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Project Report: Hershey's
 

Project Report: Hershey's

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    Project Report: Hershey's Project Report: Hershey's Document Transcript

    • 1THE HISTORY OF HERSHEY’SThe captivating story of Hersheys spans nearly a century and a half of industrial and socialchange.Milton Hershey, the man behind Hersheys Chocolate, opened his eyes to this world, on13thSeptember 1857. He developed the love for candy at a very tender age only and started hiscareer as an apprentice to a candy-maker in Lancaster, Pennsylvania.CHRONOLOGY:1876At the age of eighteen, Milton laid the foundation of his own candy shop, in Philadelphia.However, the shop closed down after six years only, following which he moved to Denver,Colorado, and started learning the art of caramel-making.1886Milton moved back to Lancaster, Pennsylvania, and launched the much-successful LancasterCaramel Company. The company grew by leaps and bounds.1893Milton attended the Chicago International Exposition and ended up buying German chocolate-making machinery and started producing chocolate-coated caramels.1894He started the Hershey Chocolate Company, selling off his caramel business. With this, hestarted the production of Hershey chocolate caramels, breakfast cocoa, sweet chocolate andbaking chocolate.Interesting Information On Background & Origin Of Hersheys ChocolateWithin six years of starting Hershey Chocolate Company i.e. in 1894, Milton began theproduction of milk chocolate, in the form of bars, wafers and other shapes. As the methods ofmass-production became popular, the company was able to lower the per-unit cost of milkchocolate and bring the product within the common mans reach. The chocolate was animmediate success and witnessed heavy demand. To cope up with the rising orders, Miltondecided to increase his production facilities.Soon, Hershey witnessed the opening of a new chocolate factory, amid the gently rollingfarmland of south-central Pennsylvania, in Derry Township. The location was close to the ports
    • 2of New York and Philadelphia, from which the factory sourced its imported sugar and cocoabeans. At the same time, it was surrounded by dairy farms, easily providing the much-neededraw material - milk. Even the supply of honest, hard-working labor came locally. In short,Pennsylvania proved the ideal location for the chocolate factory.The new factory came into operation by the summer of 1905, when it started producingdelicious milk chocolates. With time, Milton started looking forward to expanding the productline of his company. In 1907, Hershey Chocolate Company began producing flat-bottomed,conical milk chocolate candies. Given the name of Hershey’s Kisses, they were initiallyindividually wrapped in silver foil. Machine wrapping was introduced in 1921. Sometime later,the plume was added to the chocolates and in 1924, they were trademarked as well.The early 1900s saw the introduction of a number of products in Hershey Chocolates offerings.These included Mr. Goodbar (1925), Hershey’s Syrup (1926), Chocolate Chips (1928) and theKrackel Bar (1938). Such was the popularity of Hersheys products and the business acumen ofMilton that the company maintained its profitability even during the Great Depression andmanaged to avoid any worker layoffs. As World War II started, Hershey Chocolate startedproducing a survival ration bar for military use.By the time World War II ended, Hershey had supplied more than a billion of the survival rationbars, known as Ration D bars. It had even earned five Army-Navy “E” Production Awards, for itsexceptional contributions to the war effort, which included making parts for the Navy’santiaircraft guns. In 1956, seven years after the death of H.B. “Harry” Reese, H.B. Reese CandyCompany was sold to Hershey Chocolate Corp. This was expected, considering the fact thatHershey Chocolate had been supplying the coating for REESE’S “penny cups, since long.In 1968, Hershey Chocolate was renamed as Hershey Foods Corporation. In the decades thatfollowed, the company witnessed the expansion of its confectionery product lines, acquiring ofrelated companies and diversification into other food products. Today, Hershey is amongst theleading North American manufacturers of chocolate and non-chocolate confectionery andgrocery products.
    • 3MAJOR COMPETITORS OF HERSHEYS:Some of the major competitors of Hersheys are:Mars Inc.Cadbury & Krafts Food Co.Nestle SAFerrero GroupMARKET LEADERS IN CONFECTIONERY INDUSTRIES14.810.37.64.84.5MarsCadburyNestleHersheyKraftMARKET SHARE BY VOLUMEMARKET SHARE BY VOLUME
    • 4MARKET SHARE OF ALL THE MAJOR COMPETITORS IN THE CONFECTONERY INDUSTRYGLOBAL MARKET SHAREMARSGlobal Market Share: 14.6%Best-Selling Candies: M&Ms, Snickers, Milky WayEtc: Snickers was named after the Mars familys favorite horse in 1930NESTLÉGlobal Market Share: 12.6%Best-Selling Candies: Nestlé Crunch, ButterfingerEtc: Just bought Krafts frozen pizza business and said it wouldnt bid for CadburyKRAFTGlobal Market Share: 8.3%Best-Selling Candies: MilkaEtc: Milkas mascot since 1901 has been a purple cowFERREROGlobal Market Share: 7.3%Best-Selling Candies: Ferrero RocherEtc: The Italian company is known for its chocolate-hazelnut spread Nutella
    • 5CADBURYGlobal Market Share: 6.9%Best-Selling Candies: Cadbury Creme EggEtc: Cadbury became solely a confectioner after spinning off its beverage business in 2008HERSHEYGlobal Market Share: 6.7%Best-Selling Candies: Hersheys, Hersheys KissesEtc: Americas milk chocolate pioneer has been considering making an offer for Cadbury4225784329The Hershey Co.Mars Inc.Russel StoverNestle USA Inc.Lindt & SprungliRM Palmer Co.Private LabelOthers0 10 20 30 40 50US MARKET SHAREUS MARKET SHARE
    • 6COMPARATIVE STUDY OF ALL THE MAJOR COMPETITORSOn the basis of:PRODUCTHERSHEYS CADBURY & KRAFT MARS NESTLEMilk Chocolate Bar Dairy Milk Mars SmartiesAlmond Bar Fruit & Nut Snickers MilkyBarDark mildly sweetchocolate BarRoast almond M’n’M ChokitosCookies ‘N’ Crème Crackle Skittles PollywaffleAir delight chocolateBar5 Star Twix White knightHershey’s Drops Relish 3 Musketeers Peppermint crispHershey’sMiniaturesPicnic Bounty CrunchHershey’s Nuggets Perk Milky Way ClubMr. Goodbar candybarGems Kudos Golden RoughSymphony Bar Nutties Galaxy NesquikSugar free chocolate Caramel MarathonGoogly TrackerMr. POP RevelsDolmioFlyteM-AzingMinstrelsSeeds of ChangePromiteAnalysis:According to the above table, it is clear that when we compare Hershey’s products withthat of it competitors, Mars Inc. emerge as the leader. Mars has the maximum numberof products available in the market followed by Cadbury. Hersheys fall on the third placeclosely followed by Nestle.
    • 7On the basis of:PLACEHershey’s:The first plant outside Hershey, Pennyslvania opened on June 15, 1963 in Smith Falls, Ontaria,Canada and the third opened on May 22, 1965 in Oakdale, California. In February and April2007 Hershey’s announced that their Smith Falls and Oakdale plants would close in 2008, beingreplaced in part by a new facility in Monterrery, Mexico. The Oakdale factory closed onFebruary 1, 2008. Hershey chocolate factory in Sao Rogue, Brazil was opened in August 2002.Hershey also had plants in Stuarts Draft, Virginia; Lanchaster, Pennsylvania; Hazleton,Pennsylvania; Memphis; Tennessee; Robinson, Illinois and Guadalajara, Mexico.Cadbury:Cadbury produces chocolate for more than 200 countries so that they have a chance to enjoy itas well and make profit. This gives them a wide range of consumers around the world. CadburySchweppes therefore makes sure that the cultures of these different people are kept. They cando this by producing products, which are eaten in that particular country without upsettingreligious or cultural practices.Mars:Mars Inc. are very popular globally, Mars chocolates are eaten all over the world with Mars Barand Snickers being the most popular. It has factories in 68 countries worldwide. It has one ofthe biggest share in the chocolate industry because of its wide reach all over the world.NestleNestle again has spread worldwide.Nestle when entering a new market does not goingalonebut it looks for partners and mergers. Till nownestle has collaborated with companies manyMNCs etc.It is because of this world wide spread that now itis coming up with Advertisementswhich can be broadcasted in the different nations in theworld. The recent example with would be the Nestleadvertisements having “Deepika Padukone” as its brand ambassador.
    • 8On the basis of:PRICINGHershey’sHershey’s pricing strategy is to maintain the price level at a consistently high rate. In India ittargets mostly foreigners and upper class Indians.Price cut off or no increase in prices but products weight would be reduced.CadburyPrice is an important element of the marketing mix. The price charged for a chocolate bar candetermine whether a consumer will buy it and the level of sales achieved can determinewhether or not Cadbury Schweppes will make a profit. Price is also affected by factors such asthe state of the economy, what competitors are charging, the stage reached in the products lifecycle and above all what price the market will bear. From the marketing point of view this iswhat matters.MarsMars’s has been marketed as a mass market chocolate product, targeting children, teenagersand working adults. Pricing for Mars is modestly priced. This is an affordable candy thateveryone can afford and enjoy.NestleNestle again decides it price on the basis of competition. The best think about the companynestle is that it is very flexible and it can come down with the price very quickly. The company isrenowned to bring the price down even up to half if needed.But this risk taking attitude has also earned nestle losses. Though lowering the price wouldattract the customers but it would not help them cover up the cost incurred in productionhence causing them losses. This was the situation earlier but now nestle is a full-fledged andgrowing company.It has covered allits losses and is now growing at a rapid rate.
    • 9On the basis of:PROMOTIONPromotion is one of the four aspects of marketing. Promotion comprises four subcategories:1:Advertising2:Personal selling3:Sales promotion4:Publicity and public relationsThe specification of these four variables creates a promotional mix or promotional plan. Apromotional mix specifies how much attention to pay to each of the four subcategories, andhow much money to budget for each. A promotional plan can have a wide range of objectives,including: sales increases, new product acceptance, creation of brand equity, positioning,competitive retaliations, or creation of a corporate image. Nowadays nestle going in for BrandAmbassadors to promote their product.These brand ambassadors are famous people who usually people idolize and people can relateto them.Hershey’sAdvertisingHershey company’s most recent examples of advertisings are listed below:1. Carolers2. Drops3. Mother and Daughter4. 4. S’moresPersonal SellingThe customer can deliver without additional charge. Hershey’s does not have Personal Selling.
    • 10Sales promotionThe commercialization of many holidays is continuing to expand and the popularity of gifts forthese holidays is also increasing. Hershey can provide holiday product in outlet other than theirwebsite.(i.e. Hallmark, Barnes and Noble).The increase in the importance of commercializednon-traditional holidays(i.e. sweetie days, grandparents’ day, and boss’s day) and traditionalholidays (i.e.Christmas, Valentine’s Day, Mother’s day, Halloween)allows Hershey to optimizethe importance of their speciality gifts products. By providing their gifts using retail channels,Hershey has an opportunity to increase the sale of their specialized gift products.Publicity and Public RelationsHershey appointed Arnold Worldwide to create fully integrated advertising and marketingprograms for its core chocolate brands, including Hershey’s, Reese’s, Hershey’s Kisses, Take 5,York and Kit Kat. Arnold is known for building brands through multi-faceted programs thatinclude broadcast, print, design, interactive, direct, promotions and public relations.CadburyAdvertisingThe advertisement aimed at conveying the idea that no specific occasion is required forconsuming Cadbury chocolate.Celebrities EndorsementsCadbury roped in Priety Zinta for its Perk brand. Priety Zinta’s angelic dimples lair thefoundation for what would become the Indian teenager;s favorite snack. After this campaign,Perk’s sale surged.The Big ‘B’ factorThe big factor that has pushed up Cadbury sales is the Amitabh Bachchan campaign. Cadburyappointed Amitabh Bachchan as its Brand Ambassador.MarsStill wholly owned by its founding family, packaged foods giant Mars is one of the worldsbiggest private companies, with annual sales in excess of $30bn. In addition to its globe-spanning confectionery brands, which include Snickers, M&Ms, Starburst and Skittles, thecompany is one of the leading worldwide manufacturers of petfood, through Pedigree and
    • 11Whiskas and other brands, and also manufactures sauces and easy-cook rice-based mealsunder the Uncle Bens umbrella. n April 2008, in by far the biggest acquisition in the companyshistory, Mars acquired gum and mint giant Wrigley in a substantial $23bn deal which made itthe worlds largest overall confectioner. It was pushed back into second place two years later bythe merger of Kraft and Cadbury. In chocolate, it still ranks behind Hershey in the US, althoughMars has a far wider global spread. M&Ms and Snickers are the worlds best-sellingconfectionery brands.NestleNestle launches new campaign for KIT-KAT; uses animation for the first time in india. this is anadvanced promotional activity used by Nestle in India.Nestle advertise its products through TV commercials, Print Media, Bill boards etc. Theadvertising budget is preplanned at the starting of the financial year which is kept secret by thecompany. Nestle do not have any sponsors. Deepika Padukone is the brand ambassador for thisbrand in India. The product is marketed aggressively in the market.
    • 12COMPETITIVE ADVANTAGESHershey’sHershey Foods has gained popularity embodying favorite American adjectiveslike "biggest," "fastest" and "most."The Hershey Bar and the Hershey Kiss, specific brands most readily identifiedwith Hershey, retain an old-fashioned brand. They are sold using simplepackaging, which has remained (more or less) the same for 100 years,reasonable pricing, and steady quality.As an all-American brand, Hershey capitalizes on patriotism and loyalty.It has been the official chocolate of the American military since World War I,when Hershey Bars were included in soldiers rations.Today, the company leads the American market with its brands, accounting for38 percent of all chocolate sold in the US. This figure is more impressive whenwe consider that the American market is the worlds largest consumer ofconfectionery.Broad product portfolio stabilizes the company’searnings.Focusonresearchanddevelopment(R&D)helps Hershey to gauge the emergingmarket for healthier snacks options.Cadbury:Cadbury is the largest global confectionery supplier, with 9.9% of global market share.High financial strength.Strong manufacturing competence, established brand name and leader in innovation.Advantage that it is totally focused on chocolate, candy, chewing gum, uniqueunderstanding of consumer in these segments.Successfully grown through its acquisition strategy. Recent acquisitions, includingAdams, 2003, enabled it to expand into important markets like the US market.NestleLeading overall market position and number one or two brands in most areas.The extraordinarily large scope of Nestles business provides for significant economies ofscale in manufacturing, marketing and administration.The research and development capabilities allow the Company to lead the way ininnovation and provides for maximum portfolio flexibility.
    • 13SUGGESTIONS FOR HERSHEYSEnhancing market presence through acquisitions and licensing agreements Growth in theglobal confectionery market. Streamlining businessthroughrestructuringoperations and supplychain management.The main competitors of Hershey Foods are Mars and Nestle. Mars is already a threat forHershey, because Mars has a stronger presence than Hershey in Europe, Asia, Mexico, andJapan. Hershey should pay special attention towards marketing its products in these areas.Unlike Hershey, Mars has historically relied upon extensive marketing and advertisingexpenditures to gain market share, rather than on product innovation. Taking a lesson fromthis, Hershey should also increase its advertising budget.China and India are huge untapped markets. Malaysia, Indonesia, Vietnam, and Thailandalso are untapped, So, Hershey has the opportunity to gain a foothold in those Countries.There is another opportunity for Hershey to develop environmentally safe products andpackages, reducing industrial waste, recycling, and establishing an environmental auditprocess are strategies that could benefit Hershey.Another opportunity is that Hershey diversifies more into non-chocolate candies becausethat segment is growing most rapidly in foreign countries like U.S & U.K.Hersheys should adopt Positive market outlook.The company should diversify its products.Growing market for premium chocolate productsHersheys should market itself as a health conscious brand.