emerging market. which increased at a compounded annual growth rate (CAGR) of 25. HCHN mainly uses scientific research to develop products and technologies that provides consumers with products that offer health benefits in the areas of heart health. Weaknesses Excessive dependence on the US market. syrups. and hot cocoa). At the same time it results in stable revenues and easy penetration into new markets and product categories. Thus. The center leverages Hershey's internal scientific capabilities as well as partnerships formed with internationally known researchers and institutions. and pantry items (including baking products. the company also operates retail stores which display the company’s branded products. by improving brand equity and also market share.6%. in-store selling. Brazil. The company also invests considerably in consumer insights. gum and mint refreshment products. Increasing number of customers are looking for healthier snacks options. Focus on research and development (R&D). Hershey has maintained its investment in R&D and spent approximately $30. The primary focus of HCHN is work on product innovation that are drawn upon clinical studies and scientific analysis of the health benefits of cocoa. weight management.5 million in 2010. Its strong domestic position also enabled it to extend its operations in emerging countries like China. The company’s branding and promotional strategies have placed it strongly in the US confectionary market. the company provides a range of snack products (including calorie bars and snack nuts).

convenience stores. mass merchandisers. In comparison to this. its competitors such as Kraft Foods generated 57. In FY2010. With this acquisition Hershey will gain an immediate market presence in many high potential countries like Malaysia and Indonesia.1% of the company's total net sales came from McLane Company (McLane).8% of the revenue was generated from the US market. Hershey also entered into a licensing agreement with HP Hood. chain grocery stores. dollar stores. department stores and natural food stores. In FY2010. through these business agreements the company has been expanding its operations in the US as well as other growing markets in the Asian countries. Hershey acquired Van Houten Singapore consumer business from Barry Callebaut. This agreement grants HP Hood the license to manufacture. HP hood and Hershey will in partnership launch a line of single serve Hershey branded products including Hershey's Reduced Fat Chocolate Milk. The company's main customers comprise of wholesale distributors. These customers then resell Hershey's products to the end consumers in some 2 million retail outlets in North America and other locations worldwide. The market growth will primarily be driven by increased The Hershey Company © Datamonitor Page 7 . concessionaires. vending companies.7% in 2009 to a high of 3. Hence. New Zealand. Moreover geographic concentration of revenue increases vulnerability to market conditions in the US. the company has gained exclusive license of the Van Houten brand name and related trademarks in Australia. with moderate to strong growth in all product categories. which in turn will drive its revenue growth.The Hershey Company SWOT Analysis Hershey's growth potential Hershey depends on the US for a major portion of its revenue. These products will be marketed across the US.5% of its revenue from outside the US in FY2010. excessive dependence for revenue on one geographical region as well as on a few number of distributors can immensely restrict Hershey's growth potentials. Although the overall market growth is expected to remain similar during 2009-14. Both the companies i. chain drug stores.1% in 2014. the annual rate of growth is set to rise from a low of 2. Thus. Opportunities Enhancing market presence through acquisitions and licensing agreements In 2009. which in turn would augment well for the company's topline and bottom-line growth. approximately 22. Hershey's Chocolate Milkshake and Hershey's Cookies n' Cream Milkshake. almost 84. Growth in the global confectionery market According to Datamonitor. McLane is one of the primary distributors of Hershey's products to Wal-Mart Stores. the global confectionery market grew at CAGR of 3% during 2005-09 period. With this acquisition. a distributor of dairy products in the US in 2009. Middle East and Asia for the retail and duty free distribution channels. wholesale clubs. sell and distribute extended-shelf-life Hershey flavored milks and milkshakes across the US.e.

Flake. As part of the program. to a planned expansion of the West Hershey facility. it will result in the annual savings of approximately $60 million to $80 million. In addition to this. streamlining business operations through similar restructuring plans will help Hershey to remain competitive and increase its profit margins. "Next Century" in 2010. there has been a lot of consolidation that has taken place in the confectionary industry which all the more intensifies competition in the confectionery market. The Hershey Company © Datamonitor Page 8 .The Hershey Company SWOT Analysis demand for premium chocolates. honey and blueberry. Thus. that offer low priced alternative to the branded products. Hershey with its wide spread presence in both the matured and emerging markets can benefit immensely from the ongoing trend. global reach and some iconic brands such as Dairy Milk. The estimated cost of the program included pre-tax charges and non-recurring project implementation costs of $140 million to $170 million over three years. Recently. These developments can erode Hershey's competitive edge and force it to lose market share in many of the geographical regions thereby rendering blow to its revenue growth. is also becoming a greater competitive threat. consumers have increasingly become price-conscious and have been increasingly opting for these private brands. and Dairylea among others. In addition to this the threat from private labels. in 2010 Cadbury was acquired by Kraft Foods. Due to the economic downturn in the US. the company has launched an initiative. Moreover. Crunchie. the preference for chocolates that features ingredients such as lavender. Threats Ongoing consolidation revamps the confectionery market by making it more competitive The products offered by Hershey faces stiff competition from many other brands offered by multinational. These investments will help Hershey to create a more cost-effective and efficient supply chain. regional and local competitors. Once the plan is fully complete. is also expected to fuel the market as a subset of product premiumization. production will transition from the company's facility at Hershey. national. The two companies together have become a powerful company in terms of products offerings. Toblerone. Hershey's competitors have been expanding their scale of operations by extending products offered as well as enhancing geographical reach. The company can leverage its strong product portfolio and distribution network to expand its reach and carter to a larger customer base thereby increasing its revenue base. Streamlining business through restructuring operations and supply chain management In order to bring about operational efficiency. Pennsylvania.

during 2010.66 per pound. Since the unilateral price pass-off to the customers could erode the company's market share. trading in a range from $. Majority of these raw materials witnessed record prices during 2010. Prices are stronger in the face of strong demand for dairy products and tight supply of butterfat. and profitability would depend on the cost saving initiatives.56 per pound due to the subpar yield for the current year's crop. hence.48 to $. while peanut prices in the US increased from $. The Hershey Company © Datamonitor Page 9 . sugar. and traded in a range between $1. Also in 2010.26 and $1. For instance.53 per pound. On the other hand.The Hershey Company SWOT Analysis Rise in prices of major raw materials could increase operating expenses As a confectionary manufacturer. cocoa butter and cocoa powder. The company's major raw materials constitute cocoa products including cocoa liquor. prices for dairy products increased from $. The rising inflation.18 per pound on a class II fluid milk basis. the average cocoa futures contract prices increased compared with 2009. refined sugar prices increased significantly in the US. dairy products.14 per pound to approximately $. and peanuts. Cocoa futures prices during 2010 traded at prices that were near 30-year highs. Hershey depends heavily on a wide basket of global commodities for manufacturing its goods. would pressurize the company's margins. During 2010. prices of sugar and peanuts also recorded significant growth. the company has to implement stricter cost rationalization measures to deliver the similar earnings growth in future. the prices for which have risen substantially in recent years.46 per pound to $.

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