02 Hershey

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Hershey Company - 2009Case Notes Prepared by: Dr. Mernoush Banton

Case Author:Anne Walsh and llen Mans!"eld

A. Case Abstract

Hershey Company #$$$.hersheys.%om& "s a %omprehens"'e strate("%mana(ement %ase that "n%ludes the %ompany)s %alendar De%ember *+, 200!"nan%"al statements, %ompet"tor "n!ormat"on and more. he %ase t"me sett"n( "sthe year 2009. /u!!"%"ent "nternal and eternal data are pro'"ded to enablestudents to e'aluate %urrent strate("es and re%ommend a three-year strate("%plan !or the %ompany. Head1uartered "n Hershey, Pennsyl'an"a, HersheyCompany "s traded on the Ne$ or3 /to%3 %han(e under t"%3er symbol H/.

B. Vision Statement #Proposed&

o be the $orld lead"n( %ompany o! %on!e%t"onary and other related produ%ts bybr"n("n( "nno'at"'e and s$eet produ%ts to our %ustomers.

C. Mission Statement #A%tual&

he m"ss"on o! the Hershey Company "s 4Bringing sweet moments of Hersheyhappiness to the world every day #*&To or sta!eholders" this means#Consmers# Del"'er"n( 1ual"ty %onsumer dr"'en %on!e%t"onery eper"en%es !or

all o%%as"ons. #+, 2&$mployees# W"nn"n( $"th an al"(ned and empo$ered or(an"5at"on $h"le ha'"n(!un. #9&Bsiness %artners: Bu"ld"n( %ollaborat"'e relat"onsh"ps !or pro!"table (ro$th $"thour %ustomers, suppl"ers, and partners. #6, 7&Shareholders# Creat"n( susta"nable 'alue. #&Commnities: Honor"n( our her"ta(e throu(h %ont"nued %omm"tment to ma3"n(a pos"t"'e d"!!eren%e. #8, &

+. Customer2. Produ%ts or ser'"%es

*. Mar3ets6. e%hnolo(y7. Con%ern !or sur'"'al, pro!"tab"l"ty, (ro$th8. Ph"losophy. /el!-%on%ept. Con%ern !or publ"% "ma(e9. Con%ern !or employees

Copyr"(ht 20+* Pearson du%at"on

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&. $'ternal Adit

C%M ( Competitive %rofile Matri'

Hershey )estle Cadbry MarsCritical Sccess*actors

+eight

,ating

+eighted Score

,ating

+eighted Score

,ating

+eighted Score

,ating

+eighteScore

Pr"%e%ompet"t"'eness 0.+6 2 0.2 + 0.+6 * 0.62 6 0.78

;lobal pans"on 0.0 2 0.+8 6 0.*2 + 0.0 * 0.26

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+.

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Strengths

+. Hershey)s or(an"% l"ne "n%ludes Da(oba

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/ales #>tr 's year a(o 1tr& -0.60 *6.+0 -6.0

Net ?n%ome #D 's D& *6.90 -+.20 -8.00

Net ?n%ome #>tr 's year a(o 1tr& *0.+0 2*.+0 28.0

/ales #7-ear Annual A'(.& 6.2* -0.87 +2.99

Net ?n%ome #7-ear Annual A'(.& -.0 -2.76 +2.89

D"'"dends #7-ear Annual A'(.& +0.69 +.88 ++.*

%rice ,atios Hershey 8ndstry S;% 2

Current P Eat"o 20.9 *7.* 28.

P Eat"o 7-ear H"(h NA +2.* +8.8

P Eat"o 7-ear =o$ NA 6.7 2.8

Pr"%e/ales Eat"o +.77 +. 2.27

Pr"%eBoo3 Ialue +*.87 7.9 *.6

Pr"%eCash @lo$ Eat"o +*.0 +9.00 +*.0

%rofit Margins : Hershey 8ndstry S;% 2

;ross Mar("n *.8 20.8 *.9

Pre-a Mar("n ++.8 .8 +0.*

Net Pro!"t Mar("n .6 7.7 .+

7r ;ross Mar("n #7-ear A'(.& *8.7 6+.7 *.8

7r Prea Mar("n #7-ear A'(.& +*.7 9.8 +8.8

7r Net Pro!"t Mar("n #7-ear A'(.& .9 .0 ++.7

*inancial Condition Hershey 8ndstry S;% 2Debt1u"ty Eat"o 2.9* +.** +.09

Current Eat"o +.* +.2 +.7

>u"%3 Eat"o 0. 0. +.*

?nterest Co'era(e .7 6. 2*.

=e'era(e Eat"o 8.* *.8 *.6

Boo3 Ialue/hare 2.82 +0.62 2+.8*Adapted !rom $$$.money%entral.msn.%om

Avg %

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8. Hershey "s a%t"'ely "n'ol'ed "n or(an"5at"onssu%h as the World Co%oa @oundat"on Co%oa@oundat"on, $h"%h supports en'"ronmentalproe%ts that "n%lude non %hem"%al pest,mana(ement pra%t"%es, and $h"%h en%oura(esusta"nable !arm"n( pra%t"%es to support

e%osystems "n the re("on.

0.06 * 0.+2

. Chan(es "n produ%t pa%3a("n( ha'e resulted"n l"(hter mater"als and less $aste dur"n( themanu!a%tur"n( pro%ess

0.0* * 0.09

. Due to (lobal supply "n"t"at"'es, the %ompanyproe%ts a redu%t"on o! +,700 pos"t"ons o'erthe net three-year per"od

0.0 6 0.2

9. Hershey re%ently %losed the"r Eead"n(,Pennsyl'an"a, plant "n 2009, el"m"nat"n( *00

obs

0.07 * 0.+7

+ea!nesses

+. Ad'ert"s"n( epenses !or the 1uarter"n%reased by 68 per%ent as the %ompany%ont"nued to promote "%on"% brands su%h asthe Hershey G"ss and Eeeses produ%ts

0.0 + 0.0

2. /ome o! Hersheys prem"um produ%ts o! ha'e!altered lately as %ustomers s$"t%hed to lo$erpr"%e produ%ts

0.0 + 0.0

*. he %ompany plans to d"s%ont"nue the"rCa%ao Eeser'e brand as $ell as the"r/tarbu%3s %ho%olate partnersh"p

0.07 2 0.+

6. otal %har(es to Hersheys ;lobal /upply

rans!ormat"on Pro(ram ha'e been!ore%asted do$n$ard !rom 887 m"ll"on to860 m"ll"on

0.07 2 0.+

7. Hershey proe%ts a net sales (ro$th o! 2 to *per%ent "n 2009 due to a de%l"ne "n %ore brandsales as $ell as un!a'orable %urren%ye%han(e rates

0.07 + 0.07

8. he %ompanys lon(-term debt "n%reased !rom+,29,987 "n 200 to +,707,976 "n 200

0.0 + 0.0

. Hersheys other assets de%l"ned to +7+,78+"n 200 !rom 760,269 "n 200

0.0 + 0.0

Total -. /.2/

*. S+4T Strategies


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Strengths +ea!nesses

+. Hershey)s or(an"% l"ne"n%ludes Da(oba

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re("on.. Chan(es "n produ%t

pa%3a("n( ha'e resulted"n l"(hter mater"als andless $aste dur"n( the

manu!a%tur"n( pro%ess. Due to (lobal supply"n"t"at"'es, the %ompanyproe%ts a redu%t"on o!+,700 pos"t"ons o'er thenet three-year per"od

9. Hershey re%ently %losedthe"r Eead"n(,Pennsyl'an"a, plant "n2009, el"m"nat"n( *00

obs

4pportnities S>4 Strategies +>4 Strategies

+. he (lobal mar3et "s'alued at appro"mately+0.6 b"ll"on by 20+0

2. Cho%olate a%%ounts !or77. per%ent o! themar3et)s o'erall (lobal'alue

*. here has been manymer(ers and

a%1u"s"t"ons "n the%on!e%t"onery "ndustry6.

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beans to %ho%olateprodu%ts

. Due to produ%t)s pr"%epo"nt, the re%ess"ondoes not "mpa%t

%on!e%t"onery produ%tsdrast"%allyThreats

S>T Strategies+>T Strategies

+.

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9. S%AC$ Matri'

*inancial Stability 5*S6 $nvironmental Stability 5$S6

Eeturn on ?n'estment 2 nemployment -7

=e'era(e 2 e%hnolo("%al Chan(es -*

="1u"d"ty 7 Pr"%e last"%"ty o! Demand -

Wor3"n( Cap"tal 7 Compet"t"'e Pressure -6

Cash @lo$ 7 Barr"ers to ntry -6

*inancial Stability 5*S6 Average 1.? $nvironmental Stability 5$S6 Average >1

Competitive Stability 5CS6 8ndstry Stability 58S6Mar3et /hare -2 ;ro$th Potent"al 6Produ%t >ual"ty -2 @"nan%"al /tab"l"ty *Customer =oyalty -2 ase o! Mar3et ntry *Compet"t"on)s Capa%"ty t"l"5at"on -* Eesour%e t"l"5at"on *


@/

C/

/

?/876*2+

Conservative Aggressive

Competitive&efensive

+

2

*

6

7

8

-2-*-6-7- -+-8

-

-8

-7

-6

-*

-2

-+

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e%hnolo("%al Gno$-Ho$ -* Pro!"t Potent"al *

Competitive Stability 5CS6 Average >/.@ 8ndstry Stability 58S6 Average 1.

-a"s: @/ J / K *. J #-*.6& K 0.6L-a"s: C/ J ?/ K #-2.6& J #*.2& K 0.

H. 9rand Strategy Matri'

+. Mar3et de'elopment2. Mar3et penetrat"on*. Produ%t de'elopment6. @or$ard "nte(rat"on

7. Ba%3$ard "nte(rat"on8. Hor"5ontal "nte(rat"on. Eelated d"'ers"!"%at"on


+ea!Competitive

%osition

Quadrant IIQuadrant I

Quadrant IVQuadrant III

StrongCompetitive

%osition

,apid Mar!et 9rowth

Slow Mar!et 9rowth

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8. The 8nternal>$'ternal 58$6 Matri'

The 8*$ Total +eighted Score

/tron(*.0 to 6.0

A'era(e2.0 to 2.99

Wea3+.0 to +.99

H"(h*.0 to *.99

? ?? ???

Med"um2.0 to 2.99

?I ?I

HersheyCompany

I?

=o$+.0 to +.99

I?? I??? ?L

. S%M

De'elop ne$d"etary

%ho%olate !or

"nd"'"duals$ho $ouldl"3e to lose

$e"(ht or ared"abet"%s

Partner $"thother

"ntermed"ar"es

!or "n%lud"n(Hershey)sprodu%ts "n

the"r ("!tbas3ets

7ey *actors +eight AS TAS AS TAS

4pportnities

+. he (lobal mar3et "s 'alued at appro"mately 0.0 6 0.*2 * 0.26


The $*$ Total+eighted

Score

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+0.6 b"ll"on by 20+0

2. Cho%olate a%%ounts !or 77. per%ent o! themar3ets o'erall (lobal 'alue

0.09 --- --- --- ---

*. here has been many mer(ers anda%1u"s"t"ons "n the %on!e%t"onery "ndustry

0.07 * 0.+7 6 0.2

6.

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*. =ar(est produ%er o! %ho%olate "n NorthAmer"%a

0.06 2 0.0 6 0.+8

6. Eeported se%ond 1uarter 2009 sales up 7.9per%ent to +.+ b"ll"on and pro!"t o! +.*m"ll"on on Fuly 2*, the !ourth stron( 1uarter "na ro$ !or the %ompany

0.0 --- --- --- ---

7. he %ompany plans to %lose the"r onl"ne ("!tbus"ness $h"%h !eatured seasonal produ%tsand ("!ts that %ould be personal"5ed by the%onsumer

0.0 --- --- --- ---

8. Hershey "s a%t"'ely "n'ol'ed "n or(an"5at"onssu%h as the World Co%oa @oundat"on, $h"%hsupports en'"ronmental proe%ts that "n%ludenon %hem"%al pest, mana(ement pra%t"%es,and $h"%h en%oura(e susta"nable !arm"n(pra%t"%es to support e%osystems "n there("on.

0.06 --- --- --- ---

. Chan(es "n produ%t pa%3a("n( ha'e resulted"n l"(hter mater"als and less $aste dur"n( themanu!a%tur"n( pro%ess

0.0* + 0.0* 6 0.+8

. Due to (lobal supply "n"t"at"'es, the %ompanyproe%ts a redu%t"on o! +,700 pos"t"ons o'erthe net three-year per"od

0.0 --- --- --- ---

9. Hershey re%ently %losed the"r Eead"n(,Pennsyl'an"a, plant "n 2009, el"m"nat"n( *00

obs

0.07 --- --- --- ---

+ea!nesses

+. Ad'ert"s"n( epenses !or the 1uarter"n%reased by 68 per%ent as the %ompany

%ont"nued to promote "%on"% brands su%h asthe Hershey G"ss and Eeeses produ%ts

0.0 --- --- --- ---

2. /ome o! Hersheys prem"um produ%ts o! ha'e!altered lately as %ustomers s$"t%hed to lo$erpr"%e produ%ts

0.0 + 0.0 * 0.26

*. he %ompany plans to d"s%ont"nue the"rCa%ao Eeser'e brand as $ell as the"r/tarbu%3s %ho%olate partnersh"p

0.07 --- --- --- ---

6. otal %har(es to Hersheys ;lobal /upplyrans!ormat"on Pro(ram ha'e been!ore%asted do$n$ard !rom 887 m"ll"on to860 m"ll"on

0.07 --- --- --- ---

7. Hershey proe%ts a net sales (ro$th o! 2 to *per%ent "n 2009 due to a de%l"ne "n %orebrand sales as $ell as un!a'orable %urren%ye%han(e rates

0.07 + 0.07 * 0.+7

8. he %ompanys lon(-term debt "n%reased!rom +,29,987 "n 200 to +,707,976 "n200

0.0 + 0.0 6 0.*2

. Hersheys other assets de%l"ned to +7+,78+ 0.0 + 0.0 6 0.*2


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"n 200 !rom 760,269 "n 200SDBT4TA -. .E3 -.3?

SDM T4TA ATT,ACT8V$)$SS SC4,$ 1.12 1.2

7. ,ecommendations

@orm more partnersh"p $"th "ntermed"ar"es su%h as +-00-@lo$ers orW"neCountry;"!tBas3et.%om or s"m"lar to o!!er Hershey)s produ%ts as%omplementary or e%lus"'ely, pa%3a(ed $"th the %ompany)s e"st"n( produ%ts.he produ%ts should be sh"pped "n bul3 and "n h"(h 'olume "n order to redu%esh"pp"n( %har(es and handl"n( !ees.

. $%S 1

%ercent &ebt

3 %ercent&ebt > 1%ercentStoc!

Recession Normal Boom Recession Normal Boom

B? 700,000,000 00,000,000 +,000,000,000 700,000,000 00,000,000 +,000,000,000

?nterest 26,000,000 26,000,000 26,000,000 8,000,000 8,000,000 8,000,000

B 68,000,000 8,000,000 98,000,000 696,000,000 96,000,000 996,000,000

aes +8,+20,000 2,+20,000 *8+,+20,000 +2,0,000 29*,0,000 *8,0,000A 299,0,000 6,0,000 8+6,0,000 *++,220,000 700,220,000 828,220,000

/hares ,+9,*7,66 ,+9,*7,66 ,+9,*7,66 ,+6,+2,682 ,+6,+2,682 ,+6,+2,682

P/ .@ .0 .? .@ .0 .?

M. $piloge


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Hershey Canada, ?n%., a $holly o$ned subs"d"ary o! he Hershey Company,and the Nat"onal Ho%3ey =ea(ue made a three year e%lus"'e partnersh"p "nCanada $h"%h un'e"led the one-o!-a-3"nd HersheysCho%olate /tanley CupO, am"l3 %ho%olate repl"%a o! the most !amous trophy "n the sport"n( $orld, the/tanley Cup. he ne$ partnersh"p $"ll be("n $"th a %onsumer promot"on to

support the 20++ Br"d(estone NH= W"nter Class"%.

A re%ent poll publ"shed by Harr"s Poll re'ealed that Amer"%ans lo'e Hershey)sG"sses Brand Cho%olates and %ons"der "t an "%on"% treat and one o! the mostre%o(n"5able brands. he produ%t also has been a 4must-ha'e !or those $holo'e to ba3e and use the 3"sses %ho%olate as an "n(red"ent !or ma3"n( all types o!%oo3"es or ba3"n( pastr"es. he onl"ne dest"nat"on "s a one-stop-shop !or ba3"n(t"ps, re%"pe e%han(es and party plann"n( ad'"%e to s$eeten any (et-to(ether.W"th o'er 9,000 members, Hersheys Kissesba3"n( enthus"asts %an lo(-on toshare del"%"ous %oo3"e re%"pes, photos, stor"es, party t"ps and more.


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