ESGS in HERSHEY

Environmental

 Deforestation: Cocoa trees thrive in shade. Large-scale cocoa farming can

lead to deforestation to create more growing space, reducing biodiversity and
harming ecosystems.
 Water Usage: Cocoa trees require significant water for growth. Unsustainable
water usage in cocoa production can deplete local water resources and harm
surrounding ecosystems.
 Pesticide and Fertilizer Use: Conventional cocoa farming may involve heavy
use of pesticides and fertilizers. These chemicals can pollute water sources,
harm soil health, and impact surrounding wildlife.

Social:

 Child Labor: The biggest concern is Hershey's reliance on cocoa beans

sourced from West Africa, where child labor is prevalent. Reports indicate
millions of children work in cocoa fields under harsh conditions. This violates
ethical labor practices and hurts Hershey's reputation.
 Poor Working Conditions: The working conditions for cocoa farmers in West
Africa are poor. They earn very little, leading to poverty and potentially forcing
children into labor. Hershey doesn't seem to address these root causes
effectively.

Governance:

 Lack of Transparency: Hershey has become secretive about its cocoa bean
sourcing. This lack of transparency raises concerns about whether they're
truly addressing child labor and poor working conditions.
 Harkin-Engel Protocol Violation: Hershey, along with other chocolate
companies, pledged in 2001 (Harkin-Engel Protocol) to eliminate child labor in
cocoa production. However, the problem persists, suggesting Hershey hasn't
fulfilled its commitment.
 Legal Pressures: Regulatory bodies are pressuring companies to improve
supply chains and source responsibly. Hershey faces potential legal
repercussions if they don't address child labor and improve conditions.

Marketing Strategy of Hershey

Overall, the company’s vision was “anchored in four interconnected strategies:

1) driving growth by capturing more snacking occasions,

2) profitable and sustainable international expansion,

3) operating with

best-in-class capabilities and partnerships, and

4) investing in people and communities.

marketing strategy⎯the company had signed the Cocoa Forest Initiative against
deforestation, invested in Cocoa For Good, and earned several fair trade
certifications

Building Brand Strength:

 Strong Brand Portfolio: Hershey's leverages well-known and trusted brands

like Hershey's Kisses and Reese's. These established brands hold a special
place in consumers' hearts and drive sales.
 Product Innovation: They constantly develop new and exciting candy
options to keep things fresh and attract new customers. This caters to
changing consumer preferences and prevents stagnation.
 Quality Focus: Maintaining consistently high product quality ensures
customer satisfaction and loyalty. People know they can trust Hershey's
products to deliver a delicious experience.

Reaching Consumers:

 Targeted Advertising: Hershey's utilizes various advertising channels like TV

commercials, social media ads, and print ads to reach specific consumer
groups. This allows them to tailor messages to different demographics and
interests.
 Promotional Programs: Running promotions throughout the year, like
discounts or limited-edition products, can create excitement and incentivize
purchases. This strategy boosts sales and keeps customers engaged.

Expanding Market Share:

 International Expansion: Hershey's increases market share in overseas

markets with regional brands. This allows them to cater to specific tastes and
cultural preferences while leveraging their global reach.
 Snacking Focus: They aim to capture a larger share of the snacking market.
With busy lifestyles, snacking is a growing trend, and Hershey's positions its
products as convenient and satisfying snack options.

Building Partnerships and Reputation:

 Strategic Partnerships: Collaboration with key players like distributors

(McLane) and retailers (Walmart) ensures efficient product distribution and
placement in stores, making them readily available to consumers.
 Sustainability Commitment: Hershey's demonstrates a commitment to
ethical sourcing practices (Cocoa For Good, deforestation prevention) to
protect their brand reputation. Consumers are increasingly concerned about
social responsibility, and this approach fosters a positive brand image.
 Investment in People & Communities: Investing in social responsibility
initiatives builds a positive brand image. Through programs that benefit
communities, Hershey's strengthens its connection with consumers.
Overall, Hershey's marketing strategy combines strong brands, innovative products,
and targeted advertising with strategic partnerships and a focus on social
responsibility. This multi-faceted approach helps them maintain a leading position in
the confectionery industry.

 Word-of-Mouth Marketing: A marketing strategy that relies on satisfied

customers spreading positive information about a product or service through
informal recommendations to others.

 Traditional Advertising: Paid forms of communication used to promote a

product or service to a broad audience. This can include television
commercials, print ads in magazines or newspapers, and radio ads.

 Brand Building: Marketing activities designed to create a strong, positive

perception of a product, service, or company in the minds of consumers. This
can involve creating a memorable brand logo, tagline, and consistent
messaging across all marketing channels.

 Reputation Management: The process of influencing the public's perception

of a company or brand. This can involve responding to negative publicity,
promoting positive news stories, and engaging with customers online and
offline.

 Product Innovation: The introduction of new products or features to a

market. This can be a crucial strategy for companies to stay competitive and
meet the ever-changing needs of consumers.

 Strategic Acquisition: The purchase of another company by a larger

company. Acquisitions can be used to enter new markets, expand product
offerings, or gain access to new technologies or resources.

 Diversification: A business strategy that involves expanding into new product

categories or markets. This can be done through internal development of new
products or through acquisitions.

 Experiential Marketing: A marketing strategy that creates interactive and

engaging experiences for consumers. The goal is to create positive
associations with the brand and build lasting memories

Hershey's Marketing Strategies:

 Early Focus on Quality: (Pre-1970s)
o Milton Hershey believed product quality was the best form of
advertising.
o Relied on word-of-mouth marketing from satisfied customers.
 Shift to Traditional Advertising: (1970s)
o Increased competition, particularly from Mars, forced Hershey's to
adopt traditional advertising strategies.
 o Began using commercials and other media to reach consumers
directly.
 Brand Building and Reputation Management: (1970s - Present)
o Systematic efforts to build brand recognition and positive associations
with Hershey's products.
o This likely involved elements like:
 Consistent branding across packaging and marketing materials.
 Sponsorship of events or partnerships that align with brand
values.
 Public relations efforts to promote positive news stories about
Hershey's.
 Product Innovation: (Throughout History)
o Introduced new and innovative chocolate products throughout history:
 Hershey's Kisses (1907)
 Mr. Goodbar (1925)
 Krackel (1938)
o This strategy keeps Hershey's products relevant and appealing to new
generations of consumers.
 Strategic Acquisitions: (Throughout History)
o Expanded product portfolio through acquisitions:
 Reese's Peanut Butter Cups (1960s)
 Jolly Rancher and Payday brands (1996)
 SkinnyPop popcorn (2018)
o This strategy allows Hershey's to enter new market segments and
cater to diverse consumer preferences.
 Limited Diversification: (Throughout History)
o Primarily focused on chocolate and candy products.
o Diversification into non-chocolate snacks has been slow and limited.
o Example: Acquisition of Leaf Brand (1996) for Jolly Rancher and
Payday.
 Experiential Marketing: (1973 - Present)
o Opened Hershey's Chocolate World theme park in 1973.
o Offers an interactive and immersive brand experience for consumers.
o Creates positive brand associations and memories.

Hershey's Supply Chain, Societal, and Legal

Challenges
Supply Chain Challenges:

 Reliance on Child Labor: Hershey's cocoa beans come from West Africa,
where child labor is prevalent. This raises ethical concerns and makes it
difficult to ensure traceability and ethical sourcing.
 Lack of Transparency: Hershey has become secretive about its cocoa bean
sourcing practices, making it difficult to assess their efforts to address child
labor.
  Fragmented Farming System: The cocoa farm system in West Africa is
highly fragmented, making it challenging to track labor practices across
numerous small farms.

Societal Challenges:

 Poverty of Cocoa Farmers: The working conditions for cocoa farmers in

West Africa are poor, with low wages that perpetuate poverty and potentially
force children into labor.
 Negative Public Perception: Consumers are increasingly concerned about
ethical labor practices in the chocolate industry. Hershey's reliance on child
labor could damage their brand reputation.

Legal Challenges:

 Increased Regulation: Legal pressures are mounting to improve supply

chains and source responsibly. The US has legislation in place to prevent
products made with slave labor, and other countries are enacting similar
measures.
 Potential Lawsuits: Hershey could face lawsuits for unethical labor practices.
 Risk of Losing Certifications: Regulators in West Africa threatened to bar
Hershey's sustainability programs if they didn't address child labor concerns.

Hershey's CEO Michele Buck: Key Points

 Working-class background: Buck grew up in a working-class family and
started working at a young age (12 years old).
 Education and career path: She has a master's degree in business
administration and began her career in marketing and brand management.
 Rise at Hershey's: Buck joined Hershey's in 2005 as the chief marketing
officer and rose through the ranks to become CEO in 2017.
 Focus on Brand Value: She is credited with maintaining and enhancing the
value and reputation of Hershey's powerful brands.
 Intangible Asset Growth: Her brand management contributed to a significant
increase in Hershey's intangible assets (from $369 million to $1,295 million in
3 years).
 Diverse Leadership: Buck leads a board with a mix of experienced
executives from various industries.
 Brand Reputation Focus: As CEO, Buck prioritizes reputation management
through strong brands, employee engagement, and a clear company purpose.
 Importance of Iconic Brands: Hershey's iconic brands are a key pillar of the
company's reputation.
 Sustainability Initiatives: Buck spearheaded Hershey's "Cocoa For Good"
program, a $500 million investment in sustainable cocoa sourcing.
 Commitment to ESG: She is committed to updating Hershey's environmental
strategy and human rights policies to improve sustainability throughout the
company's operations and supply chain.

Potential Approaches to address child labour:

 Cocoa For Good Program: The case mentions Hershey's "Cocoa For Good"
initiative, a $500 million investment in sustainable cocoa sourcing. While
details aren't provided, it suggests a potential commitment to improving
sourcing practices.
 Legal Pressures: The case highlights the increasing legal pressures around
child labor. Hershey might be taking steps to comply with stricter regulations
to avoid lawsuits.
 Board Diversity: The case emphasizes the diverse experience of the board
of directors. Board members with expertise in areas like international supply
chains or legal compliance could be advising on improving sourcing practices.