Hershey India Private Limited

Operating Geography: India, Maharashtra (Mumbai)

About Hershey India:
Hershey India Private Ltd. was founded in 1997 as a 100% subsidiary of The Hershey Company, a 100+ year old
Pennsylvania based company. It is the fourth largest producer of quality chocolates in the world and a Global leader
known for bringing happiness to the world through its chocolates, sweets, mints and other tasty snacks. It is known
in India for iconic products like Hershey’s Kisses, Hershey’s Syrup, Hershey’s Spreads, Hershey’s Milk Shake, and
Hershey’s Cocoa Powder as well as other significant brands like Sofit, Brookside Chocolate and Jolly Rancher.
Revenue: 320 crore in 2017
Competitors: Mondelez Cadbury, Nestle

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Product line used for the report:

1. Brookside – Brookside dark chocolates:

2. Hersheys Kisses:

Hershey’s Brand:

(Hershey’s kisses and Brookside chocolate) vs (Cadbury dairy milk, dairy milk silk, Oreo, celebrations, Cadbury
Bourneville)

- Chocolates will be launched only in South India, because one-third of the chocolate market of India is in South

- Chocolates will be available in modern trade, large general trade and e-commerce in South

- Manufacturing Plants already in Bhopal, Madhya Pradesh, Gujrat and Hyderabad are planning to expand in India

- Hersheys International will be investing 50m$ in India over the next 5 years to scale its operation in India

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PESTLE:
Political - The Hersheys India can look into the following factors before entering into the Indian market

 Political stability and importance of Confectioners sector in the country's economy - India has recently seen
that for the two current terms the same government is coming into power and making the policies for trade
in India. The confectionery market in India is valued at $1.5 billion, growing at a two-year CAGR of 9%, as per
Nielsen India. Various reports suggest that India is the fastest growing confectionery market among the BRIC
countries
 Level of corruption – FSSA lays emphasis on consolidating the laws related to food and to establish FSSAI for
laying down science based standards for articles of food and to regulate their manufacture, storage,
distribution, sale and import, to ensure availability of safe and wholesome food for human consumption and
for matters connected with them. The strict penalties imposed in FSSA may lead to increase in corruption, as
enterprises may resort to unfair practices to avoid these penalties.
 Trade regulations & tariffs related to Consumer goods
 India is presently known as one of the most important players in the global economic landscape. Its trade
policies, government reforms and inherent economic strengths have attributed to its standing as one of the
most sought after destinations for foreign investments in the world. Also, technological and infrastructural
developments being carried out throughout the country augur well for the trade and economic sector in the
years to come.
 With the Government of India striking is important deals with the governments of Japan, Australia and
China, the external sector is increasing its contribution to the economic development of the country and
growth in the global markets. Moreover, by implementing the FTP 2015-20, by 2020, India's share in world
trade is expected to double from the present level of three per cent.
 *
Revised estimates at current prices, **Advanced estimates at current prices
 Exchange Rate Used: INR 1 = US$ 0.0145 as on May 29, 2019
 Pricing regulations – In India there is a Pricing Regulatory Authority of India that ensures that both market
and the customers benefit from selling goods.
 Taxation – Excise taxes, sales tax and GST is being applied on consumer goods in India.

Economic-

 What type of economic system there is and how stable it is- The economy of India is a developing
mixed economy. It is the world's seventh-largest economy by nominal GDP and the third-largest by purchasing
power parity (PPP).
 Government intervention in the free market and related Consumer Goods- The Competition Commission of
India's attempts to restrict Government control of the market represent a streamlining of India's competition
jurisprudence along the lines of international best-practices.
 Exchange rates & stability of host country currency- A relatively stable exchange rate greets the New Year
erasing memories of wild swings last year. The one-month Bloomberg Implied Volatility Index plunged 125 basis
points to 8.28 per cent in the past four weeks to the New Year suggesting the local unit is likely to be stable this
year. A basis point is one hundredth of a percentage point.
While this will help burnish the allure of domestic securities to overseas investors, companies can breathe also
easy on their US exposure

 Efficiency of financial markets – Hersheys India already established in in Hersheys US need not to raise money
from public. Hence it will be a private company working in India.
 Economic growth rate - The economy of India is a developing mixed economy. It is the world's seventh-
largest economy by nominal GDP and the third-largest by purchasing power parity (PPP). The country ranks
139th in per capita GDP (nominal) and 119th in per capita GDP (PPP) as of 2018. After the 1991 economic
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 liberalisation, India achieved 6-7% average GDP growth annually. Since 2014 with the exception of 2017, India's
economy has been the world's fastest growing major economy, surpassing China.
 Unemployment rate – According to the International Labour Organisation (ILO), India will again see its
unemployment rate at 3.5 per cent in 2018 and 2019, the same which was seen in 2017 and 2016. According to
the latest data, there will be 18.9 million jobless people in India next year a little more than 18.6 million for 2018
 Inflation rate - In FY 2020, the panel expects consumer price inflation to average 4.4%. Meanwhile, our panel
projects wholesale inflation of 3.6% for FY 2019, unchanged from last month's report. In FY 2020, our panel
foresees wholesale inflation averaging 3.7%

Social-

 Class structure, hierarchy and power structure in Indian society – Class cannot be the exclusive axis in
understanding power in Indian society. A caste- ridden rural society with an Adivasi fringe needs. Over-
deterministic attribution of the hegemonic powers to corporate capital takes away from the centrality of
struggle and the contingent unpredictability of historical process.
 Demographics - The Maharashtra state is able to attract investments as there are huge location and
demographic advantages. The state continues to be the single largest contributor to the national economy
with a share of nearly 15% in the country’s Gross Domestic Product (GDP).
 Entrepreneurial spirit and broader nature of the society. Some societies encourage entrepreneurship while
some don’t.
 Health level of the population - The Indian Constitution makes the provision of healthcare in India the
responsibility of the state governments, rather than the central federal government. It makes every state
responsible for "raising the level of nutrition and the standard of living of its people and the improvement
of public health as among its primary duties

Technology-

 Recent technological developments by The Hershey Company- Modern facilities factory has been setup in India
which ensures that the production process is streamlined and efficient.
 Technology's impact on product offering- According to a recent report from ING, technology helps food
manufacturers produce more efficiently for a growing world population. There are 7.5 billion people in the world
right now and that means a higher demand for food each year. By using tech to improve processing and
packaging, it can improve the shelf life and safety of food.
 Impact on cost structure in Confectioners industry- Global Confectionery Market size was valued at $184,056
million in 2015, and is expected to reach $232,085 million by 2022, supported by a CAGR of 3.4% during the
forecast period 2016 - 2022. Confectionery market comprises array of food products such as chocolates, raw
pastes, and various sugar-based products. In addition, it includes therapeutic and dietetic confectioneries that
differ in formulations from traditional confections. The preferred type of confectioneries often differ according
to the geographical regions due to difference in regulatory norms and other factors such as economy and taste &
preference of customers. The global confectionery market is growing at a steady pace owing to high demand
from middle-class consumers.
 Rate of technological diffusion- The rate of diffusion is accelerating. A straight line extrapolation would suggest
that the rate of technological adoption should continue to accelerate until it occurs instantaneously. By the year
2100, a personal teleporter, say, should be adopted by everyone alive the year it is introduced

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Legal-

 Discrimination law - The Constitution of India has several provisions which grant certain fundamental rights
to its citizen, which includes right to equality. Article 15 prohibits state from discrimination on the grounds of
religion, race, caste, sex and place of birth.
 Consumer protection law - Consumer protection laws are a form of government regulation that aim
to protect the rights of consumers. For example, a government may require businesses to disclose detailed
information about products—particularly in areas where safety or public health is an issue, such as food.
 Employment law - Indian governments at federal and state level have sought to ensure a high degree of
protection for workers, but in practice, this differs due to form of government and because labour is a
subject in the concurrent list of the Indian Constitution
 Health and safety law - The Health and Safety at Work Act 1974 says that employers are responsible for
making sure that all their employees are safe at work and are protected from possible dangers to
their health. This includes making sure that the job and the work environment are safe and has
no health risks.

Environmental-

 Weather –Weather of Maharashtra is considered advantageous for foods processing in India.

 Climate change- Maharashtra state is reeling from the impacts of climate change, and particularly from frequent
droughts in rural areas and floods in urban areas. Over the last 3-4 years, the government has transformed its
policy framework and institutional approach to managing climate change, and the results are starting to show
 Laws regulating environment pollution- Maharashtra Pollution Control Board (MPCB) is implementing various
environmental legislations in the state of Maharashtra, mainly including Water (Prevention and Control of
Pollution) Act, 1974, Air (Prevention and Control of Pollution) Act, 1981, Water (Cess) Act, 1977 and some of the
provisions under Environmental (Protection) Act, 1986.

SWOT Analysis
Strength:

 Undisputed confection leader with a strong global brand image

 Broad portfolio of iconic brand

Weakness:

 Low Growth in India since it was established

Opportunity:

 Increasing awareness about the health benefits of chocolates

 Rising chocolates consumption and chocolates as luxuries in developing countries
 Impulse consumption and festivals in India
 Lack of small luxury chocolates in India

Threats:

 High competition in confectionery and snacking segment

 Local handmade custom chocolates available at cheap prices that’s the preference of the Indians
 Quality of and fluctuations in raw material prices

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Porter’s five force analysis

Threats of new Entrants:

 By innovating new products and services. New products not only brings new customers to the fold but also give
old customer a reason to buy The Hersheys Company’s products.
 By building economies of scale so that it can lower the fixed cost per unit.
 Building capacities and spending money on research and development. New entrants are less likely to enter a
dynamic industry where the established players such as The Hershey Company keep defining the standards
regularly. It significantly reduces the window of extraordinary profits for the new firms thus discourage new
players in the industry
`

Bargaining power of supplier:

 By building efficient supply chain with multiple suppliers.

 By experimenting with product designs using different materials so that if the prices go up of one raw material
then company can shift to another.
 Developing dedicated suppliers whose business depends upon the firm. One of the lessons The Hershey
Company can learn from Wal-Mart and Nike is how these companies developed third party manufacturers
whose business solely depends on them thus creating a scenario where these third party manufacturers have
significantly less bargaining power compare to Wal-Mart and Nike.

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Bargaining Power of Buyers:

 By building a large base of customers. This will be helpful in two ways. It will reduce the bargaining power of
the buyers plus it will provide an opportunity to the firm to streamline its sales and production process.
 By rapidly innovating new products. Customers often seek discounts and offerings on established products
so if The Hershey Company keep on coming up with new products then it can limit the bargaining power of
buyers.
 New products will also reduce the defection of existing customers of The Hershey Company to its
competitors

Threat of substitute Products or Services:

 By being service oriented rather than just product oriented.

 By understanding the core need of the customer rather than what the customer is buying.
 By increasing the switching cost for the customers.

Rivalry among the Existing Competitors :

 By building a sustainable differentiation

 By building scale so that it can compete better
 Collaborating with competitors to increase the market size rather than just competing for small market

Growth Plan for Hershey India:

Hershey’s is already the fourth largest producer of quality chocolates in the world and a Global leader. As per the
president of Hershey Company Steven Schiller, there is probably more potential in India than any other market
where the chocolate maker has operations. He reckons that going forward growth for the company in India is going
to be robust, with its four core brands growing at 50 per cent currently.

Hersheys India will be a new market for India. For them right now the focus should be on Product Development.
Globally the chocolate is being accepted and liked by the consumers. TO enter into the Indian market and to
successfully capture the customer they need to know what’s the taste of India. Hence, since their launch in 2018,
their Initial focus should be on product development.

By 2019, Hersheys India should start working on Market Development. Since the chocolates will be there in the
market for a year it is important that they should know how to sell it. People already having the knowledge about
the brand will always go for Hersheys, especially with the launch of their small packs of Kisses and Brookside. These
small packs is the best way for market development for Hersheys as this will bring new customers and people trying
Hersheys for the first time.

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Hersheys India Investment:

Following is a paper clipping by the President of Hershey about their Idea of investment in India.

One of the biggest threat to Hersheys India while starting their business is high competition in confectionery sector.
While Hersheys will be launching in India, there will already be other products competing with it. A Horizontal
Integration Strategy can be a good option for Hersheys as each competing business can work under Hersheys. This
will be a crucial step for Hersheys as in coming years they will need to increase their customer base in India.

Hersheys has already done a Horizontal Integration with Brookside, the producer of Brookside Dark premium
chocolates. With this they have also launched Brookside in India. Other than this the brands that Hershey owns are
HEATH
HERSHEY'S BLISS
HERSHEY'S EXTRA DARK
HERSHEY'S KISSES
HERSHEY'S MILK
CHOCOLATE BAR
HERSHEY'S MINIATURE
HERSHEY'S POT OF GOLD
HERSHEY'S SIMPLE PLEASURES
ICE BREAKERS
JOLLY RANCHER
KIT KAT
LANCASTER CANDY
MAUNA LOA
MILK DUDS

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References:

 https://www.livemint.com/Companies/NUvQGz1xwH90XkgMLOoPFI/Hersheys-bets-on-healthy-snacks-
to-drive-growth-in-India.html Nov 14-2018
 https://economictimes.indiatimes.com/industry/cons-products/food/for-hershey-india-is-a-sweet-spot-
to-invest-in-ceo-buck/articleshow/66268386.cms Oct 18-2018
 https://www.businesstoday.in/magazine/the-hub/all-our-products-will-be-made-in-
india/story/317144.html Feb 24-2019
 https://www.business-standard.com/article/companies/hershey-to-raise-india-presence-
117092801147_1.html Sept 29-2017