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Reputation

The problem of using cocoa suppliers that involve in forced, child, and trafficked labor is an ongoing issue in the chocolate industry. As the company that provided 43.2% of the chocolates in the U.S, Hershey’s reputation could be damaged if they do not carefully handle the issue. It has been ten years since September 2001, when Hershey made an agreement to put an end to forced child labor in cocoa farm by 2005. Ten years after Hershey’s commitment, hundreds of thousands of children continue to work in hazardous conditions on cocoa farms in West Africa, and human trafficking continues. For countries such as the U.S, which people and its government pay a lot of attentions on companies’ ethical business behaviors. In the long term, Hershey’s reputation will decline if the issue of using forced, child, and trafficked labor is not carefully addressed.

Lost Market Share and Sales to its competitors

Hershey is a manufacturer of chocolate and other candy items, selling its products in over two million retail outlets in 50 different countries.Although Hershey has global reach, more than 90% of its revenue and profits come from the United States. Ever since the Raise The Bar campaign brought Hershey’s issue with forced child labor to attention, over 50,000 consumers nationwide have signed petitions to Hershey to “go Fair Trade”, and thousands more have called the company and protested its stores. Since there was no significant action taken by Hershey to address with the issue yet, there is are possibilities for Hershey to lose its U.S market share to its competitors such as Mars and Nestle, who have committed to begin sourcing cocoa that is independently certified to comply with labor rights standards.

Even though it would be a disadvantage for Hershey in the U.S market if they do not address the issue of the use of child labor in its supply chains, it is not likely that Hershey will experience a significant decline in their financial performance given their strong market share and brand. Hershey, along with its competitors, is expanding globally to reach larger markets and to increase sales, especially in the BRIC (Brazil,Russia, India, China) countries, where using child labor is not their primary concern.

Sources:

“Hershey Factbook 2011.” N.p., July 2011. Web. 25 Apr. 2013. <https://www.thehersheycompany.com/assets/pdfs/hersheycompany/FactBook-July-2011.pdf>.

“Hershey Foods (HSY).” Stock:. N.p., n.d. Web. 25 Apr. 2013. <http://www.wikinvest.com/stock/Hershey_Foods_(HSY)>.

Larsen, Todd. “Annual Report Card: Hershey, Trailing Behind Competitors, Gets “F” For Failing to Remove Child Labor From Its Chocolate Production.” Green America: Hershey Gets “F” For Failing to Remove Child Labor From Its Chocolate Production. Newsroom, 13 Sept. 2011. Web. 25 Apr. 2013.                                                          <http://www.greenamerica.org/about/newsroom/releases/2011-09-13-Hershey-Fails-to-Remove-Child-Labor-from-Chocolate-Production.cfm>.

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