Being the largest chocolate manufacturer and non-chocolate confectionery producer, the Hershey Company has gone through many corporate synergies such as acquisitions and licensing agreements, which allowed them to develop a wide network of distribution.  The first acquisition started with the peanut butter cups by REESE’S. Hershey had been providing Reese’s Candy Company the supplies for chocolate coating since 1928 and finally bought the company in 1963 after H.B. Reese’s death. After this event, Hershey started to grow by acquiring related companies and diversify by spreading out to other food products like pasta. Here’s a complete list of acquisition/divestitures (page 4). Additionally, the company also went through merges and entered foreign markets using Agent-Importer and licensing agreement such as joint-venture methods to enter the markets penetrating strategies. Along with the synergies, the company also expanded geographically by building new chocolate factories in other states and globally. To maximize it’s net income, Hershey also got rid of its low-return asset. For instance, it sold its aseptic packaging plants and entered contracts with other companies to manufacture the aseptic drinks.

Hershey breaks down its market into three geographic regions: the US, the Americas, and Asia, Europe, the Middle East and Africa (AEMEA). Business unit wise, it is divided into the chocolate business unit and the sweet and refreshment unit with a supply-driven business model. In the United States, Hershey’s customers are mainly the middlemen in the supply chain (wholesales, vending companies, dollar stores, etc.), not the everyday customers we see in the stores. In North America especially Canada, Hershey sold assets, removed manufacturing to existing sites, and divested the gum and freezer snack businesses in early 2000s in order to fit into their business operating and distribution model strategically. To stay competitive as the leading company in the industry besides Mars and Nestle, Hershey often acquired or allied with other companies in the region to decrease the competition and obtain more products type. Top five customers in Canada that has contributed 70% of the net sales are wholesalers. Hershey also adapted some of its product formula to better satisfy the people from different regions of the world. In other foreign markets such as India, China, and Brazil, Hershey usually penetrated the market starting with manufacturing or formation joint ventures. According to the Global Retail Confectionery Markets in the Fact Book (Figure 1), which includes China, Brazil, Japan, Mexico, India, South Korea, and Philippines (ranged from the highest to lowest in terms of retail sales). Moreover, even with only $1.9 billion sales in India in 2011, its growth, about 23% is the highest among those countries compare to China and Brazil (both around $11 billion sales) with 7.4% and 12.5% respectively. On the other hands, more developed Japan demonstrates a slightly decreasing at sales.

In the upcoming future, Hershey is expected to have a rapid growing market in India especially with recent acquisition of Godrej Group in India a private conglomerate. Not only India, Hershey will continue to leverage through more investment and joint ventures. Overall, Hershey aims to boost revenue to $10 billion in five years along with more leveraging and innovation. Whether or not they can accomplish this ambitious goal, Hershey is aiming something big. Hershey has devoted a lot of resources into D&R for health and wellness trends to provide healthier options for both the US and worldwide. Sales for organic and dark chocolate have generated more sales than other snacks. According to Michele Buck (Chief Growth Officer) in the Forbes article, Hershey’s top strategic plan is to penetrate more into the market in China due to increasing population and GDP growth. It is Hershey’s Number one market in global retail markets. Recently, Hershey gradually changed its business model from supply-driven to consumer-driven global approach for brand investment and product development purposes. It was hard to hear the voices from the end-customers, but they drive to listen to them so they can create something new or improve existing product such as its packaging that customers would love. To keep up and support the growth and reputation (especially in the emerging markets), Hershey is expected to develop a bigger infrastructure and thus more employees. It also needs to ensure the sustainability and affordability of its raw materials such as cocoa and sugar so that Hershey can maintain a strong portfolio of over 80 brands. Moreover, Hershey will face a lot low-priced competition from the private labels, who have demonstrated a greater growth in the industry along with a increasing price in commodities.

Figure 1:

 Source: Hershey Fact Book

Bibliography

Goudreau, Jenna. Hershey’s Provocateur-In-Chief Pushes The Candy Company To $10 Billion. 14 March 2013. 1 April 2013 <http://www.forbes.com/sites/jennagoudreau/2013/03/04/hersheys-provocateur-in-chief-pushes-the-candy-company-to-10-billion/>.

“Hershey Fact-Book.” The Hershey Company. Hershey Company, 2012. Web. 3 Apr. 2013. <http://www.thehersheycompany.com/assets/pdfs/hersheycompany/fact-book.pdf>

MarketLine. EBSCOhost: The Hershey Company. 30 Nov 2012. 1 April 2013 <http://ehis.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=9203f13f-4e1f-45f7-a8d6-16d8a0cf3f5c%40sessionmgr15&vid=4&hid=109>.

The Hershey Company. thehersheycompany Form 10-K. 22 Feburary 2013. 1 April 2013 <http://www.thehersheycompany.com/assets/pdfs/hersheycompany/TheHersheyCompany_10K_20130222.pdf>.