Hershey Foods Company

Chocolate was previously considered a “delectable symbol of luxury, wealth, and power” (Klein) in the 1500s. Using modern technology, it is now easily produced. While

The premium chocolate industry is a large market in the United States and continues to grow around 10% annually. It is also populated with very strong

At Scharffen Berger Chocolate Maker, Jim Harris was the COO (chief operation officer) and was with the company for about 18 months and was observing the increased demand for their chocolate. “America’s finest dark chocolate” company wanted to increase production by equipping factories with new machineries and equipment but did not want any difference in the taste of the chocolates they produced. As the company totally agrees on not compromising the taste of chocolates and increase the production in order to meet the rising demand for their chocolates they should probably get into customizing chocolates blend for the mass-market retailer in order to grab huge market share, increase accessibility of the chocolate to customers and provide variety of choice to the customers by maintaining the taste they are known for. As the demand is increasing from 50%, 100%, to 150% by the start of 2006, Harris has to make a significant decision in order to invest Scharffen’s capital budget in expansion of the Company. Harris is recommended to acquire the required machinery in order to fasten the production and increase the capacity of the plant and should be careful about the quantity to be produced as the acquiring of machinery will increase productivity multiple times but the initial demand for

Hershey is a widely respected brand name and as a fact is the largest producer of quality chocolate in North America and considered as global leader in chocolate and sugar confectionery. With history dating to 18th century, Hershey competes with Nestle and Cadbury to dominate global confectionary business. The main product lines include chocolate and confectionery products; food and beverage enhancers, such as baking ingredients, toppings and beverages; and gum and mint refreshment products. Corporate strategy of Hershey is focused to deliver growth and capitalize by diversifying its brand in the global market.

There is a high bargaining power of suppliers because of the need of the key ingredients required for chocolate manufacturing and limited number of suppliers for this industry. Since cocoa trees require tropical climate, it forces the main producers in the west to import them from countries in West Africa or other hot places

While Europe and the United States account for most chocolate consumption, the confection is growing in popularity in Asia and market forecasts are optimistic about the prospects in China and India (Nieburg, 2013, para 9). According to the CNN Freedom Project, the chocolate industry rakes in $83 billion a year, surpassing the Gross Domestic Product of over a hundred nations (“Who consumes the most chocolate,” 2012, para 3).

thehersheycompany.com went on to say that the Hershey Chocolate is focused on growing their company globally and sharing Hershey 's chocolate around the world.

The Hershey Company and Tootsie Roll Industries, Inc. have weathered the ”Great Depression” with a history of more than one hundred years in the confectionary candy making industry. Their vision and longevity have pushed them into the twenty first century to meet the needs of the community, consumer, affordability, environment and healthy control portions. Both companies have made available, reduced sugar, sugar free, nut free, peanut free and gluten free products that is reflected in their candies, gum and mints. The two companies are worth investing in, but may be better than the other.

Hershey concentrates on a variety of chocolate products ranging from powder form to an assortment of candy bars, including the famous Hershey Kiss®, to the wholesaling of large decadent chocolate products for other smaller chocolate candy manufacturers.

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.

Moreover, consumers and employees are also demanding chocolate companies to follow good corporate social responsibility practices in addressing the environmental concerns in terms of how to design its packaging, procurement and operational decisions. Human rights concerns are also high in terms of consumer expectations of chocolate companies with respect of forced child labour in West Africa. All of these driving forces - societal concerns, attitudes and change in lifestyles, are strong enough to shape up the competition and impose the constraint on chocolate industry profitability and competitive survival.

The premium chocolate market has been growing at 20% annually, showing that buyers are willing to pay more for a better tasting and better quality chocolate. The declining growth of the overall chocolate market and rapid growth of the premium chocolate market is positive for current producers of premium chocolates in that the decline

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.

Allison, M. (2013). Fair-trade theo chocolate fairly booming. The Seattle Times, par. 4. Retrieved from http://seattletimes.com/html/businesstechnology/2020664110_theochocolatexml.html(2013). Fair-trade theo chocolate fairly booming. The Seattle Times, par.25. Retrieved from http://seattletimes.com/html/businesstechnology/2020664110_theochocolatexml.htmlBrake, L. (2011). Theo chocolate - the ultimate in green chocolate. Earth Times, par. 2. Retrieved from http://www.earthtimes.org/green-

The natural environment involves Cocoa beans that are needed by Whittaker’s to produce their chocolate products. Over the next few years, the world is expected to face a chocolate ‘drought’, leading to soaring prices of cocoa beans due to insufficient consumable cocoa to chocolate manufacturers. (Western farm press, 2011)