Hershey Pieces

Marketing Plan

Prepared By: Lisa Fergusan, Sara Gugin, Susan Hitts, Ghulam Jafferi
Situation Analysis
• Located in Hershey, Pennsylvania
(pop. 13,000)

• Industry Leader
– $6.08 billion in sales
– 402 on Fortune 500
– 14,000 employees

• Company Groups
– Chocolate and confectionary
– Restaurant operations
– Other food products and service
Marketing Environment
• Competitive Market Forces
– Hershey controls 40% of domestic chocolate
market
– Consumers buy chocolate candy 12.2 times
per year
– Purchase cycle is 44 days
– Total of 12.4lb of chocolate per buyer per
year
Marketing Environment
• Political and Legal Market Forces
– Hershey Trust owns 78% of the company
– Merger and acquisition
• Required for growth
• Extremely challenging due to large structure

• Economic Forces
– Rising prices of raw materials
• Corn
• Cocoa
– Impact of 2008 Recession
Marketing Environment
• Technological Forces
– Packaging design
• Easier
– Packaging cost
• Cheaper

• Socio-culture forces
– Affection for chocolate
• Gift, “feel good” treat or snack
• Impact of healthy eating behavior
S.W.O.T Analysis
Strengths
• Recognized brand

• Ability to sustain new and existing products

• Growth due to Pieces product line extension

• Increase in profit percentage on sales

• Controls 40% of Domestic Chocolate Market

S.W.O.T Analysis
Weakness
• Market saturation

• Second place in international chocolate

manufacturing industry

• Difficult to merge with other companies

S.W.O.T Analysis
Opportunities
• International growth

• Create a strategy that will combat the threat of

more self-checkout lanes and parent complaints

• Create point-of-purchase materials that will

regain control of differentiation from retailers
and persuade target markets to purchase
S.W.O.T Analysis
Threats
• Reliance on retailers for product differentiation

• Increase in raw material cost

• “Self-checkout” lanes reduces impulse

purchases

• Parent complaints about candy in checkout

lanes
Pieces Financials
• Projected Pieces revenue
– 2O12 $355,058,609.00
– 2O13 $386,825,974.00
– 2O14 $417,454,423.00
– 2O15 $433,335,841.00

Projected Pieces Revenue 2012-2015

$500,000,000.00
$400,000,000.00
$300,000,000.00
$200,000,000.00
$100,000,000.00
$-
2O12 2O13 2O14 2O15
Pieces Financials
Domestic and International Pieces Revenue
Domestic International
– 2O11 $287,908,328.00 $31,989,814.00
– 2O12 $319,556,824.00 $35,506,314.00
– 2O13 $348,152,377.00 $38,683,597.00
– 2O14 $375,708,981.00 $41,745,442.00
– 2O15 $390,002,257.00 $43,333,584.00

Domestic vs. International Pieces Sales (Actual

and Projected) 2006-2015

$600,000,000.00
$400,000,000.00 Domestic
$200,000,000.00 International
$-
6

1O

12

14
O

2O

2O
2O

2O

2O
Pieces Financials
Hershey's Market Share 2011
• US chocolate 43%
• US non-chocolate 15%
• International chocolate and non-chocolate 13%

Hershey's Market Share Percentage 2011

50%
40%
30%
20%
10%
0%
US chocolate US non-chocolate International chocolate
and non-chocolate
Pieces Financials
Raw Material Cost
Cocoa Prices
• 2OO6 $0.70
• 2OO7 $0.86
• 2OO8 $1.19
• 2OO9 $1.28
• 2O1O $1.36
• 2O11 $1.34

Cocoa Price per Pound in US Dollars (Actual and

Projected) 2006-2015

$1.50
$1.00
$0.50
$-
2OO6 2OO7 2OO8 2OO9 2O1O 2O11 2O12 2O13 2O14 2O15
Pieces Financials
Raw Material Cost
Sugar Prices
• 2O11 $0.40
• 2O12 $0.39
• 2O13 $0.28
• 2O14 $0.30
• 2O15 $0.31
Average Annual Price of Sugar Purchased by
Hershey's (Actual and Projected) in US Dollars
per Pound 2006-2015

$0.60
$0.40
$0.20
$-
2OO6 2OO7 2OO8 2OO9 2O1O 2O11 2O12 2O13 2O14 2O15
Pieces Financials
Pieces Break Even Point (in bags sold)
• 2O12 64,101,573
• 2O13 69,748,648
• 2O14 75,041,241
• 2O15 77,596,176

Pieces Sales Break Even Point to Cover

Projected Expenses 2012-2015 (in bags sold)

100,000,000

50,000,000

-
2O12 2O13 2O14 2O15
Marketing Goals
Primary Goal
Diversify the Pieces brand to reach a greater
portion of the primary and secondary target
markets

Secondary Goal
Increase the market presence of the Pieces
Brand globally
Marketing Objectives
Primary Objectives
• Hire a product manager for new Kit Kat Pieces

• Develop a team
– Brand Manager, Product Manager, Marketing Director,
Marketing Manager, Financial Analyst, PR Manager,
Creative Director, Digital Manager

• Grow overall Pieces sales by 6% in next 5 yrs.

• Detailed budget plan

Marketing Objectives
Secondary Objectives
• Increase Pieces market share
– 4% by 2018
– 7% by 2023

• Implementation of Kit Kat Pieces before the end

of 2013 year

• Strategize, implement and analyze an

integrated marketing communications plan for
the Pieces Brand
Target Market
Primary Target Market
• Women age 18+ with Internet
– With children under the age of 18
– Purchasing habits
• 71% to fulfill a craving
• 100K+ income buys premium chocolate

Secondary Target Market

• Men age 18+
– Buys chocolate for other people
Packaging & Logo
Pieces Packaging
– Plastic air-tight
– Re-sealable bag
– Small snack sized bags

Kit Kat Pieces Logo Design

– Maintain the Kit Kat branding
– Merge with the current pieces logo
Features and Benefits
Major Features and Benefits
• Smaller “pop-able” and “shareable” chocolates

• Same great Kit Kat flavor in re-sealable

pouches

• Smooth chocolate on the outside, crunchy

wafer in the center
Pricing Strategy
Pieces Pricing Strategy
• Market is saturated with competitors

• Market competitive pricing strategy

– $4.50 per pound
– Large re-sealable packages of $5.40
– Forecasted profit margin of about 11% to 12%

• Incentives for wholesalers and retailers

Supply Chain Strategy
• Transportation methods
– Truck, rail, ship & plane
• Large volume sales
• Quality and cost control
• 4 channels to reach the consumer
• Implement just-in-time inventories
– Counteract the short shelf life of chocolates
– Minimize warehousing costs
• Well-designed warehouses and manufacturing
facilities
IMC Strategy
• Strengthen Hershey’s brand equity among
external and internal stakeholders

• Increase the awareness of the Hershey

Company’s investment

• Increase recognition of the Hershey Company

as a market-leader in chocolate manufacturing

• Unified image of the Hershey Company

IMC Strategy
• Address product line expansion and quality

• Prioritize key support activities

• Inform and motivate about new Kit Kat Pieces

• Use an integrated and coordinated marketing

mix to reach the target markets
Implementation
Structural Issues
• Ensure a smooth and successful
implementation

• Work with senior management to develop a

new product team

• Developmental training plan

• Communication of information
Marketing Organization
Implementation
Tactical Marketing Activities
Implementation
Tactical Marketing Activities
Implementation
Tactical Marketing Activities
Implementation
Total Implementation Plan Cost
Formal Controls
Input Control
– Financial resources
• To develop, produce, and market Hershey’s Kit
Kat Pieces
• To capture targeted market segment
• To make this product extension successful

– Research and development

• Experience in Pieces Product Line extension
• Incorporate Kit Kat taste and texture in Pieces
size
Process Controls
• Employee Compensation Systems
– Implement compensation system to promote
Hershey Kit Kat Pieces
– Exceeding sales target will be awarded an
additional 10% bonus in Hershey’s stock

• Management Training
– Training about Hershey’s Kit Kat Pieces
– Training about development Internet
distribution channel
Output Controls
Overall Performance Standards
• Increase Pieces’ sales by 6% within 5 years
• Increase market share by 4% by 2018
Reece's Pieces All "Other" Pieces
2O12 $222,725,032.00 $132,338,106.00
2O13 $242,649,316.00 $144,176,658.00
2O14 $261,862,018.00 $155,592,405.00
2O15 $271,824,160.00 $161,511,681.00
Past and Projected Sales Revenue for Reece's
Pieces and All "Other" Pieces 2006-2015

$300,000,000.00
$200,000,000.00 Reece's Pieces
$100,000,000.00 All "Other" Pieces
$-
6

1O

12

14
O

2O

2O
2O

2O

2O
Output Controls
• Product Performance Standards
– Taste and texture of Hershey’s Kit Kat Candy Bar
– Fit, form, and function of Hershey’s Pieces

• Price Performance Standards

– Same price as other Pieces products
– No changes for the customers

• Distribution Performance Standards

– Introduce Internet distribution channel
Informal Controls
• Employee Self Control
– Employee growth opportunities
– Promotes innovation

• Employee Social Control

– Employees at Hershey have great work ethics
– Work within company’s standards and norms
– Supports and encourages employees to increase
their effort and performance to meet goals and
objectives outlined in Pieces marketing strategy
Implementation Timeline
Implementation Timeline
Marketing Audits
Audit of External Environment
– Analysis of Pieces’ customer needs
– Review of customer behavior including health
consciousness
– Perception of Hershey’s Pieces product line
– Level of brand recognition
– Health of Chocolate Industry
– Researching of competition
– Analysis of political situation in international
markets
– Review of raw material pricing trends
Marketing Audits
Audit of Internal Environment
– Labor productivity analysis
– Labor cost review
– Equipment requirements and efficiency
– Effectiveness and efficiency of marketing team
– Accuracy of marketing planning process
– Review of current product portfolio
– Pieces’ market share analysis
– Pieces sales and cost comparison by period
– Comparison to Hershey’s Product Lines
– Pieces’ profit and contribution margin analysis
Marketing Audits
Audit of Current Marketing Plan
– Review of current marketing objectives
– Effectiveness of marketing department in
implementation of marking plan
– Evaluation of marketing budget
– Staffing needs and training requirements
– Financial impact of implementation of
marketing plan
References
• Hoovers. (2012). Retrieved from
http://www.hoovers.com/company/The_Hershey_Comp
any/rfktti-1.html

• Mintel. In (2008). Mintel. Retrieved from http://0-

academic.mintel.com.catalog.lib.cmich.edu/sinatra/oxyg
en_academic/search_results/show&/display/id=296684

• The Hershey Company. (2011). Hershey. Retrieved

from http://www.thehersheycompany.com/