Forces and Trends in Chocolate Industry - Essay Example

? Forces and Trends Forces and Trends This paper outlines forces and trends in the chocolate industry. Consequently, these trends will be discussed with respect to the Hershey Chocolates Company. Thus, the company’s business environment will be analyzed. This environment is comprised of the following forces and trends: Buyer power Supplier power Substitute availability and competitive rivalry Buyer Power Buyer power demonstrates the company’s ability to sustain its demand with or without the existing demand market. Consequently, the forces and trends affecting the chocolate industry’s buyer power include the following: Economic recession Health-consciousness and calorie counting Population growth Economic Recession Economic recession refers to a spell in the business cycle where there exists a contraction or slowdown in business activity. Consequently, economic recession impacts negatively on businesses. This implies that, for Hershey Chocolates Company to succeed it has to effectively wither the economic recession (Pearce and Robinson, 2004). Therefore, the company has to come up with effective marketing strategies to ensure continued buyer power even in times of economic recession. Living up to its stature as one of the leading chocolate firms in the world, Hershey Chocolates Company has reacted swiftly and effectively to the challenge of economic recession. This process mainly involved the introduction of gift-giving in terms of themed chocolate deliveries. These gift hampers, cushioned by other components of the chocolate industry, have seen the company maintain high sales even during the economic recession spell of 2007-2008 (Almond, 2004). Health-Consciousness and Calorie Counting Health concerns are continually taking a toll on the chocolate industry with consumers insisting on consumption of healthy diets. Consequently, there has been an increase in demand for sugar free, low fat and low calorie offerings. This implies that the health concerns pose a threat to the chocolate industry. However, chocolate firms could still create an opportunity out of the threat. As a result, Hershey Chocolates Company has capitalized on the opportunity by coming up with the Kisses chocolate. This is a reduced calorie chocolate that offers a perfect alternative for customers with health-sensitive issues. Population Growth Like any other industry, the chocolate industry is driven by population growth. For the chocolate industry, this population growth occurs in one crucial way. This is owed to the fact that the elderly age group is anticipated to triple by 2015 (Silva and Simoes, 2010). Consequently, players in the chocolate industry must come up with inventive products that satisfy the needs of this generation. As mentioned earlier, Hershey Chocolates Company has already reacted by coming up with the Kisses dark chocolate. This product is associated with low cholesterol values and numerous antioxidants. Consequently, the product is tailor-made for the baby boomer generation. Supplier Power This refers to the company’s ability to operate regardless of the prevailing suppliers in the industry. It is necessary to note that the primary raw materials in the production of chocolates are cocoa bean, milk and secondary sugar. Therefore, with regard to the production of sugar and milk, there exist numerous suppliers in the market. Thus, supplier power in regards to these two products is limited. On the other hand, the supply of the cocoa beans is limited to only a few suppliers in the industry. This implies that the supplier power of the cocoa bean firms is extremely high. Therefore, the chocolate producing firms such as Hershey Chocolates Company must come up with effective ways of lowering the supplier power of these companies in order to remain competitive in the industry. Consequently, Hershey Chocolates Company has reacted to this challenge in the following ways: Research on alternative ingredient formulation Optimizing current cocoa production Research on Alternative Ingredient Formulation As a result of the reduced supply of cocoa, its price has doubled in the last four years (Manos, 2010). Consequently, increased cocoa prices put immense strain on the company’s revenues. Therefore, in order to survive and remain competitive in the industry, the company had to device strategic measures in an attempt to avert the situation. Consequently, the company is working in partnership with other firms such as Firmenich so as to come up with alternative formulation for their products. The research is geared towards obtaining alternative chocolate formulation that would minimize the use of cocoa while producing quality products. Consequently, this would result in reduced demand for cocoa. Optimizing Current Cocoa Production In an effort to optimize the current cocoa supply, Hershey Chocolates Company introduced a GPS mapping system for various cocoa farmers in Ghana. The GPS mapping is intended to help the farmers utilize modern technology in planting, pruning and adding fertilizer to their crops. This would, in turn, help the farmers in optimizing their yields; hence stabilizing the production of cocoa. Substitute Availability and Competitive Rivalry Substitute availability refers to the capability of the competitor to offer similar goods and services but at reduced prices. In the occurrence of such an event, it implies that the competitor would have an advantage in the market. The chocolate industry is an extremely competitive industry. This implies that Hershey Chocolates Company incurs stiff competition from other similar firms such as Mars, M&M and Reese. Therefore, in order to attract and maintain an enormous market base in the industry, Hershey Chocolates Company had to come up with unique, quality and tailor-made products. Consequently, the company controls various brands of top quality chocolates. The vital brands include the following: Hershey’s milk chocolate candy bars Hershey’s Kisses chocolate candy These goods are cautiously made to suit the customers’ needs and were voted by customers among the top nine US chocolate brands. Consequently, these products have given the company a competitive advantage over similar firms in the industry. However, the industry also faces stiff competition from other substitute products such as ordinary candy and cookies. Other non-chocolate snacks such as fruits, ice cream and yoghurt also pose a challenge to the industry. Consequently, industry players like the Hershey Chocolates Company must develop increased premium products in order to penetrate into the consumer market. The products must be sensitive to the health and ethical issues so as to win a share of the crowded market in the industry. With regards to rivalry with other similar companies, market growth of around 20 percent annually, together with its unique products cushions the company from the stiff competition it would have to face. Therefore, the chocolates industry experiences various forces and trends. Thus, Hershey Chocolates Company must employ strategic measures in order to maintain profitability in the fragmented market system. References Almond, S. (2004). Candyfreak: A journey through the chocolate underbelly of America. Chapel Hill, N.C.: Algonquin Books of Chapel Hill. Manos, B. (2010). Decision support systems in agriculture, food and the environment trends, applications and advances. Hershey, Pa.: IGI Global (701 E. Chocolate Avenue Hershey, Pennsylvania, 17033, USA). Pearce, J. A., & Robinson, R. B. (2004). Strategic management. Maidenhead: McGraw Hill Education. Silva, A., & Simoes, R. (2010). Handbook of research on trends in product design and development technological and organizational perspectives. Hershey, Pa.: IGI Global (701 E. Chocolate Avenue, Hershey, Pennsylvania, 17033, USA). Read More