The Hershey Company Marketing Analysis - Example

The Hershey Company marketing report Author’s Name Class Name Professor’s Name School City and State Date Table of Contents Executive Summary 3 Introduction 3 Market Description 4 Market Size 4 Distribution and Growth 4 Market concentration 5 Market leaders 5 SWOT Analysis 5 Findings Discussion 6 Strengths 6 Weaknesses 7 Opportunities 7 Threats 7 Recommendation 8 a) Target Market 8 b) New Product 9 c) The Customer Value 11 d) Justification of the Choice 12 References 13 The Hershey Company marketing report Executive Summary The Hershey Company marketing report is designed to evaluate the external and internal factors of the company. The major purpose of the report is to perform a SWOT analysis of the company and use the results to introduce a new product namely chocolate spread (Choco Chuanbo) into the Chinese market. Moreover, it gives a favorable strategy to approach the target market. This report is of high value to the organization because it presents an opportunity to know not only to establish a new product but also to increase its market in a new region. Introduction The Hershey Company is among the oldest and the largest producer of sugar confectionery and chocolate in the United States of America (North America). Moreover, it is a global and a global leader in the confectionary industry (Global Confectionery 2015). The company’s headquartered are in Pennsylvania and have approximately 22,450 employees. Hershey Company has a variety of chocolate and confectionery products such as beverages, toppings for ice creams, candies, syrups, gums, and baking ingredients. It operates under eight brands names and its products are sold in over 70 countries around the world. The business operations of the company are segmented into two categories namely North America and International (Brenner 1999). The North America Segment mainly refers to US and Canada. The company products lines include sugar confectionary, premium chocolates, pantry and snacks items, and refreshments products (Hershey Company Report 2014). Market Description The Chosen country is China. China confectionery market comprises of retail sales of cereal bars, chocolate, gum, and sugar confectionery. Market Size When it comes to the market size in terms of geographical segmentation China comes second from Japan. China accounts for approximately 22.6% of the confectionery market in Asia-pacific while Japan occupies the top position with 31.6% (Confectionary in China 2015). Distribution and Growth The growth in the Chinese confectionery market is driven mainly by chocolate. In the year 2014, the Chinese confectionery market attained revenue of $6,747.8 million, which showed a growth of 4.6% in four years. However, in 2014 alone the confectionery market grew by 2%. The sugar confectionery segment emerged as the markets most lucrative in the year 2014. The confectionary market performance is expected to accelerate by 5.3% of CAGR for the period between the year 2014 and year 2015. Since the year 2010, the confectionary market has remained over 600 million kilograms with an increase more than 1.7% every year. The Asia-pacific region, which represents the Chinese market, is comprised of China, Hong Kong, Indonesia, New Zealand, South Korea, Singapore, Vietnam, South Korea, India, Thailand, Philippines, and Taiwan (Confectionary in China 2015). Market concentration The Sugar confectionery market accounted for 51.1% of the confectionery market total value in 2014. The chocolate segments accounted for 28% of the market in the same year. More also gum accounted for 18.9%, and cereal bars for 2.0%. Market leaders When it comes to market leaders, Mars, Inc. talks the first position in the Chinese confectionery market accounting for 25% of the market value. The other companies are Want Want Group accounts for 12.7%, Lotte Group 10.7%, Mondelez International Inc. 7.3%, and others for 44.7% (Confectionary in China 2015). SWOT Analysis SWOT analysis can be defined as a list of a firm’s greatest strengths, weakness, opportunities, and threats (Morrill 2007) Strengths Weaknesses 1. Hershey has strong social responsibility and business ethics. The company operates an orphanage called Milton Hershey School (The Hershey Company profile 2015). 2. The company is among the world leaders of confectionary market. According to Global Confectionary report 2015, the company recorded a revenue of 7421.8 million U.S. dollars in year 2014 with a global market share of 7%. 3. It focuses on research and development towards for quality and health products in the confectionary market. According to Hershey website, Hershey has built a research and development center in Jimqiao in Shaghai. 1. The Hershey Company has cultural weaknesses due to its multinational nature (The Hershey Company Profile 2015). 2. It is mainly focused on the North American market (The Hershey Company Profile 2015). 3. Hershey Over relies on product innovation and does little advertising (Chocolate Trading Company 2005). Opportunities Threats 1. There is constant change of consumer taste hence the company stands to benefit due to its inclination on innovation (Global confectionary 2015). 2. According to Hershey Company profile (2015), the Chinese market is not fully tapped and it plans expand to it. 3. Hershey has an opportunity to expand the product lines due to consumer demand for confectionary products 1. There is increasing shortage of cocoa beans, which may lead to price increase (Greenberg 2002). 2. There is increased private level penetration into the confectionery market, which may lead to reduction in market share (The Hershey Company Profile 2015). 3. Life styles diseases are forcing people to seek healthier substitutes such as fruits (Greenberg 2002). Findings Discussion Strengths Its major strength is known for quality products and good business ethics as well as social responsibility. A significant chunk of the company’s profits is used to operate its children orphanage called the Milton Hershey School. Hershey Company is prominent because it is among the world leaders in the confectionary market. The last strength is that Hershey does a lot of research and development to keep up with the changing market trend. Weaknesses The major weaknesses of Hershey cultural conflict because it operates on different regions where people have different cultures. Secondly, although the company operates in different regions, it mostly focusses on North America, which is its home region. Lastly, the company relies more on innovation and does less of advertising compared to its major competitor Mars Inc. Opportunities The major opportunity is that there is a constant change of consumer taste, and Hershey has a great opportunity because it is more focused on innovation. Secondly, Hershey has an opportunity to establish itself in Chinese Market since it already has a research and development center in Jinqiao (Hershey Website). Increased demand for confectionary products gives the company an opportunity to produce more products to meet the demand. Threats The major threat is the reduction in demand for chocolate products as people seek to live healthy due to increased lifestyle diseases. People are seeking substitutes such as fruits in place of confectionary products. The second threat is a shortage of cocoa beans used in manufacturing chocolate, and other products leading to increased prices for the products. Finally, increased private penetration is threatening to decrease the market share of companies such as Hershey. Recommendation a) Target Market One of the target markets being served by Hershey Company is the Chinese market. According to Pride & Ferrell (2006), segmenting variables include demographic, geographic, psychographic, category, behaviorist, and market share. However, we will segment the Chinese market using three segmentation variables namely, demographic category, geographical, and market share. Hershey is among the confectionary market leaders in the world. Hershey has perfected the art of producing quality chocolate and sugar confectionery products, it requires very little effort to become popular in the Chinese market. Demographically, Hershey targets the general population. Choco Chuanbo is universal for celebrations as well as daily consumption because it can be sandwiched in breads burns and cakes among others. Chocolate is popular among this group of people. In category segmentation, Sugar confectionery occupies the largest segment of the Chinese confectionery market. It accounts for 51.1% of the total confectionary market value. On the other hand, chocolate is second with 28%. The Hershey Company produces all these categories of products, but it has set up a research and development center in China to identify the preference product for the Chinese market. According to Confectionery in China 2015, sugar confectionary has the greatest share in China market. Hershey targets to the chocolate categories because they feel that the market as not been well exploited. When it comes to geographic segmentation, China covers the entire Asia-Pacific region and accounts for 22.6% of the confectionery market value. It means that in additional to Chinese market Hershey can also benefit by selling its products to the entire Pacific region. However, Hershey will first sell the in the major Cities of China before venturing into the rural areas and other Asia-Pacific regions. The last market segmentation variable is market share. Mars, Inc., which is the major competitor of Hershey Company, is the leader of the Chinese market followed by Want Want Group. However, with the entry of Hershey Company in the region, many changes are expected because of the extent of innovation Hershey is known to carry out when developing its products to suit its target market. b) New Product Our new product will serve both as a luxury product and as a normal product. It can be bought as a gift and can still be used in the breakfast menus. The customized packed product will be sold at higher price than the non-customized product. According to Ramaswamy & Namakumar (2009), the marketing mix variables are product, price, promotion, and place Product The market for the new product is the Chinese Market. The product is not only new to the Chinese market but also new to the world. The product is called a chocolate spread with a brand name “Choco Chuanbo” giving it a Chinese touch. Chuanbo is a Chinese word meaning spread. Choco Chuanbo is chocolate applied to bread like the way jams and margarine and consumed just like other chocolates. The product can also be used as a sandwich to burns and bread among other products. More also this product can be consumed alone just like other varieties of chocolate products. Bearing mind that there are other companies dealing with confectionary products in the Chinese confectionery industry it is important to have a unique product that everyone will like to try. The product has been developed after a thorough market research so that Hershey gives the Chinese people what they require rather than what the company thinks the people require. The product packaging can be customized to suit the Chinese festivals such as the Chinese Valentine day where customers can place orders with the name and the color they would require on the packets. One big packet of Choco Chuabo will have several pieces packaged in other smaller customized packets. For example, a family can order a customized Choco Chuanbo with a family name on the big packet and each of the family member’s names on the subsequent packets inside it. Price According to trading economics (2015), China income per Capita has been increasing over the years. It increased from 26,955.10 CNY in 2013 to 28844 in year 2014. According to Lee (2013), a 50 gram Choco, boy pack cost 99 yuan. However, non-customized Choco Chuanbo will cost76 yuan, which about 25% lower than other chocolates of the similar size while the customized one; will cost 83 yuan, which is 10% higher. Chuanbo has been manufactured using a combination of chocolate and other ingredients to reduce substantially the amount of chocolate used without compromising the quality. Reduction of chocolate has helped to reduce the amount of sugar used hence making it both health friendly and price friendly. The price of the product is far much lower compared to other chocolate products. However, the customized Choco Chuanbo will be considered a premium product and will have a higher price than the non-customized ones. Promotion The company will carry out a thorough campaign in the target market to introduce the new product. People will be allowed to test the product and give the feedback on their experience. During the product promotion period, the company will offer huge discounts, but the discounts will not exceed the breakeven point. The promotion will run for 6 months and discounts will range between 10% and 30% from the original price. Place The company will establish the dealers and distributor of the products. The product will be launched in the major Chinese cities namely Shanghai, Honk Kong, Beijing, Shenzhen, Shenyang, Taipei, Nanjing, Dongguan, Chengdu, and Chongqing. The new product will be available at local supermarkets and stores as well as wholesale joints. More also customers can order the premium product directly from the company by placing their order requests and specifications on the Hershey Company website. Choco Chuanbo non-customized product will be accessible at any time to the customers whereas the customized will take at least a day. c) The Customer Value The key to success in business is customer value thus firms must create value for their products to attract customers and maintain their loyalty (Duchessi, 2001). The Choco Chuabo product can be used during celebrations for example valentine’s day. However, the non-customized Choco Chuanbo can be used on a daily basis during breakfast. The ability of the product to feature in different scenarios and at different prices and packs makes it popular in the market thus increasing is customer value. Its popularity is expected to give Hershey a competitive advantage. More also ordering the product online raises it customer value. d) Justification of the Choice Hershey Company’s new product fits within the SWOT analysis. The Strategy profile that has been addressed is the using of the S-O strategy. According to La Trobe University (2013), a company can match their internal strength with their external opportunities to have a competitive advantage in the market. In our case, Hershey Company has innovation and the popularity of being a globe market leader as strength and an opportunity in the Chinese market. More also the company has research and development as another strength, which matches with the opportunities of developing another product line in the Chinese market. Finally, Hershey is known for social responsibility and good business ethics hence the opportunity of the changing consumer taste gives its new product a hearty welcome. References Brenner, J 1999, “The emperors of chocolate.” Retrieved from http://www.nytimes.com/books/first/b/brenner-chocolate.html Chocolate Trading Company. (2005). Retrieved from http://www.chocolatetradingco.com/chocolate-magazine/ Duchessi, P 2001, Crafting customer value: The art and the science. West Lafayette, IN: Purdue University Press. Greenberg, A. (2002). Mounds of trouble. Philadelphia Business Journal, Retrieved from Hershey Company, 2015, Hershey Company Profile, . MarketLine Industry Profile , 2015, Global Confectionary Report, MarketLine. MarketLine Industry Profile, 2015, Confectionary in China, Marketline. MarketLine, 2015, The Hershey Company Profile, Marketline. Morrill, R L 2007, Strategic leadership: Integrating strategy and leadership in colleges and universities.Westport, CT: Praeger. La Trobe University, 2015, Business foundations: A La Trobe business school compilation,Cengage Learning Lee, R 2013, Taste Test: Kinoko No Yama vs. Choco Boy, Mushroom-Shaped Chocolate Snacks, Serious Eats, Retrieved from http://sweets.seriouseats.com/2013/05/taste-test-kinoko-no-yama-vs-choco-boy-mushroom-shaped-chocolate-snacks.html Pride, W M & Ferrell, 2006, Marketing: Concepts and strategies, Boston: Houghton Mifflin Co. Ramaswamy, V S &Namakumari, 2009, Marketing management: Global perspective, Indian context. Delhi: Macmillan. Trading Economics, 2015, China Disposable Income per Capita. Trading Economics, Retrieved from http://www.tradingeconomics.com/china/disposable-personal-income Read More