Hershey Foods Corporation - Research Paper Example

Hershey Chocolate Bar Instruction Hershey Chocolate Bar The confectionery industry has grown tremendously in the United s over the last few years. Hershey Foods Corporation is the United States market leader in confectionery. One of its products is the chocolate bar. Despite the recent tremendous growth of confectionery markets worldwide, the Hershey chocolate bar is experiencing difficulty in taking advantage of the global growth (The Hershey Company, 2014). As a result of this concern, the Hershey chocolate bar needs to strategize in order to take control of the present worldwide opportunities. The desire of humans to find something sweet to consume dates back to primitive times.Chocolate traces its history to the ancient Romans, Egyptians, Greeks and the Chinese. However, during that period, it was considered a luxurious treat that only few could afford. It evolved from ancient forms to the modern industry centered in Europe. It evolved because of the increased availability of sugar. The increased availability transformed it from an ancient delight into a main modern confectionery industry. The modern industry produces a relatively cheaper food that many people enjoy. This paper will, therefore, analyze the strengths and weaknesses, marketing strategies, consumer behaviors, as well as, the branding strategies that may be associated with Hershey Foods Corporation. BACKGROUND INFORMATION The first confectioners in United States were the Dutch bakers of New Amsterdam which were later named New York. There were about 1000 manufacturers in the US at the beginning of the twentieth century. They offered employment to about 27000 workers through which they managed to register total sales of about $60million annually. Until the 1900s, the common equipments that would be used in these enterprises were mainly of kettles, shallow trays, hand cutters, starch boards and hand printers. Compared to the current equipment most of these equipment could be termed inefficient. Efficiency increased with the introduction of European candy manufacturing inventions. They enabled production of candy in large quantities at a more pocket friendly price (Schiffman et al, 2006). This greatly improved sanitary conditions in the manufacturing industries, especially, to the candy manufactures. Besides, the increase in production played a significant role in meet the growing demand for chocolate. The First and the Second World War also contributed to the mass production of candy considering candy was consumed by the armies in the war fields. In addition, the many improvements in the candy industry making led to it being nationally recognized as food. Candy has grown into a more than $21 billion confectionery industry in the US. The confectionery industry produces a universal food product using ingredients from all over the world. The chocolate bar strongly affects agricultural markets as well as the producers of those products. For instance, products produced in the Middle West and other parts of the world such as dairy products, fruits, sugar canes greatly impact on the production of candy. The Hershey chocolate bar sales have been on the rise in recent years. However, the growth rate of both its net income and sales is slightly slower compared to other entities providing same services and they have failed to meet expectations of chocolate consumers all over the world. In addition, the chocolate bar is facing much competition from many other local, regional, national and multinational firms (Braun et al, 2002). SWOT ANALYSIS Strengths Hershey chocolate bar has various strengths that have contributed to its growth and stability in the market. It has a great market share in the Northern part of America. As a result of the large market share, it has acquired many corporations within the United States. It has also enabled the company pays shareholders their dividends on time. Due to that many consumers are loyal to the company. The other stronghold in Hershey chocolate bar is that the company’s product prices stay stable most of the time (Cadbury, 2011). The pricing is also reasonable and every person can manage to buy their products. Moreover, it has a great amount of manpower, that is, about 13700 full time employees and 2300 part time employees. Hershey company is also committed in upholding the values of its founder Milton S, Hershey. These values include provision of high standard of quality, integrity, respect, fairness and honesty. Hershey is an exemplary organization in terms of social responsibility and business ethics (Pallotta and Bolster, 1999). The organization makes an annual contribution of services, products and cash to a number of local and national charitable organizations. A significant part of its profits goes towards operating the Milton Hershey School for Orphaned Children. The firm operates the Milton Hershey School for socially disadvantaged children. It is also the sole sponsor of the Field Youth Program and Hershey National Track. Finally, it makes contributions to the Children’s Miracle Network, a national program benefitting children hospitals across the United States. Weaknesses Hershey chocolate bar, on the other hand, has a number of weaknesses. First, the company has a low global market share. Its global market share in the chocolate confectionery industry is low compared to its competitors. Secondly, concern for the natural environment is another weakness that the company should address before competitors seize the initiative. Opportunities However, the company has several opportunities it can capitalize to its advantage in the industry. The first one is capitalizing and exploring the verse international market in every part of the world. The growth of the international market presents opportunities for candies to exploit (Cadbury, 2011). They range from the mature markets of the US and Western Europe to the emerging markets of Eastern Europe, South America and Asia Pacific. India and China are huge untapped markets. Other untapped markets include Indonesia, Thailand, Malaysia and Vietnam. The Hershey chocolate bar has an opportunity to gain control in these countries. The second opportunity that Hershey chocolate bar can consider is developing environmentally friendly packages for their products. Friendly products reduce industrial waste and promote recycling. Besides, it should carry out regular environmental audits to monitor the progress of their plans and programs. Many confectionery industries are carrying out environmental audits. They have an advantage over the Hershey. Lastly, the chocolate industry needs constant innovation to meet the demands of consumers. Consumers view foods, drinks and candies as functional elements rather than strictly refreshment. Many large candy industries have kept on using new technology to increases the quantity of goods produced. Threats The threats to this product include international competitors, laws and the change in consumers’ lifestyle towards low fat and healthy food. The chocolate bar faces competition in confectionery from other European giants in both the international and the United States markets. Furthermore, the United States government subsidy on sugar prices puts the confectioners at a competitive disadvantage. Confectioners from Mexico and Canada are able to buy sugar at world prices. They then transport lower priced products into the US thereby undercut the price of US products (Schiffman et al, 2006). Healthy food provision has become the main focus for both developing and industrialized world. The increase of food related diseases has made the industrialized world become aware on the need to provide healthy foods. As a result of ensuring that food manufacturer’s produce healthy foods, laws have been made concerning food production.The “Food and Drug Administration” (FDA) has come up with regulations concerning food production. The food manufacturer is required to post the health information of their products. They also have to state the ingredient contents on their products packaging. The laws have indirectly made the consumer aware of the effects of chocolate and chocolate related products. These have also contributed to a significant drop in chocolate sales over the past years. The change in consumers’ lifestyles is also a threat to the chocolate bar. Chocolate is known to be rich in fat which in turn causes obesity and finally heart attack. Despite sugar-freeproducts becoming popular, their market is difficult to exploit. First, manufacturing difficulties for replacing sugar have presented the biggest challenge for confectioners. Secondly, consumers want their food to contain more attributes but with the same taste (Pallotta and Bolster, 1999). Consumers would prefer eating sugarless versions of their favorite candies only if they taste the same as the confection sugar. Finally, the term sugar-free is traditionally associated with diabetes. They do not purchase candies because they fear they may get diabetes. Finally, the emergence of candy substitutes also poses a challenge to the candy industry. Candy substitutes are taking away the market share from candy. They are competing with candy in packaging, taste, healthy attributes and retailing space. Competitive products have hijacked candy-eating occasions by offering healthier alternatives for all meals. Moreover, the portability of other foods has grown faster than candy. Recommendations There are two recommendations to improving the growth of the chocolate bar markets and customer base. They are international expansion and utilization of autobiographical advertising. To develop a competitive advantage, Hersheys Company should pursue more aggressive expansion into international markets. 85% of Hershey’s revenues currently come from the United States. They include a 92% of Tootsie, 52% of Kraft, and 28%of Nestle. The compounded annual growth rate of confectionery over the past five years has been sluggish in the United States, that is, at 3.6%. India presents an enormous growth opportunity for Hershey chocolate company (The Hershey Company, 2014). The confectionery industry is poised for excellent growth in India because of solid economic growth. Additionally, the Growth Domestic Product of the country is expected to grow at a rate of 8-10% for the next five years. With the buying trends of middle income consumers changing significantly, the food retail industry which estimated to be $70 billion, is expected to double in the next ten years. Business Monitoring International estimates that the confectionery sales will grow by more than 33% in volume and 99.4% in sales by the end of 2014. Currently, Nestle and Cadbury control more than 70% of the Indian confectionery market but consumers are accustomed to these brands and may be attracted to new productsand increased variety. Hershey has a significant competitive advantage in this respect. Its products are relatively unknown in India, and Hershey may provide a refreshing change for consumers in terms of product variety. A research estimate by Spencer’s Retail, one of the largest distribution chains in India, suggests that imported brand sales have more than doubled each year, while local brand sales have grown by only 20-30%. However, this growth is limited to urban cities. To realize full market potential, Hershey should cater to the uniqueness of the Indian local market and distribute its products through an efficient distribution system (Cadbury, 2011). Hershey recently acquired a major stake in Godrej Beverages, showing its commitment to growth in India. One obstacle to international expansion is that Hershey does not own several of the brands it manufactures and distributes in the United States. The Hershey Company license agreements with Cadbury and Nestle prohibit Hershey from selling Cadbury, Carmello, Kit-Kat, and Rolo brands outside of the United States. Of Hershey’s 22.6% hold of United States confectionery market share, these four brands represent 4.3% share. Therefore, Hershey’s international product portfolio is inherently smaller and less powerful than its domestic product portfolio. Another area of improvement is the utilization of autobiographical advertising. Empirical studies show that autobiographical advertising, advertising that taps into memory of past personal experiences, affects how consumers remember their own past. For example, one research study found that a Disney advertisement referencing childhood memories of Mickey Mouse caused individuals to feel increased confidence that they, as children, personally experienced the same events that were referenced in the advert. Another research shows that just thinking about manufactured childhood events for extended periods of time can create false memories or distorted beliefs about personal childhood experiences. Moreover, autobiographical advertising can cause consumers to experience increased feelings of nostalgia towards different brands and products. Importantly for Hershey’s marketers, autobiographical advertising that resonates with viewers and stimulates consumer imagination has the dual benefit of positively influencing consumers’ attitudes towards the brand. Hershey needs to adopt autobiographical advertising to reinforce consumers’ personal connections with their products.For example; it can design an advertising campaign that depicts images of happy children enjoying its products. Another option is for Hershey Company to recycle past advertising campaigns from earlier decades, such as the 1950s and 1960s. Recycling past advertising campaigns can tap into existing consumer memories from their childhood (Braun et. al., 2002). MARKETING STRATEGY AND MIX Products In the marketing strategy and mix, price, product, place and promotion mix are the main aspects that are considered.Hershey`s develops many products such as cookies, chocolate syrup, kisses, cocoa, candy bar and baking chocolates.The Hershey Chocolate was first sold in 1900. Another variety, circular in shape, called Hersheys Drops was released in 2010. Hersheys Company also produces other chocolate bars in different flavors. These include Cookies ‘N’ cream, Special Dark Chocolate, Symphony, Krackel with crisped rice and Mr. Good bar with peanuts. There are also six limited flavors: Nut Lovers, Twosome Whoppers, Cookies ‘N’ Chocolate, Twosome Health, double chocolate and Twosomes Reeses Pieces. All flavors have calories ranging between 210 calories and 230 calories per standard-sized bar.The largest Hersheys chocolate bar available weighs five pounds. Itscost is 44.99 dollars on Hersheys website. Price Price is used as a marketing tool (Braun et al, 2002). Hershey`s company makes changes to the prices and weights of the chocolate bar. It is doneto accommodate the changes in the competitive environment and costs. The increase of chocolate bar prices helps to balance increases in the input costs of the company. The input costs include packaging materials, raw materials, fuel and transportation. The price of chocolate bar has remained affordable to everyone. The Hershey`s chocolate brands have high quality chocolate. The pricing of the chocolate products is therefore reasonable. In addition, Hershey`s promote their prices so that the regular customer sticks to them. Since Hershey`s chocolate bars are a worldwide product, prices differ depending on the economics of a country Place At first, the company was situated in Lancaster, Pennsylvania. This position was changed when Hershey decided to add his production facilities.Theymoved to Derry Township, south-central Pennsylvania. The location was near the ports of Philadelphia and New York. The ports supplied imported cocoa beans that they required. Hershey`s chocolate brand distributes products from their main factories in Pennsylvania to the Hershey`s retail stores in Dubai, Singapore, Chicago, Dubai, Niagara Falls and New York City (Kotler and Armstrong, 2013). Promotion Mix A promotion strategy comprises of a blend of promotion tools that a company uses to build customer relationships. There are various ways Hershey`s chocolate bar promotesits products in order to achieve the objective for their sales targets. One of the ways is through advertisements. They include print, internet, broadcast among others. Hershey`s chocolate bar hasits own website. The website enables customers to get information about the company products and achievements. Besides, they promote their products through public relations media. The media include sponsorships, web pages, special events and press releases. For holiday seasons, they have introduced some holiday products especially for the kids. CONSUMER BEHAVIOR Consumer behavior study is very important. It helps to establish the trends of consumption in the market.Hershey chocolate company periodicallychanges their products depending on the desires of their consumers. Changing products to meet customer demands increases the likelihood of customers continuing to buy the products. The company maintains a high level of standards, ethics and values towards their customers. It uses extra efforts to attract customers and sponsors of high quality. The company’s main customers are the wholesale distributors, vending companies, dollar stores, the grocery stores and convenience store. The company maintains a good relationship with its customers. It delivers quality services to the customers.It has a strong customer service department which serves customers efficiently (Kotler and Armstrong, 2013). The cultural environment affects a society’s basic perceptions, preferences, behaviors and values. The company strives to predict cultural shifts within the market. Predicting these shifts helps identify new opportunities or threats in the market. Predicting the cultural shifts can, for example, identify that consumers have changed their preferences to certain products. A number of people have developed allergies towards peanut. Peanut is one of the ingredients of chocolate and this means that the people who are allergic to peanut cannot use chocolate. Besides, the increasing incidences of people developing obesity have made the public more conscious about what they eat. People have been made aware that chocolate contains high calories. They have, therefore, reduced the consumption of chocolate and chocolate products.Reduction of consumption consequently lowers the sales of the chocolate products. BRANDING STRATEGY Hershey’s continually develops branding strategies to meet demands of its customers. Hershey`s chocolate brand continues with the distribution of its product lines (Pallotta and Bolster, 1999). The company is planning to expand the brand’s chocolate varieties and taste.It has planned merchandising and programming events throughout the year. Advertisements, on the other hand,are expected to boost its activities in the near future.Another branding strategy is the development of their products through research and development.Research and development are expected to improve the quality and quantity of their products. In conclusion, Hershey’s Chocolate is a successful company that has managed to maintain its business for a long time. Hershey`s chocolate bar has a great opportunity of expanding its markets. It should make new improvements in its technology.To achieve sustainable, long-term growth; the Hershey Company must focus on international expansion, particularly in India, and new marketing strategies that leverage memory and nostalgia. Also with the advancement in technology the company should come up with new varieties of their product to enable them cover as many consumers as possible. It is also clear the, the opportunities and advantages associated with chocolate production outweigh the challenges and disadvantages that may be experienced. References Braun K., Ellis R., & Loftus E. (2002). Make My Memory: How Advertising Can Change Our Memories of the Past. Hoboken, New Jersey: John Wiley & Sons. Cadbury, D. (2011). Chocolate Wars: The 150-Year Rivalry between the Worlds Greatest Chocolate Makers. New York, NY: HarperCollins. Kotler, P. & Armstrong, G. (2013). Principles of Marketing. Bulletin of the Centre for Research and Interdisciplinary Study. 2013(1): 93-113. Pallotta, J. & Bolster, R. (1999). The Hersheys Milk Chocolate Bar Fractions. Broadway. New York, NY: Cartwheel Publishers Schiffman, L., Kanuk, L.& Das M.(2006).Consumer Behavior. Upper Saddle River, New Jersey: Pearson Education. The Hershey Company. (2014). Hershey’s history. Retrieved from< http://www.thehersheycompany.com/about-hershey/our-story/hersheys-history.aspx > 22nd April 201. Read More