Category Archives: Crisis – Short-term Effects

Financial Performances

Even though “Raise the Bar, Hershey!” Campaign aims at Hershey as its main target for sourcing cocoa beans and other materials produced through unlawful labor practices, child labor has been a long existing issue in the confectionery industry. Having been in the industry for over a century, Hershey is a well-established company that has a large market share and retains a strong base of customers. Hence, the effect of the child labor crisis will not reflect in the company’s financial performance in short term. Stock prices would have been a measurement for the impacts that the crisis could have on Hershey, but we will not see such effect until later. It is also understandable to the public that this industry-wide issue would not be solved in a short period of time. Moreover, the data regarding its third quarter sales and earning will not be released until late October. According to Hershey’s second quarter report, its net sales has increased 7.5 %, the net sales were $1.33 billion compared with $1.23 billion for the second quarter of 2010. This increase in its net sales demonstrates how Hershey maintains strong financial performance even during times of public negativity and protests.

Dividend is another measurement for the company’s profitability and directly affects the investment decisions made by the company’s shareholders. While the issue over the use of child labor in its supply chain might cause concerns among the shareholders, but in the short run, the shareholder would not face any financial losses as Hershey continues to issue dividends to the stockholders.

Reputation Risks

Hershey might not experience any significant financial losses, but protests against Hershey for its use of cocoa produced through child labor and Hershey’s refusal to disclose the names of its direct supplies put the company’s reputation at risk. The community is disappointed that Hershey, the largest producer of chocolate in North America, failed to comply legislations regarding legal labor practices in its supply chain. As a result, nonprofits and advocacy groups voiced their discontent through campaigns such as “Raise the Bar, Hershey” to demand the company for change. Initiated by Green America, Global Exchange, and International Labor Rights Forum, “Raise the Bar, Hershey” campaign was launched in 2010. From 2010 to 2011, the campaign released reports targeting Hershey’s corporate responsibility and its lack of progress in driving child labor and other unlawful labor practices out of its supply chain. In its 2011 report, Hershey received the worst rating for its progress in making commitments to responsibly certified cocoa since 2010 among its competitors such as Barry Callebaut and Mars, who have made progressive changes.

The advocacy groups have definitely brought consumer’s attention to Hershey’s child labor issues. Consumers were appalled to find out that their long trusted chocolate producer have been exploiting children for profit when the company’s target market is children. On June 8th, 2011, hundreds of students and concerned consumers gathered around Hershey’s store in Times Square to protest against the company’s the use of child labor in its supply chains. At the same time, “Raise the Bar, Hershey!” also asks their supporters to print out a consumer alert card, each containing a QR code that informs people about the dark side of the chocolate industry and directs them to take action, and place it next to Hershey’s products.

The increasing discontent among customers, who are concerned about Hershey’s use of cocoa beans produced through unlawful labor practices, is very likely to put pressure on retailers carrying Hershey’s products. As the negative voices reached its peak, there is a great chance that retailers would start removing Hershey’s products off their shelves. This will not only hurt the company’s brand image but also affect the sales of Hershey’s products, as Hershey sells all of their products through retailers. In conclusion, if Hershey does not address its child labor issues in a timely manner, Hershey will lose more customers, decrease in sales and revenues, eventually.

References:

Ackerman, Tori. “Activists Protest Hershey in Times Square, Calling on Chocolate Giant to Stop Using Child Labor.” NY Daily News. NY Daily News, 8 June 2011. Web. 23 Apr. 2013. <http://www.nydailynews.com/new-york/activists-protest-hershey-times-square-calling-chocolate-giant-stop-child-labor-article-1.127762>.

“Form 10-Q.” The Hershey Company – SEC Filings. The Hershey Company, 10 Aug. 2011. Web. 24 Apr. 2013. <http://phx.corporate-ir.net/phoenix.zhtml?c=115590&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTc3NTk2NDQmRFNFUT0wJlNFUT0wJlNRREVTQz1TRUNUSU9OX0VOVElSRSZzdWJzaWQ9NTc%3d >.

Sniderman, Zachary. “Campaign Protests Hershey’s With QR Codes.” Mashable. Mashable, 13 July 2011. Web. 02 May 2013. <http://mashable.com/2011/07/13/hershey-qr-protest/>.

“Still Time to Raise the Bar: The Real Corporate Responsibility Report for the Hershey Company.” Labor Rights.org. N.p., n.d. Web. <http://laborrights.org/sites/default/files/publications-and-resources/HersheyReport2011_0.pdf>.

“Whole Foods Drops Hershey’s Scharffen Berger Chocolates Over Child Labor Issues.” Green America. Green America, 3 Oct. 2012. Web. 25 Apr. 2013.    <http://www.greenamerica.org/about/newsroom/releases/2012-10-03-Whole-Foods-Drops-Heshey-Sharffen-Berger-Chocolates-Over-Child-Labor-Issues.cfm>.