Jack Stauber 1

BUS 497A

23 August 2022

Hershey Company

Introduction:

Before the Hershey Company came into fruition in 1894, Miltion Hershey owned another

company by the name of “Lancaster Caramel Company” which was sold off in 1893 after he had

attended the World’s Columbian Exposition in Chicago and had a vision for the future which was

more chocolatey and less caramel. According to Hershey Company’s mission statement, they are

staying true to their roots. “At the Hershey Company, we make chocolate brands that people

love... bringing sweet moments of Hershey happiness to the world everyday (Calvin Miller,

NCESC, 2022)”. According to the mission statement, a few key points are revealed as to what

their main objectives are. It can be broken up into 3 key sections being: “Brands that people love,

bringing sweet moments to everyday people, and to serve customers all over the world (NCESC,

2022)”. Part of the reason for Hershey being so successful is in large part due to their expertise in

marketing/branding. They have several recognizable brands including Kit Kat, Reeses, and

Kisses to which Hershey devouts large resources to their marketing department to expand their

influence. For many, Hershey is nostalgic and included within many family traditions dating

back generations. The main focus of the Hershey Company today is in figuring out how they can

expand their reach to even more families and become an integral part of the communities they

serve. As a result they are continuing to expand their product lines, looking for innovative ways

to source their materials ethically, and expand their community outreach programs.
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Effectiveness of the strategies:

The Hershey Company, an American multinational company is one of the largest

chocolate manufacturers in the world producing products such as cakes, candies, and milkshakes.

The Hershey Company has been very successful in following their strategies and goals to bring

chocolate goodness to a greater audience. In reading their vision statement “We not only offer the

best merchandise at the best prices, but we’re always working to make your shopping experience

enjoyable (NCESC, 2022)”. As a result, we know they are utilizing a cost leadership strategy and

a broad differentiation strategy by utilizing their value chain networks, reducing their

manufacturing and production costs through automation, improved training modules and they are

expanding their reach by diversifying into other related markets. This allows Hershey to improve

their systems of operation so they can provide the “best merchandise possible all while reducing

the retail prices and making the shopping experience more desirable.” According to Yahoo

Finance, the Hershey Company achieved “revenue of USD $9.72B TTM, diluted EPS of 7.86

along with a market capitalization of USD $47.29B and an EBITDA of 2.56B (Yahoo Finance,

2022)”. This performance indicates that Hershey has done very well this past year and is

continuing to perform well in large part due to their research and development, large cash

reserves and the marketing that goes into creating, packaging and branding new and existing

products and experiences. With this in mind, Hershey has been performing above average in

their respective industry and is continuing to push forward in offering quality food at affordable

prices to increase their market share and overall reach.

Analysis of the External Environment:

In analyzing some of the external factors affecting Hershey, a few come to mind. The first

being suppliers which have been affected by the Russian-Ukrainian war and Covid lockdowns
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impacting the availability of materials and how quickly they can be sourced. This has led to an

increase in material prices which has resulted in higher than average retail prices for the

consumers. There has been an increase in competition among the confectionery industry which

as it is is already very saturated so that has been cutting away at some of Hershey’s profit

margins. The fact that “Hershey is an already very established brand with very good supplier

relations and favorable reputation has put them in a very good position to continue to increase

market share and see favorable returns (Hershey Company, 2022)”. However another concern is

that of government regulations and foreign policy including taxes which has had a direct impact

on their ability to perform in domestic markets and internationally.

General Environment:

When considering the general environment that affects Hershey, we will create a

PESTEL Framework to gauge at some of the challenges and market conditions that most

prominently affect their bottom line. In constructing the PESTEL Framework, we see that one of

the largest trends facing the Hershey Company is based on legal and environmental factors

pertaining to child labor laws and sustainability. At the Hershey Company, high labor standards

are at the core of all processes ranging from how their employees and suppliers are trained to

how their products are sourced and manufactured. According to the Hershey Company, they are

determined to ethically source their ingredients from developing countries and to work with their

suppliers to increase the education rate and provide wellness programs to help kids. Among the

communities they work in, they have so far provided “USD $43m as of 2021 and expect to reach

$105m by 2025” along with the fact that over “15.4m global children have been supported so far

by Hershey’s wellness programs” and is expected to achieve 50m people by 2025 (Hershey

Company Sustainability, 2022). The company has a strong commitment to ensuring that the
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highest labor standards are being maintained throughout their value chain. As a result, they seek

to “source (by volume) 100% of their priority ingredients and materials responsibly and

sustainably by 2025” through employee initiatives and supplier code of conducts (Hershey

Company Sustainability, 2022). This approach that Hershey is taking will set them apart from

their competitors within the industry because the Hershey Company is actively working with

their suppliers, with employees and with customers to help support initiatives aimed at reducing

the extent of child labor in 3rd world countries and providing resources to help feed and care for

malnourished children through education/wellness programs. Not only is Hershey working to

ethically source all their materials throughout their value chain, but they’re helping their

communities the best they can by providing training modules in human rights, resources, and

programs to help make a positive impact in the communities they serve.

Business Environment:

Many parliamentary bodies, business communities and customers want companies to take

a harder stance in implementing a sustainable agenda into their core business functions and as a

result it’s becoming a more practical and profitable alternative to traditional means. According to

the Food and Beverage Insider, “Companies embracing sustainability as a means of doing

business are reaping great benefits among a population that’s increasingly becoming

environmentally and socially conscious (Food & Beverage Insider, 2018)”. According to the

data, “From 2017 to 2018, chocolate with environmental claims sold five times faster than the

overall market”. As a result, the market looks very attractive for Hershey. For instance, “84% of

consumers surveyed avoid products with excessive packaging and 60% of respondents said they

prefer recyclable packaging (Food & Beverage Insider, 2018)”. Governments around the world

such as the U.S. are passing legislation to incentivize and promote businesses to push for a more
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sustainable approach when conducting business. According to the Sustainability Alliance, such

laws include the “Clean Air Act, Food Safety Laws, and Lacey Act (U.S. Sustainability Alliance,

2022)”. This trend is likely to continue spreading around the world to be adopted in some form

by other governments. As more agencies continue to ramp up their sustainability agendas and

pass legislation to meet such demand, it will become a major opportunity for Hershey to be at the

forefront of this new trend. The most important threat that Hershey faces in their industry is

from established competitors such as Nestle and Mars who are also utilizing a sustainable agenda

to increase their market share but even then Hershey is in a great opportunity to continue

remaining a top leader within the confectionery industry.

Internal Analysis:

The Hershey Company has many resources and capabilities that give it a unique position

within the confectionery industry but according to Blooloop, what differentiates them from their

competitors is the fact that they are “the only amusement park in the world focused on fun and

chocolate (Charlotte Coates, Blooloop Publications, 2020)”. The research and development that

Hershey early on in developing an amusement park as a key function of their business operations

has become a major strength within their business portfolio. As a result, the amusement park has

catapulted Hershey into a whole new stratosphere to the likes that can be compared to Disney in

that they promote a culture of fun, endless creativity, and nostalgia for wanting more. According

to Forbes, Hershey’s early innovations in creative branding, in building up a cultural image of a

place that’s fun and their “continued expertise in superior distribution, product domination, and

cost reduction practices in how they produce, manufacture and supply” has helped them become

the “leading U.S. chocolate firm with over 44% of the market share (David Trainer, Forbes,

2020)”. As a result of these past efforts Hershey has been able to continue innovating with their
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products and services, increase their market share and expand into new markets where

competitors would find it extremely difficult. No other competitor within the confectionery

market has been able to utilize all of these factors and combine them into a major success story

like Hershey has with its amusement park. The company culture and reputation that Hershey has

in the public sphere and within is unparalleled in the market and no other competitors except for

Nestle and Mars even come close so it’s rare, it's valuable, is costly to imitate and is hard to

transfer but not impossible. This has helped Hershey become a leader and a differentiator when it

comes to developing leading products.

Major Strategic Issue:

As discussed above, one of the major strategic issues that Hershey needs to take into

consideration for the short-term is they need to continue retaining control of their market share

and to not become complacent as more aggressive competitors like Nestle and Mars and

innovative small companies try to challenge them for market control. As a result, Hershey may

need to consider expanding their online presence and distribution through online retail and

through social media to reach a larger audience than they currently do (Umar Farooq, Marketing

Tutor, 2021). Sometimes when a company is so big it gets hard to continue innovating and to

remain relevant, so the best course of action would be to expand into other markets, continue to

increase branding and expand their product lines to meet the demands of new consumers because

inevitably a new market will arise and Hershey needs to make sure that they are at the forefront

to take advantage of it. However, the Hershey Company has many strengths to which it can

capitalize on for future growth. With the research and wealth of knowledge that Hershey has at

its disposal, they will have a major advantage over most of their competitors because they’ll

know what works and what doesn’t and be able to give the consumers exactly what they want.
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Given the fact that “Hershey is continuing to innovate with their products and services and are

evolving at such a rapid pace to keep up with modern demand” (Hershey Company Innovation,

2022), they will continue to achieve much success and inspire future generations to buy from

them. For the long-term, the Hershey Company needs to continue expanding into other related

markets and continue to innovate so they can increase their market prevalence and not fall victim

to being outdated. With these strategies in place, Hershey will be in a very good position to lead

in their respective industry.

Available Alternative Strategies:

One of the areas that the Hershey Company should consider in the context of what I just

talked about is building an online presence with the younger generations whether that be through

targeted advertisements on social media, community events, or video games. If they could

expand their reach to include a wider audience that's primarily online, then that could open doors

to more referrals, word of mouth advertising and a whole new generation of consumers that will

want to buy your products. Since Hershey already laid out in its mission statement that they

desire to become an affordable high quality snack and to provide a unique shopping experience,

what they could do is expand into the metaverse, take advantage of 3D virtual worlds and make

the experience immersive and unforgettable so that everytime you see Hershey being advertised

you are amazed. The metaverse is an up and coming megatrend that will only continue to

become more popular and widely used as it becomes more mainstream. According to Forbes,

Hershey desires to become “a snacking powerhouse” and they mention that the company has a

“superior distribution platform” over its competitors that can be utilized to expand upon it’s

already existing geographical footprint and so by advertising “better-for-you-snacks” to the

younger demographics, this can help them penetrate a new market among the growing
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population of health conscious people (David Trainer, Forbes, 2020). As the demand for healthy

snacks continues to rise, Hershey will need to make sure to be in the best position possible to

capitalize on the demand since according to IRi’s State of the Snack Industry, “47% of

consumers eat three or more snacks per day” and is gradually increasing (David Trainer, Forbes,

2020). So making sure to be at the forefront of what consumers demand and being able to fill the

demand as cheaply and efficiently as possible will result in Hershey’s success especially when

they can provide their own unique touch.

The other alternative that Hershey should consider in expanding their business operations

is to allow people to customize and craft their own treats the way they want through a

personalized interface like they do at HersheyPark. This can lead to greater brand reputation,

future collaborations with artists and influencers and increased brand awareness from new

customers who like the innovation. According to Forbes, Hershey already has a “superior

distribution platform” in terms of relationships that they have with suppliers, and retailers which

they can utilize to reduce their costs all throughout their value chain all while having a dominant

branding image which they can push when they make customization a reality. Hershey also has

one of the largest market shares in the industry according to Forbes and “six of the top ten

confectionery brands as measured by retail sales in 2018” which they can utilize to make a new

variation of an already existing product like vanilla reeses or peppermint kisses. In addition to

making new variations of existing products, they can also utilize the same ingredients but craft

them into new products like a strawberry banana chocolate bar. Allowing customers the ability to

customize their products in a unique way like through an immersive interface where they can

pick and choose can create a whole new level of brand loyalty to enhance their shopping

experience that people would be fixated on getting their hands on as many products as possible
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like a strawberry snowman. This would make the customers feel like they have more control and

flexibility over how their food is being delivered and could be another tradition among many that

families celebrate. For instance we should consider the fact that many of Hershey’s products are

standardized to meet the demand of many but giving customers the option to pick and choose

their ingredients, their flavors, and potential shapes could make the experience more curated

towards the individual and many would pay to have that experience. Another important factor

that we must take into consideration is the price that this customization is being offered at and so

creating a curated experience, enhancing the shopping experience, and making it affordable and

packaging it in a unique design can provide another means of differentiation that separates

Hershey from its competitors. All of this is possible because of the indispensable relationships,

value chains and cost reduction processes that Hershey has perfected over the years to give

themselves market dominance.

Recommendations:

As a result of what we have just discussed, we must take into consideration the position

that Hershey finds itself in within the industry and by which it carries out its business operations.

With this in mind we can determine how well they perform relative to their competitors and

industry average and the kinds of profits that they could witness. As such we will be utilizing

Porter’s five forces diagram to help construct possible strategies and recommendations that

Hershey could take advantage of to help increase their competitive edge. In constructing the five

forces diagram, it can be used as a guide for crafting competitive strategies and corporate level

strategies. Hershey’s corporate strategy should be mainly focused on a “pattern driven speciality

as in promoting responsible and ethically sourced chocolate” (Business Consultants FZE, 2021)

within their value chain and making sure that their suppliers comply with all the necessary rules
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and regulations when sourcing their cocoa beans. Along with the fact that Hershey needs to make

sure that their suppliers are providing them with cocoa beans that are of high quality and not

substandard. According to Dairyreporter, “For companies that outsource their chocolate creation

to enhance proficiency and take advantage of cost reduction processes”, Hershey could benefit

immensely by collaborating with a company like Barry Callebaut which specializes in ethically

sourced premium cocoa offerings (Business Consultants FZE, 2021). This would give Hershey

the ability to access an expansive aptitude in premium chocolate which is ethically sourced, and

could lead to greater innovations in work capacity. This collaboration could also lead to the

creation of new cocoa flavors and expansion of new items.

Hershey’s competitive strategy should focus on the expansion of new items and in

marketing those items. With continuous innovation of new offerings and giving consumers what

they demand at an affordable price through a cost leadership strategy, they will continue to stand

out from their competitors and increase their market share. Hershey must continue utilizing their

large marketing network and continue to push for reduction in their prices so that by the time it

reaches retail, consumers will benefit from lower prices all while the quality is the same. As a

result of continuous innovation and automation being utilized within the factories, that will help

reduce their costs while making it possible for Hershey to offer a new assortment of products at a

much cheaper price. According to Fern Fort University, this makes the barriers to entry much

more difficult for new entrants when Hershey is continuously changing what the standard is and

capitalizing on most opportunities before others have the chance to even make a move (Fern Fort

University, 2022).
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References:

Business Bliss Consultants FZE. “Business Analysis of the Hershey Company.” UKDiss

(Specialist Dissertation Services), 17 August 2021,

https://ukdiss.com/examples/hershey-company-strategy-analysis.

Coates, Charlotte. “Hershey’s Chocolatetown: Inside the Sweet New Expansion at Hersheypark.”

Blooloop, 9 Sept. 2020,

https://blooloop.com/theme-park/in-depth/hersheys-chocolatetown.

Farooq, Umar. “Distribution Strategies – Definition, Types and Examples.” Marketing Tutor, 16

Mar. 2021, https://www.marketingtutor.net/distribution-strategies. Accessed 23 Aug.

2022.

Haanaes, Knut, and Natalia Olynec. “Why All Businesses Should Embrace Sustainability.” IMD

Business School, 9 May 2022,

https://www.imd.org/research-knowledge/articles/why-all-businesses-should-embrace-sus

tainability.

Hammelburger, Michael. “15 Cost Reduction Strategies for Your Business.” The Bottom Line

Group, 17 May 2021,

https://thebottomlinegroup.com/15-cost-reduction-strategies-for-your-business.

“Hershey: Company Vision and Strategy.” Hershey Company, 2022,

https://www.thehersheycompany.com/en_us/home/about-us/the-company/strategy.html.

Accessed 22 Aug. 2022.

Hershey. “Sustainability: Goals and Progress.” The Hershey Company, 2022,

https://www.thehersheycompany.com/en_us/home/sustainability/goals-and-progress.html.

Accessed 22 Aug. 2022.

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Mansuri, Mahenoor. “Retrenchment Strategy - Types of Retrenchment Strategy.”

StartupTalky, 21 Mar. 2022, https://startuptalky.com/retrenchment-strategy-explained.

Miller, Calvin. “Hershey Mission and Vision Statement Analysis.” Employment Security

Commission, 8 Aug. 2022,

https://www.ncesc.com/hershey-mission-and-vision-statement-analysis.

Strategic Management Department. “The Hershey Company Porter Five Forces Analysis, Porter

5 Forces Analysis.” Fern Fort University,

https://fernfortuniversity.com/term-papers/porter5/analysis/688-the-hershey-company.

Accessed 23 Aug. 2022.

“Sweet Sustainability in the Confectionery Space – Digital Magazine.” Food Beverage Insider,

Informa Markets, 18 Dec. 2018,

https://www.foodbeverageinsider.com/sustainability/sweet-sustainability-confectionery-s

pace-digital-magazine.

Trainer, David. “Competitive Advantages Drive Sweet Growth Opportunities for the Hershey

Company.” Forbes, 25 Aug. 2020,

https://www.forbes.com/sites/greatspeculations/2020/08/25/competitive-advantages-drive

-sweet-growth-opportunities-for-the-hershey-company/?sh=687c54bb2d3f.

Tribe, Bright. “U.S. Sustainability Policies and Laws.” The U.S. Sustainability Alliance, 18 Apr.

2022, https://thesustainabilityalliance.us/u-s-laws. Accessed 22 Aug. 2022.

Yahoo. “The Hershey Company (HSY).” Yahoo Finance, 19 Aug. 2022,

https://finance.yahoo.com/quote/HSY/key-statistics?fr=yhssrp_catchall.
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Appendices

Appendix 1: The Hershey Company: Financial ratios & Income Statement

(Source:https://finance.yahoo.com/quote/HSY/key-statistics?p=HSY)
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(Source:https://finance.yahoo.com/quote/HSY/key-statistics?p=HSY)

Appendix 2: PESTEL Analysis

P E S T E L
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Trade Raw material Consumers Transparency Climate Consumer

restrictions price changes becoming through change could protection
more health technology hurt cocoa laws (Title
conscious production VII)

Corruption Currency Popularity of Building Sustainability Copyright

exchange confectionery customer initiatives to and laws
rates gifts and relations reduce global regarding
snacks through data warming patents
collecting

Labor Laws Change in Growth rate 3D printing in Changes in Sherman

disposable of population confectionery weather Antitrust Act
income business

Tax Unemployme Distribution Artificial Environment Employment

regulations & nt rates of Age Intelligence, al policies and Labor
policies machine laws (FLSA)
learning and
virtual reality

Government interest/inflati Societal R&D activity Environment Worker and

policies on rates norms and al advocacy safety laws
values groups (OSHA)

Foreign GDP Growth Cultural Technological

Trade policy barriers and change and
traditions awareness

Political Lifestyle & Incentives for

Lobbying personality use of
changes technology

Candy
Industry
Advocacy in
the U.S.

Appendix 3: Corporate Level Strategy

Expansion Cost Reduction Retrenchment Hybrid Combination

Strategies Strategies Strategies Distribution Strategies
Strategy
Diversification Automation and Liquidation Physical Combination of
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of products dual use of whether that be of warehouses and two or more

and markets technology in businesses, retail locations strategies to push
factories certain assets, for maximum
products, or effectiveness
services.

Cooperation Increased Divestiture/Dives Online Making a process

with value relationships with tment from commerce and or outcome more
chain and suppliers and certain products direct sales desirable/
companies retailers in value or services from website profitable through
chain to reduce utilizing resources
material costs from more than
one specific area.

Integration of Strong training Turnaround, 3rd party

products and programs and when negative retailers and
services cooperation among trends start to wholesale
within unions and become prevalent distributors
business regulatory bodies and solutions are
operations needed to get out.

Concentration Fuel efficient and

within a durable fleets to
certain market reduce
to better transportation
penetrate their costs
target
audience.

Appendix 4: Competitive Strategy Framework

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Appendix 5: Porter’s Five Forces Framework

(Source: Fern Fort University, 2022,
https://fernfortuniversity.com/term-papers/porter5/analysis/688-the-hershey-company)

Threat of New Entrants: New entrants in the confectionery market bring innovation, new ways
of doing things and put pressure on The Hershey Company through lower pricing strategy,
reducing costs, and providing new value propositions to the customers. The Hershey Company
has to manage all these challenges and build effective barriers to safeguard its competitive edge.
Hershey can help mitigate these problems by innovating new products and services. New
products not only bring new customers to the fold but also give old customers a reason to buy
their products. By building economies of scale so that the fixed cost per unit can be reduced.
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 discouraging new players in the industry.

Bargaining Power of Suppliers: Most companies in the confectionery industry buy their raw
material from numerous suppliers. Suppliers in dominant positions within the industry can
decrease the profit margins of the Hershey Company. Powerful suppliers in the Consumer Goods
sector use their negotiating power in order to extract higher prices from the firms in the
confectionery industry. The overall impact of higher supplier bargaining power is that it lowers
the overall profitability of companies like Hershey. The Hershey Company can tackle this
problem by building an 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 the
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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 compared to Wal-Mart and Nike.

Bargaining Power of Buyers: Buyers are very demanding, they want to buy the best offerings
available by paying the lowest price possible. This puts pressure on the Hershey Company’s
profitability in the long run. The smaller and more powerful the customer base is of The Hershey
Company the higher the bargaining power of the customers and higher their ability to seek
increasing discounts and offers. Hershey can tackle this problem 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 keeps 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
from Hershey to its competitors.

Threat of Substitute products or services: When a new product or service meets a similar
customer needs in different ways, industry profitability suffers. For example services like
Dropbox and Google Drive are substitutes for storage hardware drives. The threat of a substitute
product or service is high if it offers a value proposition that is uniquely different from present
offerings of the industry. The Hershey Company can tackle this problem by being service
oriented rather than just product oriented. By understanding the core need of the customer rather
than what the customer is buying and by increasing the switching cost for the customers.

Rivalry Among the Existing Competitors: If the rivalry among the existing players in the
confectionery industry is intense then it will drive down prices and decrease the overall
profitability of the industry. The Hershey Company operates in a very competitive industry. This
competition does take a toll on the overall long term profitability of the organization. The
Hershey Company can tackle this problem by building a competitive advantage where
differentiation of products and services can be sustained. By building economies of scale so that
it can compete more effectively and by collaborating with other competitors to increase the
market size of the confectionery industry rather than just competing within a small market.