Hershey Corporation: The Internal and External Elements

Hershey Corporation:

The internal and external elements of the candy industry and the competition

Hershey was once the most dominant company within the American candy industry: it purveyed an inexpensive candy bar that satisfied most Americans' chocolate cravings. However, as chocolate has become a gourmet item and Americans' preferences have grown more sophisticated, Hershey has been faced with a dilemma as to how to retain brand loyalty while acknowledging changes in the industry. Hershey currently seeks to focus on its core products, without changing its brand to compete with higher-priced specialty goods. It must also learn how to better-position itself in an America which is increasingly at war against childhood obesity. Candy is being banned from schools, and is less socially acceptable to consume for both children and adults.

Recently, Hershey has built upon its core brands by producing items such as "a new bite-sized candy dubbed Hershey's Drops. The candy comes in two flavors, Hershey's Milk Chocolate Drops and Hershey's Cookies 'n' Creme Drops, and features a light, shiny finish instead of a candy shell, which the company claims will mean no mess for candy-eaters" (Hershey Drops, 2011, Candy Industry). Convenience, fun, and kid appeal are at the core of Drops, as the case with all Hershey's brands, spanning from its fun-size peanut butter cups to the neat squares of its classic bars. Even the most sophisticated of its brands, like its Symphony Bars, are low-priced, non-intimidating, and can be found on supermarket shelves everywhere.

The problem with focusing on the 'low end' of the candy market is that it is increasingly difficult for Hershey to compete on price alone. Hershey has had to raise the prices of its chocolate bars 13% because of the escalating prices of energy and commodity costs. Because candy bars are not necessities, it is very easy to cut back on them, and for budget-minded consumers who buy Hershey's, they are even more apt to feel the 'pinch.' Worse yet, its competitors, Mars and Nestle have not had to, or chose not to, raise their prices. Mars and Nestle have expanded more into the 'gourmet' lines of chocolates, including gourmet M&Ms and bars labeled with their cacao percentage. They have retained their flagship low-price brands at the same level of cost, like regular Mars M&Ms and Nestle Crunch Bars but branched out into premium-tasting items and even, in the case of Mars, personalized 'customized' M&Ms to be used as favors for weddings and birthdays.

One concern for all the chocolate companies, even Mars and Nestle, is that fears about diabetes and obesity will impact sales in the future. "64% of Americans are classified as overweight or obese; the U.S. is spending $75 billion a year on weight-related diseases; more than 325,000 people each year die from obesity-related illnesses; and one in five children are obese" (Rogers 2011). Hershey's has produced low-sugar and low-calorie product versions of its favorite brands to cater to the needs of overweight Americans, but once again, the fact that the core of the Hershey's product line is chocolate cannot be denied. Even artificial sweeteners do not have a full 'good nutrition' seal of approval from many mothers and dieticians. Hershey's has created a new 'Air Delight' bar, its version of the British Aero Bar produced by Cadbury. The sense of 'lightness' conveyed in the bar's taste and construction (although it is not specifically a low-calorie item), may be presumed to address critics of the candy's calorie density. The 'air-infused' bar is also presumably cheaper to produce than a dense bar of premium chocolate.

To generate more interest and 'buzz' about its products, Hershey's is introducing some new products in the form of 'limited runs' on its classic brands, to encourage a 'buy now' mentality, particularly amongst consumers who enjoy the nostalgia aspect of classic brands with a twist. "Peter Paul Mounds and Almond Joy candy bars are among the 'core'" products Hershey Food Corp. plans to keep as the centerpiece of its long-term growth… introducing two new experimental variations of its popular Almond Joy chocolate bar in May and June, one with pineapple-flavored coconut and white chocolate and the other with chocolate-flavored coconut and dark chocolate" (Silvestrini 2003). Hershey's is using online media to market its candy, including allowing visitors to its website to 'unwrap' a classic-looking Hershey bar virtually, and to contribute s'mores recipes using Hershey's bars on Facebook. The company also stresses its ethical roots in its corporate history, noting the philanthropy and civic-mindedness of its founders.

Hershey's strategic decisions are based in the fact that Hershey has many competitors in the premium market, such as Godiva and boutique independent chocolate makers. Kid-friendly appeal, availability, and cheapness are what still make Hershey 'chocolate for the people' and exert a profound nostalgic pull. The company has concentrated and focused its resources, shifting its direction away from non-chocolate hard candy and gum market (except for its Icebreakers gum). While this might seem like a wise mood, given the newfound emphasis on chocolate as a 'health' food, because Hershey's does not prominently display the cacao percentage of its chocolates like other companies, and instead relies on the traditional images of the bars, its status as a health food is tenuous.