M&A

The Hershey Company's most recent acquisitions have been:

Feb 2009- Van Houten Singapore Pte Ltd (chocolate brand sold in Asia)

Oct 2006- Dagoba Organic Chocolate LLC (producer of chocolate products)

Aug 2005- Joseph Schmidt Confections Inc (producer of premium handcrafted chocolate products) and Scharffen Bergen Chocolate (producer of premium dark chocolate products)

Dec 2004- Mauna Loa Macadamia Nut Corp (producer of macadamia nuts)

Sugar Prices Expected to Rise

Taken from 10/19/10 article on MSN.

"...droughts in South America have pushed down sugar cane forecasts and should ultimately result in high sugar prices. Brazilian company Cosan Ltd. last month revised its 2011/12 sugar cane crush forecast downwards. Also, the Environmental Protection Agency's recent approval for an increase of the percentage of ethanol allowed in gasoline from 10% to 15%, could increase demand for sugar and further affect prices."


http://articles.moneycentral.msn.com/news/article.aspx?Feed=MW&Date=20101019&ID=12191289&Symbol=US:HSY

Stock Update

10/18: $51.33
10/19: $50.98
10/20: $51.10
10/21: $49.32
10/22: $49.91

Stock Update

10/11: $49.26
10/12: $49.91
10/13: $50.76
10/14: $50.86
10/15: $51.62

Hershey Recipe Change....Yes, It's True...Well, Somewhat...

My classmate posted a blog recently on Hershey's recipe change and how it is leading to the decreased market share.  http://luciangmarsinc.blogspot.com/2010/10/fake-chocolate-say-it-isnt-so-hersheys.html  I feel like it is an area I should address in my Hershey blog...and also add a bit of clarification for those who are ready to switch chocolate bars. 

Yes, Hershey has changed their recipe on some of their products.  They have replaced the cocoa butter with vegetable oil in these products.  If you look at the labels, they are pretty easy to spot.  The FDA does not allow a product to be called "chocolate" if it contains any vegetable oil.  So the changed products will say something like "chocolatey coating" or "chocolate-flavored".  However, 85% of their products remain unchanged.  The classic Hershey bar, for instance, is the same recipe that we have grown up on.  Some of the products that have been changed are their smaller sellers, such as Mr.Goodbar, Take5, and Kissables. 

While I'm not sure I agree with the recipe change, I do see where the temptation came in to cut costs.  Because of the high competition in the candy industry, they couldn't raise their prices to pass their increased costs along to consumers.  Some customers have stated they feel betrayed...like Hershey tried to slip the recipe change in under the radar.  Well, they did.  At the same time, I don't remember hearing any ads about how Mars candy bars were going to be shrinking to cut costs.  So who's to say which, if either, was more deceitful?

Some people have stated that the new recipe provides less health benefits because of the removal of cocoa butter.  Well, seriously, most people are not eating chocolate for the health benefits.  The milk chocolate that most people enjoy actually provides little health benefit when you take into account the high amounts of sugar and fat that make it so yummy.  If you are seeking the health benefits, try a spoonful of pure unsweetened cocoa instead.     

Today show video:  http://today.msnbc.msn.com/id/26184891/vp/26788318#26788318

Article:  http://www.pennlive.com/midstate/index.ssf/2008/09/a_consumer_segment_on_nbcs.html

Hershey falling short on Fair Trade

October is Fair Trade Month.  Even though Hershey leads the US market share at just over 40%, they are doing the least in the area of fair trade.  Competitors Mars, Kraft, Nestle, and Cargill are embracing fair trade.  Global Exchange, Green America, and the International Labor Rights Forum, and Oasis USA got together to release the report, TIME TO RAISE THE BAR: The Real Corporate Social Responsibility Report for the Hershey Company.   (Hershey released its first ever Corporate Social Resonsobility Report last week.) 

http://www.fastcompany.com/1693089/hershey-gets-a-not-so-sweet-declaration-for-fair-trade-month

Original Hershey Chocolate Factory Set To Close

Hershey has announced that they will be closing their original factory.  They state that it is old and cannot accomodate new equipment necessary to remain cometitive globally.  A new facility is being built just outside of town for $300M.  600 workers are scheduled to be moved to the old to new plant, but 500 employees are scheduled to be replaced by machinery.

 http://www.npr.org/templates/story/story.php?storyId=130079220&ft=1&f=1003

Probe of Hershey Trust Purchase of Golf Course Stalled?

This is an interesting article that came out today.  A watchdog group is accusing Attorney General and Republican nominee for governor Tom Corbett of stalling (to prectect political allies) in launching an investigation into the purchase of a golf course by the trust that oversees the Milton Hershey School.  Representatives of the nonprofit Protect the Hersheys' Children Inc. said Corbett's office ignored concerns it had expressed over the acquisition of the golf course as far back as 2006 (the year the course changed hands).  The investigation did not begin til this September.  Earlier this month, The Philladelphia Inquirer reported that the trust paid an inflated price of $12M for the golf course, which is said to be operating at a loss.  They also claim that the sale enabled several dozen local investors to profit.....one of them being Hershey's then CEO Richard Lenny.  Corbett's office oversees Pennsylvania charities and confirmed last week that it had launched a non-criminal investigation of The Hershey Trust Co.

Read the full article here:

 http://finance.yahoo.com/news/Hershey-school-watchdog-hits-apf-1936455721.html?x=0&.v=1

Hershey Teaming Up With Registered Dieticians!

This is just a very brief bit of the article.  It is a unique idea, but I wonder how many people will take advantage of it and how much it will cost Hershey to administer.  When I visited the program’s website, it says that the voucher for a free visit with a registered dietician has ended.  However, there is a link to help you find a RD if you are interested in meeting with one on your own. 

9/15/10

Hershey Center for Health & Nutrition and American Dietetic Association Unveil National Initiative to Cover the Cost of Registered Dietitian Visits for Consumers

Initiative Kicks Off MODERATION NATION, Program that Features Host of New Tools and Resources to Educate People on How to Achieve Balance through Moderation The Hershey Center for Health and Nutrition (HCHN) has joined with the American Dietetic Association (ADA) to unveil Moderation Nation, a new program which kicks off by providing complimentary visits with ADA member registered dieticians to consumers, age 18 or over.  Moderation Nation seeks to educate people on how to achieve balance in their lives through moderation, both in nutrition and physical activity. The program features online and face-to-face engagement tools, such as Moderation Menus and a new iPhone mobile application, to help people understand what moderation means for them and their families and how to apply it to their everyday lives. While the concept of moderation has been espoused for decades, this campaign represents one of the first concerted efforts to turn the theory of moderation into practice on such a widespread scale. Read the whole article here: http://www.thehersheycompany.com/news/release.asp?releaseID=1471272

Press Release: Breast Cancer Awareness 220-Mile Charity Bike Ride

10/1/10
Hershey's Bliss Chocolates Kicks off Breast Cancer Awareness Month with 220-Mile Charity Bike Ride

Hershey's Bliss Chocolates is kicking off Breast Cancer Awareness Month as the presenting sponsor of the seventh annual YSC Tour de Pink - a four-day, 220-mile bike ride benefiting Young Survival Coalition (YSC). On October 1, more than 200 breast cancer survivors and supporters began pedaling from Hershey, Pa., to New York City, raising funds and awareness for YSC - the premier international organization dedicated to the critical issues unique to young women and breast cancer. This year, the ride will expand to also include a three-day ride from Newbury Park, Calif., to Malibu, Calif on October 29 - 31. Hershey's Bliss Chocolates also is honoring young survivors by featuring four women and their survivor stories on http://www.hersheysbliss.com/.


In honor of Breast Cancer Awareness Month, Hershey's Bliss Chocolates will donate $300,000 to YSC, raising awareness for breast cancer and funding critical programming and education.

"Hershey'sBliss Chocolates is proud to continue The Hershey Company's support of Young Survival Coalition as a presenting sponsor of this year's charity bike rides," said Michele Buck, Senior Vice President, Global Chief Marketing Officer, The Hershey Company. "Breast cancer is a disease that touches the lives of many Americans. Hershey's has donated more than $1.75 million to YSC over the past six years and we invite everyone to join us in support of the cause."

Sixth Annual YSC Tour de Pink presented by Hershey's Bliss
For the sixth consecutive year, The Hershey Company invited consumers to show their support for Young Survival Coalition by taking part in the YSC Tour de Pink presented by Hershey's Bliss four-day ride. The 220-mile bike ride kicked off Friday, October 1, in Hershey, Pa., with finish line ceremonies taking place in New York City on Monday, October 4. This year, an additional three-day, 200-mile bike ride has been added that will span from Newbury, Calif. to Santa Barbara, Calif. from October 29 - 31, 2010.
Consumers across the country also had the chance to get involved by joining the YSC Tour de Pink presented by Hershey's Bliss Virtual Charity Ride. The Virtual Ride challenged consumers to pedal 220 miles in their own community, logging efforts and raising funds for YSC online.

Young Survival Coalition (YSC) is the premier international organization dedicated to the critical issues unique to young women and breast cancer. YSC works with survivors, caregivers, and the medical, research, advocacy and legislative communities to increase the quality and quantity of life for women diagnosed with breast cancer ages 40 and under.

"The Hershey Company's support of Young Survival Coalition helps provide funds for the critical programs and services we offer to young women battling breast cancer and their families," said Lisa J. Frank, Co-Founder of Tour de Pink and Board Member of Young Survival Coalition. "With funds raised through participation in YSC Tour de Pink presented by Hershey's Bliss bike rides, we're able to offer outreach programs that bring awareness about YSC to many communities."
For more information on the YSC Tour de Pink presented by Hershey's Bliss, visit http://www.hersheysbliss.com/.

About Young Survival Coalition
Young Survival Coalition was founded in 1998 by three women diagnosed with breast cancer under the age of 35 who were discouraged by the lack of information available to young women diagnosed with the disease. YSC reaches over 200,000 women every year both virtually through youngsurvival.org or Facebook and locally in their communities, with nearly 30 affiliates, across the United States. Dedicated to the critical issues unique to young women diagnosed with breast cancer, YSC offers resources, connections and outreach so women feel supported, empowered and hopeful.

YSC works to change the face of breast cancer by advocating for more research involving young women diagnosed with breast cancer and building awareness that young women CAN and DO get breast cancer.

 http://www.thehersheycompany.com/news/release.asp?releaseID=1478202

Personal Comments:
I love when companies sponsor events like these where they not only encourage the community to get involved in raising money but also to get out and be more active.  It would be better, however, if they got events like this out there more so that people know about them.  This press release is the first I heard about this event.

Quarterly Dividends Declared

The Board of Directors of The Hershey Company (NYSE: HSY) today declared quarterly dividends of $0.32 on the Common Stock and $0.29 on the Class B Common Stock. The dividends are payable December 15, 2010, to stockholders of record November 24, 2010. It is the 324^th consecutive regular dividend on the Common Stock and the 105^th consecutive regular dividend on the Class B Common Stock.



http://www.thehersheycompany.com/news/release.asp?releaseID=1479100

Vertical Integration & Outsourcing

I can't find that Hershey uses much vertical integration.  From 1918 to 1946, they had sugar operations in Cuba.  They did add some backward integration with the purchase  of the Mauna Loa Macadamia Nut Corporation in December 2004.  Their forward integration seems to end at the Hershey store located in Hershey, PA. 

In February 2007, Hershey announced plans to cut 1,500 jobs by moving some of their operations to Mexico and outsourcing the production of their block chocolate bars to Barry Callebaut (notes as the world's leading manufacturer of high-quality cocoa and chocolate products).  The block chocolate is the main ingredient in many of Hershey's products.  Side note:  In February 2009, Barry Callebaut sold 100% of its consumer company in Asia, Van Houten Singapore, to Hershey.  They retained ownership of the Van Houten Brand but granted Hershey a perpetual, exclusive license of the brand name and related trademarks in Asia Pacific, the Middle East, and Australia/New Zealand for consumer products.

Other than the creation of manufacturing facilities in Mexico, I find no other information indicating Hershey is outsourcing.  With outsourcing becoming such a commonly used competitive strategy, I think their lack of outsourcing could be a contributing factor to their weaknesses in the global market.
  


http://www.scdigest.com/assets/newsViews/07-05-02-1.php?cid=1041&ctype=content
http://foodbizdaily.com/articles/27841-hershey-to-buy-van-houten-singapore-consumer-business.aspx

Generic Strategy Fit

From the Five Generic Competitive Strategies outlined in our text, I think Hershey follows a focused low-cost provider strategy. 

Strategic Target:  They compete in a narrow market niche. (mostly candy and some other food products)

Basis of Competitive Advantage: There is constant competition to have a low cost product.  In this market niche, competitors will quickly meet/beat low prices.  So on this aspect, they don't quite fit.

Product line:  The features and attributes of their products are tailored to the tastes and requirements of the niche members. (e.g. dark chocolate when buyers became more health conscious)

Production emphasis: They are continuously searching for ways to reduce costs while putting out new innovative products matched to niche member preferences.  My post from 8/31/10 talks a bit about how they are evolving their processes to reduce costs.

Marketing emphasis:  Marketing efforts point out the features that satisfy targeted consumers wants/needs while remaining budget friendly. (e.g. in store displays of buy 2 for $1)  Because of the competitive pricing in the niche, more emphasis is placed on the product features in marketing than on the price.

Keys to sustaining strategy:  Hershey demonstrates that they are committed to serving the niche at the lowest costs they can.  They also do not demonstrate any attempt to enter into other market segments and seem to be concentrating on increasing their competitive position in the candy/food product industry.

Stock Update

9/27: $47.41
9/28: $47.64
9/29: $47.79
9/30: $47.59
10/1: $47.79

10/4: $47.63
10/5: $48.10
10/6: $48.17
10/7: $47.88
10/8: $48.75