Hershey's: Bitter Times in a Sweet Place Essay

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HERSHEY FOODS CORPORATION: BITTER TIMES IN A SWEET PLACE

INTRODUCTION

Born into a poor, lower-class family, Milton S. Hershey dropped out of school before reaching the fourth grade. He developed an interest in becoming a confectioner. He believed there would be great demand for affordable, mass-produced chocolate, and thus he built the Hershey Chocolate Company. Hershey’s is now the largest producer of quality chocolates in North America and a global leader in chocolate and sugar confectionery. Although he enjoyed making money, Milton S. Hershey was intent on using his vast fortune for philanthropic purposes. He decided to surround his enterprise with a model town and personally financed the building of roads, utilities,
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This legacy of educating disadvantaged children from the community would affect our thinking as members of the Hershey Trust Company’s board of trustees. It may be viewed as a bias in our decision-making where we may favor protecting the endowment of the Milton Hershey School over protecting the equally important interests of the Hershey Foods Corporation and the Hershey, Pennsylvania community in general.

Is diversification a valid reason to sell HFC? How would such diversification have served the Hershey School 10 years ago, for example? What are the pros and cons of this strategy?

We believe that diversification of an investment portfolio alone is not a valid reason to sell Hershey Foods Corporation in this case. Ten years ago, there would have been few benefits for the Hershey School with the sale of the Hershey Foods Corporation stock. These benefits include a price advantage on the sale of the stock and a short-term monetary gain for the endowment fund. Another benefit is that the Hershey Trust Company’s investment portfolio would be less concentrated in Hershey stock, which in theory may be to their advantage if the Hershey stock were to suddenly decline in value. Ten years ago the Hershey Trust Company, who was a major shareholder in the Hershey Corporation, was advised that in order to ensure

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