The Hershey Company works to bring you Almond Joy and lots of Kisses. The company makes such well-known chocolate and candy brands as Hershey's, Kisses, Reese's peanut butter cups, Twizzlers licorice, and, under license, Mounds candy bar, York peppermint pattie, and Kit Kat wafer bar. Hershey also makes grocery goods, including baking chocolate, chocolate syrup, cocoa mix, cookies, snack nuts, breath mints, and bubble gum. Products from the chocolate king are sold to wholesale distributors and retailers of all kind throughout North America, and exported overseas. The Hershey Trust -- which benefits the Milton Hershey School for disadvantaged children -- controls approximately 80% of Hershey's voting power.
The company's operations consist of one business segment, in which more than 80 name brands are made, marketed, sold, and distributed. Among its significant customers, the wholesale distribution giant McLane Company accounted for 13% of Hershey's sales in 2011. Wal-Mart accounted for about 17%. Hershey also has a retail presence. Referred to as The Hershey Experience, the company's retail operations comprise Hershey's Chocolate World (Hershey, Pennsylvania) and stores in New York City, Chicago, Niagara Falls (Ontario), Shanghai, Dubai, and Singapore.
Hershey's business focuses on three regions. The US is the company's largest market. The Americas, its second region, consists of Canada, Mexico, Brazil, Central America, Puerto Rico, and global exports. Hershey also operates a third region in Asia, Europe, the Middle East, and Africa. While the US is a top revenue generator, sales outside the US from developing regions have contributed an increasing chunk of change, from about 14% in 2009 to 16% in 2011. Hershey's strategic focus is on expanding its global presence as it jockeys for market share via-à-vis rivals Mars and Kraft, which owns Cadbury. In 2012 Hershey acquired Canadian confectioner Brookside Foods. Brookside produces fruit pieces, nuts, and dark chocolate-covered exotic dried fruits. The $172.9 million deal extends Hershey's reach outside of the US, as well as complements its chocolate lineup.
Overseas, Hershey has agreed to buy out the 49% stake that it didn't already own in its Indian joint venture with Godrej Industries and a minority investor. The takeover includes $47.6 million in debt and candy brands Maha Lacto and Nutrine, beverage brands Jumpin and Sofit, and manufacturing facilities. The former JV will operate as a Hershey's subsidiary, renamed Hershey India. In 2011 Godrej Hershey posted sales of $80 million; Hershey's portion of the JV's loss was $7 million.
Despite a troubled economy that has slowed consumer spending, Hershey has enjoyed a sustained increase in sales during the past five years. In fiscal 2011 (ends December) sales grew more than 7% over the prior year due to both higher prices and sales volumes in the US and overseas. Year-over-year earnings, which slumped more than 60% back in 2007 due to restructuring and impairment charges, have since seen a double-digit rebound. Results beat expectations, thanks in part to the company's efforts to cut costs as it invested in building core brands and in new product introductions. Cash generated from operations tumbled in 2010 and 2011, but has averaged approximately 10% of sales during the past five years.
Mergers & Acquisitions
Hershey penetrated the Asian confectionery market by acquiring Van Houten Singapore from Swiss confectioner Barry Callebaut in 2009. Barry retained ownership of the brand, but granted Hershey a perpetual license for Van Houten consumer products in the Asia/Pacific and Middle East, and Australia and New Zealand.
Sales & Marketing
The company makes a point to launch new versions of old favorites, such as Jolly Rancher lollipops and bite-size bits of chocolate bars. Although chocolate bars take center stage, most recently premium dark varieties, it introduced sugar-free chocolate to tempt the growing number of diabetic and overweight consumers. Moving into the snack aisle, Hershey has rolled out cookies, 100-calorie treats, and granola bars. – less