Applying Bowman’s Clock Strategy to The Hershey Company

The marketing strategy of Haigh’s chocolate has been identified through detailed analysis of the external and the internal environment of the present market conditions and development of the Haigh’s. There has been complete detailed SWOT analysis of the company on the basis of research conducted from several secondary sources. It has been conducted in order to determine the important strategies and the key strengths of the company. Talking about the chocolate sector which has been further segmented into several categories in which Haigh holds the important position and have captures the major chunk of the market. Such markets range from chocolate blocks, bars and other diet varieties like gluten and eggless products. The demand in the chocolate market is also divided on the basis of the geographic location markets like that in Sydney, Melbourne and Adelaide chocolate markets. Other factors affecting demand in the market includes demographic, behavioural and psychographic segmentation.

This results from the fact that it is a mature segment with many well established companies vying for market share. The industry is highly consolidated and very fragmented. To grow their businesses, companies rely heavily on mergers and acquisitions to capture additional market share. Historically, the grocery industry has been characterized by slow growth which results in strong price competition and the development of aggressive marketing campaigns between existing firms. Perceived product quality and strong brand recognition by consumers are the basis of competition among firms in the industry. The source of General Mills’ competitive advantage lies in its ability to develop innovative products and highly reputable brands. As a result, they hold cost leadership positions across a number of grocery categories. Exhibit 1 shows the top US companies according to their sale of packaged foods globally. Market leaders include Kraft Foods, PepsiCo, Nestle, Mars, Kellogg, and General Mills, however, neither company possess an overwhelming share of global sales. This is in part due to the large degree of product diversity throughout the industry and the strong brand rivalry of each competitor’s labels.

Hershey’s and Cadburys are moving towards the premium chocolate market through the acquisition or upmarket launches (Zietsma, 2007). The profit potential present in this sector supported by its 20% annual growth rate make it very attractive for large organizations to come forward and avail this opportunity. There is a low threat of new entrants prevailing in this chocolate industry because of the high capital requirements and expected retaliation by current manufacturers. Current players in the industry also possess some barriers to entry for new entrants by maintaining economies of scales with their large production capacity and keeping their product differentiation with their specialized and novelty chocolate products. Even though there are low switching costs and easy access to distribution channels, but still the brand loyalty of the customers including the Rogers’ Chocolate itself make it harder for new firms to come into the competition.

As of 2008, Hershey Company still appears to be providing strong investor returns. Although its profit margin has decreased, its gross profit rate has remained steady, indicating that the Company is still effectively

The chocolate industry operates in an oligopoly market. An oligopoly is when a small number of firms dominate the market. While not a quite a monopoly, an oligopoly market is still controlled by a select number of companies and the market can be directly impacted by one or two major firms (Oligopoly Investopedia). Hershey’s has control of the largest market share, holding 44.4% (U.S Market Share). Mars Incorporated follows behind in second by holding 28.9%. While these two companies hold much of the control and power within the industry, LIndt/Ghirardelli and Nestlé maintain a combined share of 15.1% of the industry’s market. This means that four companies hold a combined 88.4% of the market, with two of them holding a combined 73.3%. The market was not always this way however. Up through the 1960s many candy suppliers were regional.

With giants such as Walmart, and Kroger running the grocery store industry it’s difficult for companies such as Smuckers to bargain for shelf-space and prices. Brand name items drawn to the center of the store are what leverages these companies to succeed in the industry. After numerous acquisitions and strategic alliances, Smuckers developed a solid core of product lines which experienced success rapidly. Product lines that experienced the most success as a result of strong positioning in the industry included their Coffee labels, flour and baking products, Oils and food spreads. A 9-Cell Industry Attractiveness/Business Strength Matrix shows that the Industry attractiveness is relatively moderate. With many competitors and strong buyer power from large grocery chains such as Kroger, companies such as Smuckers have explored different strategies that have proved successful in what can be described as a saturated industry. The case insinuates that there may be opportunities in the industry in regards to special markets and perhaps Oils and Baking with sugar free products, but otherwise the recession, although it drove families to buy store bought as opposed to eating out, has had its effects on the food service industry as well.

The second force that I will use to analyze the Trader Joe’s company is the “the rivalry among established competitors”. Factors to consider when looking at the rivalries in the industry are industry demand, cost conditions, and exit barriers. Trader Joe’s competitors include The Kroger Co., Whole Foods Market, and Safewat Inc., and all super markets in general (Llopis, 2011). With that said, there seems to be a high demand for what Trader Joe’s offers, private labels. This means that the intensity in the industry is less compared to an industry with a flat demand. Trader Joe’s does not have to fight hard to sell their products because of the service they have created. Trader Joe’s brand can be considered “diversity on steroids” which has somewhat of a cult following among consumers (Llopis, 2011). Consumers that want unique experiences with their food are able to do exactly that at

The premium chocolate industry is having an intensive competition in Canada with the strong growth potential. Industry growth opportunity imposes increasing competition from rivals and threats of new entrance that adds pressure on overall profitability. Even though Roger’s has been able to establish its place in the chocolate industry with its strong brand recognition and products’ quality, it still needs to be on top of ever- going market changes, by continuously

The possibilities for product differentiation are numerous in that there are many different ways to make chocolate, many different items to add to chocolate, and many different ways to use chocolate. Having so many different options to market chocolate could present an open door for competitors, creating their own niche to draw customers. A large number of products to choose from could also make it difficult for Roger’s to draw customers to its own products, decreasing their profit potentials.

Social factors of both countries includes health consciousness, population growth rate, age distribution and cultural aspects. Health consciousness is a key factor for Whey Hey product due its nature. Germany is located in the 12th place on the top 30 markets with rising health concerns, being the second European country to appear on the ranking, just after United Kingdom in the 9th place (EuromonitorInternational, 2012).

Distribution for the brand is already exceptional; it is rare to see a vending machine or candy display without at least one variety of Skittles. The current method of distributing the product is a mixture of pull and push strategies. Retailers of candy demand Skittles because they know that consumers will purchase them often enough to move product and produce profit, while Wrigley actively offers the product to said retailers, using their already-present pull force to facilitate even wider distribution. The above analysis leads to the belief that changing the basic distribution strategy is unwise, yet

To facilitate the valuation aspect of the analysis, free-cash-flow forecasts are provided in case Exhibit 10 for Hershey as a stand-alone entity. Most students should find it easy to calculate a value for Hershey using the discounted-cash-flow (DCF) method and industry-comparable multiples, which also are provided. As with any valuation case, students must make judgments about the appropriate capital structure, the weighted average cost of capital (WACC), sales growth, and the terminal growth rate. Once students have explored the value drivers for Hershey though sensitivity analysis, they may then evaluate the bids from both Nestlé S.A.–Cadbury Schweppes PLC (NCS) and the Wm. Wrigley Jr. Company. They will want to examine whether the bids are fair from the perspective of HFC shareholders and whether the synergies assumed by the bidders in their offer prices are reasonable.

M&M’s biggest competitor is Hershey’s brand like M&M candies. The competition is fierce among the chocolate industry. Hershey and Mars are rivals and want the opportunity to gain more of the market share. In 1954, Hershey-ettes were introduced to compete against the similar M&M’s. However, they were not successful and are generally only available for consumers around the Holiday season. By the millennium, Hershey extended the popular Hershey Kisses brand in creating the Kissables. Hershey intended for direct competition to M&M small candy coated round tablet of chocolate in multitude of colors. The candy factories started in standard size packs and by the 70’s moved into standard size candy boxes. In the current year and season, you will find M&M’s in candy canes to small snack sizes and inside ornamental objects. The chocolate world becomes difficult to present as it becomes difficult to come up with new ideas in the candy business. As more companies release products similar to the M&M’s, it will become increasingly difficult for Mars to continue to command the level of market share in the chocolate candy industry and the product has a potential to get lost in the supermarket aisle.

Industry Analysis: Cadbury Schweppes (CS) is comprised of a global confectionery and beverage company. For the purpose of this case we will maintain our focus on the confectionery business and the assessment of adding to their sugar confectionery portfolio. CS is number three in the beverage business but see the opportunity to become the largest confectionery in the world. The categories are chocolates, sugar and chewing gum. At this time Adams is the number two sized in the gum business. This industry operates on “bigger is better in confectionery”. Their strategic discussions and ambitions appear to stay true, in mentality, to this mantra. This mantra could be potentially dangerous to the business. CS had a presence in over 70

Hershey chocolate is known as one of the world’s most popular chocolate brands. For 118 years, the Hershey brand remains a favorite chocolate treat in over 90 different countries. Beginning only manufacturing milk chocolate, the company today manufacturers over 100 different varieties of candy. Many people are familiar with the traditional Hershey milk chocolate bar, Reese’s peanut butter cups, and bite sized Hershey kisses. The process behind producing these famed treats is a fascinating process. By evaluating the company’s manufacturing process and business dynamics, consumers can gain a better perspective of the science behind the candy the enjoy most.