The Market Position of Hershey Company - Case Study Example

Assessment of the Hershey Company By: Professor: Class: University: City: State: Date of submission: Contents Contents 2 Executive Summary 3 Introduction 3 Market Description: Canada 4 SWOT Table 5 Recommendations 6 Target market 6 New Product Description: Hershey’s Kisses Deluxe 7 Customer Value Proposition 8 Justification of the New Product 9 References 10 Executive Summary The report aims at analyzing the market position of The Hershey Company which one of the internationally recognized producers of chocolate. Within the confectionary industry, the company experiences stiff competition from established companies such as Mars, Cadbury, and Nestle. However, the report focused on The Hershey Company, Canada, through analyzing its market share, internal and external market analysis, and recommendations to enhance performance and competition. Introduction Considered as the largest producer of chocolate and the major manufacturer of confectionery including non-chocolate and chocolate related grocery products, The Hershey Company mainly operates in North America. With its mission statement “Undisputed Marketplace Leadership,” the company aims at being the global leader within the confectionary industry. The properly established organizational brands are the Almond Joy, Reese’s, Kit Kat, and Hershey’s Chocolate Bar. Milton S. Hershey founded the company in 1894 and incorporated it on October 24, 1927. Moreover, the company operates as separate reportable branches that deal in manufacturing, selling, retailing, and dispensation of different packaged chocolate and confectionary products, guns, pantry substances, and mint refreshment products in the 80 distinct names of the products. To compete effectively, the company operates in different market segments consisting of defined geographic areas including Mexico, US, and Canada. Besides such segments, the company also operates in over 50 states. Despite the troubled economies responsible for the declining consumer spending, the company has been experiencing increased sales and net income in the past five years. Company’s revenue and net income increased by 9% and 5% respectively in 2012. Such increment is responsible for the boost in new product introduced in the US associated with sales in acquisition Brookside. The threat associated with increasing competition in North America from properly established confectionary companies including Nestle and Cadbury; however, there is effective moderation of the licensing agreements. It is from such backgrounds that the report aims at analyzing The Hershey Company market description within the confectionery industry, the size, and concentration of the market. Besides, the report would focus of SWOT analysis, recommendations based on the target market, and justification of the chosen strategy. Market Description: Canada In North America, The Hershey Company majorly operates in Canada where it sold assets and removed its manufacturing to the existing sites. Moreover, the company divested the gum and the freezer snacks businesses in the early 2000s with an aim of fitting the operations of the businesses and ensure adequate distribution of the company’s model strategy. To ensure proper competition and the leading company within the confectionery industry, the company often focus on acquiring and allying with other companies within the region to ensure decrement in competition and acquisition of more products type. In Canada, the top five organizations contributing to 70% of the net sales come from the wholesalers. Additionally, the company has been able to adapt to some of its product formula ensure better satisfaction of people from different locations. In 2014, the company acquired The Allan Candy Company, which manufactures confectionery in North America, Canada and known throughout Canada for its iconic brands such as Big Foot, Laces, Allan, and Hot Lips. After few years of growth, the sales of chocolate declined slightly in 2015 in terms of volume reflecting an increment of 2% in volume and 5% value terms equivalent to 123,500 tonnes and CAD 3 billion. In Canada, the company’s major competitor in the production of chocolate confectionary is Nestle Canada. Hershey and Nestle have market share of 14% and 15% respectively; they are followed closely with the Cadbury Adams, which is a subsidiary of Mondelez International holding 13% of the market share. At constant 2015 prices, the chocolate confectionary was projected to rise by compound annual growth rate (CAGR) of 1% in terms of retail volume and 2% value to reach 130,800 tonnes and CAD3.4 billion in 2020. With the general economic focus, it is likely that the growth of the confectionery industry would decline while the relative category would appear to be stable and steady in development. However, it is important to focus on two growth areas: small segments of organic chocolate and the trend of making premium the imported brands. SWOT Table Strength Weaknesses The company established The Milton Hershey School for the orphan boys since they offer vital social and environmental responsibility to increase public image The company started a renaissance for manufacturing chocolates For being the largest manufacturer of pasta, the company enjoys strong name and image; production of diversified products such as gum and chocolate The company operates in several industrial segments making the name to spread easily within the large markets The company corporate properly with students and professors and established a toll free line (1-800-468-1714) for acquisition of more information The facility has designs for inclusion of housing, parks, and schools for the employees for motivation Increasing level of competition and market entrants limits company’s market share growth Increment in the scope of coverage dilutes and lessens the authority The company’s debt is more than that of the competitors Increased expenses on advertisement exceeding up to 46% The major concern for the company is the continuous rise in the price of cocoa leading increased cost of products and reduction in the purchasing power of consumers (Hershey Company, 2016) Opportunity Threat Production in varied products and tastes could improve market share globally Production of dark chocolate is advantageous from health perspective The company enjoys effective communication with both suppliers and consumers Production of cocoa in areas like India could reduce cocoa cost Untapped markets such as China, Thailand, Vietnam, Malaysia, Indonesia Improvement of efficiency for distribution Strong customer loyalty High competition from Nestle, Mars, and Cadbury; decline in company’s demand due to increased diabetes With increased environmental awareness, societies expect construction of treatment facility which is costly Increasing base price of chocolate as raw material leads to reduce purchasing power of consumers Improving technology increases the cost of production Natural disasters and climate disrupting agricultural activities including cocoa production Recommendations Target market Selection of the appropriate target market plays important in the development of appropriate marketing strategies and programmes. As a result, the company needs to consider adoption of different methodologies to appeal various segments of the market through consideration of the purchase goals of consumers, their knowledge of the product, involvement, and various in the purchase behaviours of the consumers. Mars has been competing with the company to acquire the largest market share; however, to compete effectively, it is significant that company is ahead in competition through targeting the each person in the market segments: children and adults. Initially, the company manufacture candies while targeting the children considering the profitability of such segments in the market, although the segment is small and has limitation of the company’s opportunities of growing. Therefore, developing the Hershey kisses might assist in increasing the sales in the adult market. In the past, there has been increment in industrial competition especially for the candy products (Hershey Company, 2016). Nonetheless, through Hershey’s focus on the adults, it would be in a position of separating itself from other competitors, which could translate to increment in institutional profits and market share. Several researches show that women are the early determinants of the candy taste among children; therefore, reaching the parents as the target and converting their loyalty to the company, it is evident that would introduce their children to company’s candy considering the positive taste of preference. Moreover, secondary researches also show that adults consume more than 55% of the total candies. New Product Description: Hershey’s Kisses Deluxe With the rising competition, it is important that the company focus on product differentiation to enable it increase its market share. Since Hershey is one of the major manufacturers of confectionary products, it could enjoy several mega-opportunities within the new markets. Moreover, considering that the company has the ability of producing quality chocolate products and ability of using the milk from the cow efficiently, safely, and in a manner, that satisfies all the hygienic needs, the company should consider investment in milk industries. Milk industry involves production of milk in different aspects. Through investing in such industry, it is clear that the company milk based products including dairy desserts, milk drink, yoghurts, cheese, and ice cream. Using chocolate and milk as ingredients for manufacturing various products, the company could attract potential customers. The company could decide to decide to engage in business singly or focus acquisition of smaller companies or merging with others (Madhani, 2015). Considering that businesses are highly complementary, the company would be in a position of reducing the threats associated with substitutes, making it part of the many alternatives companies for non-confectionary products within the market. For example, the company could improve its Kisses into various products including kisses milk chocolate, milk chocolate with almonds and caramel. Using the milk, the company would introduce Hershey’s Kisses Deluxe to ensure effective competition. Customer Value Proposition With the iconic brands of chocolate kisses, the company will experience increased sales. Hershey’s Kisses Deluxe is chocolate that will offer the consumers double standard size of the diminutive kisses brand. Besides, with addition of milk and adequate consideration of the ingredients, the product will offer consumers proper nutrition and healthy ingredients. Moreover, the product has a hazelnut centre and flecked with crisps of rice making it attractive to the customers. With appropriate measures in place, the product would reach the market on time making it easier for the customers to access it and make adequate comparison with the other products from the competitors. Since the introduction of the Hershey Kisses with almond in many years, the production of Hershey’s Kisses Deluxe after all those years reflect the iconic innovation that the product present to the consumers. Currently, most consumers are focusing on the chocolate products which less sweet and creamier. Moreover, the product is appealing to the taste of many consumers. The company wraps the Deluxe brand chocolates in gold wrapper rather than silvers which makes increases its customer value. In markets such as America, the company would sell the version of the product with rice crisps instead of wheat, which makes consumers view it as gluten free product. Justification of the New Product Through development of the product, the company would be improving its strengths and creating several opportunities. The Kisses Deluxe chocolate is referred to as the premium product, which targets the consumers that require purchasing premium chocolate as gifts. These factors for the strengths of the company since the product is twice the size of the standard kisses chocolate which makes it easily identifiable within the market segments. Adequate testing and designing of the product before introduction into the market reflects its degree of safety for consumption to the customers. Such an iconic brand also meets the needs of the customers through ensuring its availability in several retail stores, online-market platforms, and affordable to most consumers. However, for the opportunities, the addition of milk while producing chocolates would result in production in different associated products. These products might assist in increasing organizational market base. References Hershey Company. (2016). SWOT analysis. Retrieved September 1, 2016, from https://hersheycompany.wordpress.com/category/2-swot-analysis/ Hershey Company. (2016). Hershey's Situation Analyse. Retrieved September 1, 2016, from https://hersheycompany.wordpress.com/ Madhani, A. (2015, October 20). Hershey Kisses goes bigger with newest chocolate product. Retrieved September 1, 2016, from http://www.usatoday.com/story/money/2015/10/20/hershey-kisses-deluxe-hazelnuts-new-product/74234732/ Read More