Hershey Foods Corporation

views updated Jun 08 2018

Hershey Foods Corporation

100 Crystal A Drive
Hershey, Pennsylvania 17033-0810
U.S.A.
Telephone: (717) 534-6799
Toll Free: (800) 539-0261
Fax: (717) 534-6760
Web site: http://www.hersheys.com

Public Company
Incorporated: 1927 as Hershey Chocolate Corporation
Employees: 14,000
Sales: $4.5 billion (2001)
Stock Exchanges: New York
Ticker Symbol: HSY
NAIC: 311330 Confectionery Manufacturing from Purchased Chocolate; 311340 Nonchocolate Confectionery Manufacturing; 311320 Chocolate and Confectionery Manufacturing from Cacao Beans

Hershey Foods Corporation holds the top position in the U.S. confectionery market. The name Hershey is synonymous with chocolate, yet the company’s founder made his first fortune by manufacturing caramel. While famous for its major candy brands—Hershey’s, Reese’s, Kit Kat, Kisses, Twizzlers, Jolly Rancher, Ice Breakers, Carefree, and Breath Savers—the company also markets grocery products including Hershey’s baking chocolate, chocolate milk, ice cream toppings, cocoa, chocolate syrup, peanut butter, and Reese’s and Heath baking pieces. Hershey operates with two main divisions, Hershey Chocolate North America and Hershey International, the latter of which exports the firm’s products to over 90 countries. The Milton Hershey School Trust controls 77 percent of Hershey’s voting power. In 2002, the Trust planned to diversify its holdings and, in a controversial move, announced that it was putting Hershey Foods up for sale.

Company Origins

Milton S. Hershey was born in 1857 in central Pennsylvania. As a young boy Hershey was apprenticed to a Lancaster, Pennsyl vania, candymaker for four years. When he finished this apprenticeship in 1876, at age 19, Hershey went to Philadelphia to open his own candy shop. After six years, however, the shop failed, and Hershey moved to Denver, Colorado. There he went to work for a caramel manufacturer, where he discovered that caramel made with fresh milk was a decided improvement on the standard recipe. In 1883, Hershey left Denver for Chicago, then New Orleans, and later New York, until in 1886 he finally returned to Lancaster. There he established the Lancaster Caramel Company to produce “Hershey’s Crystal A” caramels that would “melt in your mouth.” Hershey had a successful business at last.

Hershey Makes His First Chocolate Sale: 1895

In 1893, Hershey went to the Chicago International Exposition, where he was fascinated by some German chocolate-making machinery on display. He soon installed the chocolate equipment in Lancaster and in 1895 began to sell chocolate-covered caramels and other chocolate novelties. At that time, Hershey also began to develop the chocolate bars and other cocoa products that were to make him famous.

In 1900, Hershey decided to concentrate on chocolate, which he felt sure would become a big business. That year, he sold his caramel company for $1 million, retaining the chocolate equipment and the rights to manufacture chocolate. He decided to locate his new company in Derry Church, the central Pennsylvania village where he had been born, and where there would be a plentiful milk supply. In 1903, Hershey broke ground for the Hershey chocolate factory, which would remain the largest chocolate-manufacturing plant in the world through the twentieth century.

Before this factory was completed, in 1905 Hershey produced a variety of fancy chocolates. But with the new factory, Hershey decided to mass-produce a limited number of products that he could sell at a low price. The famous Hershey’s Milk Chocolate Bar, the first mass-produced chocolate product, was born.

In 1906, the village of Derry Church was renamed Hershey. The town was not simply named after the man or the company: it was Milton Hershey’s creation, the beneficiary of and heir to his energy and his fortune. Hershey had begun planning a whole community that would fulfill all the needs of its inhabitants at the same time that he planned his factory. A bank, school, recreational park, churches, trolley system, and even a zoo soon followed, and the town was firmly established by its tenth anniversary. One of Hershey’s most enduring contributions was the Hershey Industrial School for orphans, which he established in 1909 with his wife Catherine. After Catherine’s death in 1915, the childless Hershey in 1918 gave the school Hershey company stock valued at about $60 million. In 2002, the school, which became the Milton Hershey School in 1951, continued to control 77 percent of the company’s voting stock.

In 1907, Hershey’s Kisses were first produced, and the next year, in 1908, the Hershey Chocolate Company was formally chartered. In 1911, its sales of $5 million were more than eight times the $600,000 made ten years earlier at the company’s start.

Continued Success: 1920s-1940s

The Hershey company continued to prosper, producing its milk chocolate bars (with and without almonds), Kisses, cocoa, and baking chocolate. In 1921, sales reached $20 million, and in 1925 Hershey introduced the Mr. Goodbar Chocolate Bar, a chocolate bar with peanuts. In 1927, the company was incorporated as the Hershey Chocolate Company and its stock was listed on the New York Stock Exchange.

By 1931, 30 years after the company was established, Hershey was selling $30 million worth of chocolate a year. As the Great Depression cast its shadow on the town of Hershey, Milton Hershey initiated a “grand building campaign” in the 1930s to provide employment in the area. Between 1933 and 1940, Hershey’s projects included a 150-room resort hotel, a museum, a cultural center, a sports arena (where the Ice Capades was founded), a stadium, an exotic rose garden, and a modern, windowless, air-conditioned factory and office building. Hershey liked to boast that no one was laid off from the company during the Depression.

Though Hershey’s intentions seem to have been wholly sincere, there was always some suspicion about his “company town.” Labor strife came to the company in 1937, when it suffered its first strike. Though bitter, the strike was soon settled, and by 1940 the chocolate plant was unionized.

In 1938, another famous chocolate product was introduced: the Krackel Chocolate Bar, a chocolate bar with crisped rice. The next year Hershey’s Miniatures, bite-sized chocolate bars in several varieties, were introduced.

During World War II, Hershey helped by creating the Field Ration D—a four-ounce bar that provided 600 calories and would not melt—for soldiers to carry to sustain them when no other food was available. The chocolate factory was turned over to the war effort and produced 500,000 bars a day. Hershey received the Army-Navy E award from the quartermaster general at the war’s end. Hershey died soon after, on October 13, 1945.

Hershey Begins Expansion: 1960s

After Milton Hershey’s death, the chocolate company continued to prosper and maintain its strong position in the chocolate market. By the 1960s, Hershey was recognized as the number one chocolate producer in America.

With the company’s growth came expansion. In 1963, Hershey broke ground for the construction of two new chocolate factories, in Oakdale, California, and Smiths Falls, Ontario. Expansion for Hershey also meant looking for acquisitions, the first of which was the H.B. Reese Candy Company that same year. Also in 1963, the company’s president and chairman, Samuel Hinkle, arranged for the founding of the Milton S. Hershey Medical Center of the Pennsylvania State University in Hershey, Pennsylvania.

While the company played a hand in many developments within Pennsylvania, its main endeavor continued to be the food industry, including, for the first time, non-confectionery food. Among its acquisitions were two pasta manufacturers, San Giorgio Macaroni Inc., in Lebanon, Pennsylvania, and Delmonico Foods Inc., in Louisville, Kentucky, in 1966. In 1967, the Cory Corporation, a Chicago-based food-service company, was acquired. Due to its expansions beyond chocolate, the company changed its name in 1968 to the Hershey Foods Corporation. The name change also marked the passing of an era when in 1969 it raised the price of Hershey’s candy bars, which had been five cents since 1921, to ten cents.

As the 1970s unfolded, changes in American culture forced Hershey Foods Corporation to change also. Before the 1970s, the company, heeding the words of its founder that a quality product was the best advertisement, had refused to advertise. Thousands of people who came to tour the chocolate factory each year had spread the world about Milton Hershey and his chocolate. A visitors bureau had been established as early as 1915 to handle tours of the facilities, and by 1970 almost a million people a year visited Hershey.

Word of mouth had served as a valuable source of advertising for Hershey during most of its existence. But as people became more health conscious and the consumption of candy declined, the influence of advertising became a greater factor in the candy business. By 1970, Mars had deposed Hershey as the leader in candy sales, provoking Hershey to launch a national advertising campaign. On July 19, 1970, Hershey’s first consumer advertisement, a full-page ad for Hershey’s Syrup, appeared in 114 newspapers. Within months, the corporation was running ads on radio and television as well. Also that year, under an agreement with British candymaker Rowntree Mackintosh, Hershey became the American distributor of the Kit Kat Wafer Bar. Hershey introduced a second Rowntree candy, Rolo Caramels, the next year.

Company Perspectives:

Our mission is to be a focused food company in North America and selected international markets and a leader in every aspect of our business. Our goal is to enhance our #1 position in the North American confectionery market, be the leader in U.S. chocolate-related grocery products, and to build leadership positions in selected international markets.

In 1973, Hershey’s Chocolate World Visitors Center was opened to educate people about chocolate-making, with exhibits about tropical cocoa-tree plantations, Pennsylvania Dutch milk farms, and the various stages of the manufacturing process. The facility was established to replace tours of the actual plant, which were discontinued in 1973 due to an overload of traffic.

Under the direction of its chief executive officer, William E. Dearden, Hershey adopted an aggressive marketing plan in 1976 to offset its shrinking market share. Dearden, who had grown up in Milton Hershey’s orphanage, joined forces with his chief operating officer, Richard A. Zimmerman, to implement a campaign aimed at customers in grocery stores, where half of all candy was sold. Specialty items such as a wide line of miniatures, holiday assortments, and family packs were marketed. A national ad campaign promoting Hershey’s Kisses, and the introduction of the Giant Hershey’s Kiss in 1978 tripled sales of the product between 1977 and 1984. The Big Block line of 2.2-ounce bars and premium candies such as the Golden Almond Chocolate Bar were also introduced, as were Reese’s Pieces Candy and Whatchamacallit and Skor Candy Bars.

Growth Through Acquisition: Late 1970s and 1980s

Hershey also made plans to diversify, to lessen the company’s vulnerability to unstable cocoa-bean and sugar prices. In 1977, Hershey acquired a 16 percent interest in A.B. Marabou, a Swedish confectionery company, and bought Y&S Candies Inc., the nation’s leading manufacturer of licorice. The following year, it bought the Procino-Rossi Corporation (P&R), and in 1979 it acquired the Skinner Macaroni Company to add to its stable of brand-name pastas. In 1984, Hershey purchased American Beauty, another pasta brand, from Pillsbury and formed the Hershey Pasta Group.

Another 1979 acquisition, the Friendly Ice Cream Corporation, a 750-restaurant chain based in New England, tripled the number of employees on Hershey’s payroll. After experiencing major structural changes owing to its 1970s expansion, the company implemented an intensive values study to pinpoint and communicate the principles inherent in its corporate culture and history.

In 1982, Hershey opened another plant, in Stuarts Draft, Virginia. The next year it introduced its own brand of chocolate milk, and in 1984 it introduced Golden Almond Solitaires (chocolate-covered almonds). In 1986, in addition to introducing two new products, the Golden III Chocolate Bar and the Bar None Wafer Bar, Hershey acquired the Dietrich Corporation, the maker of the 5th Avenue Candy Bar, Luden’s throat drops, and Mello Mints. Not content with such a year—the first to top $2 billion in sales—in December Hershey purchased G&R Pasta Company, Inc., whose Pastamania brand became the eighth in Hershey’s pasta group.

However, the acquisitions did not stop there. In June 1987, Hershey acquired the Canadian candy and nut operations of Nabisco Brands for its subsidiary Hershey Canada Inc. The three main businesses Hershey acquired were Lowney/Moirs, a Canadian chocolate-manufacturing concern; the Canadian chocolate manufacturer of Life Savers and Breath Savers hard candy; and the Planters snack nut business in Canada.

The biggest acquisition of all came in August 1988, when Hershey made a $300 million deal for Peter Paul/Cadbury, an American subsidiary of the British candy and beverage company Cadbury Schweppes plc. Hershey purchased the operating assets of the company and the rights to manufacture the company’s brands, including Peter Paul Mounds and Almond Joy Candy Bars and York Peppermint Patties, and Cadbury products including Cadbury chocolate bars and Cadbury’s Creme Eggs, an Easter specialty candy. Observers predicted that Hershey’s economies of scale and clout with retailers would bring increased profitability to the newly acquired Cadbury lines. This purchase pushed Hershey’s share of the candy market from 35 percent to 44 percent, and helped Hershey back to the top of the American candy business. At the same time, Hershey decided to sell the Friendly Ice Cream Corporation to concentrate on its core confectionery businesses. The company was sold to Tennessee Restaurant in September for $374 million.

The decline in candy consumption that began after World War II, as a prosperous America found its waistline expanding uncomfortably, accelerated during the 1970s as the fitness craze began. However, in the 1980s this trend reversed. Candy consumption reportedly increased from 16 pounds per capita in 1980 to 19.5 pounds in 1988, coincidentally the same period during which Hershey regained the top spot in U.S. candy through its acquisitions of Dietrich Corporation and Peter Paul/Cadbury. In the early 1990s, Hershey maintained its confectionery position in the United States through several successful introductions: Hershey’s Kisses with Almonds chocolates in 1990; Hershey’s Cookies ‘n’ Mint chocolate bars in 1992; Hershey Hugs white chocolate-covered kisses in 1993 (which had become a $100 million brand by 1995); and Reese’s NutRageous bar in 1994, which quickly moved into the top 20 candy-bar list.

Key Dates:

1887:: Milton Hershey establishes the Lancaster Caramel Company.
1895:: The company begins to sell chocolate.
1900:: Hershey sells his caramel company to focus on chocolate.
1906:: The village of Deny Church is renamed Hershey.
1927:: The firm incorporates as Hershey Chocolate Company and is listed on the New York Stock Exchange.
1940:: Hershey’s chocolate plant is unionized.
1963:: The H.B. Reese Candy Company is acquired.
1968:: The firm adopts the name Hershey Foods Corporation.
1970:: Hershey’s first consumer advertisement appears in 114 newspapers.
1988:: Hershey purchases the operating assets and manufacturing assets of Peter Paul/Cadbury brands.
1996:: Hershey launches its first hard candy line, Taste-Tations, and the reduced-fat Sweet Escapes line.
1999:: The firm sells its pasta business to New World Pasta LLC.
2002:: The Milton Hershey Trust School announces plans to sell Hershey.

Diversification and International Expansion: Early 1990s

Outside of its chocolate realm, Hershey continued to bolster its pasta business while also attempting to capture more of the nonchocolate confectionery market. In 1990, it acquired the Ronzoni Foods Corp., yet another regional pasta brand, and in 1993 the Hershey Pasta Group opened a new plant in Winchester, Virginia. Through such moves, Hershey became the leader in dry pasta in the United States by 1995. Meanwhile, continuing fierce competition with Mars and the low inflation of the period—both of which made increasing prices untenable—put pressure on Hershey’s chocolate earnings. One of the company’s responses to this pressure was to increase its offerings in nonchocolate confections. Among the 1990s introductions were Amazin’ Fruit gummy bears in 1992, Twizzlers Pull-n-Peel candy in 1994, and Amazin’ Fruit Super Fruits in 1995. By going after the nonchocolate confectionery business, Hershey aimed to capture more market share among youthful shoppers, who generally preferred nonchocolate candy. It also made sense in the overall U.S. market, where nonchocolate candy sales were increasing faster than chocolate candy sales.

In the early 1990s, Hershey attempted to lessen its dependence on the North American market by cautiously moving into overseas markets. In 1990, the company introduced the Hershey brand to the Japanese market through a joint venture with Fujiya. The European market, a difficult market for foreign firms to penetrate given differing European tastes and such entrenched firms as Nestle, was targeted next. This venture was less than successful than Hershey’s move into Japan, at least at first. In 1991, Hershey acquired the German chocolate maker Gubor Schokoladen, which in the first few years after the takeover failed to meet Hershey’s expectations. In 1992, the firm purchased an 18.6 percent interest in the Norwegian confectionery firm Freia Marabou, but then promptly sold the stake the following year after it was outbid for majority control by Philip Morris. Later, in 1993, Hershey acquired the Italian confectionery business of Heinz Italia S.p.A. for $130 million, which primarily gave it the Sperlari brand, a leader in nonchocolate confectionery products in Italy. Shortly thereafter, Hershey acquired the Dutch confectionery firm Oversprecht B.V. for $20.2 million, which under the Jamin brand manufactured confectionery products, cookies, and ice cream. Although primarily distributed in the Netherlands and Belgium, Jamin gave Hershey its first penetration of the potentially lucrative Russian market when it began to distribute chocolate there after the Hershey takeover.

Strategic Changes: Mid- to Late 1990s

Meanwhile, back in North America, Hershey was being hurt by results in Canada, where too many competitors were chasing too few customers, and in Mexico, where political and economic turmoil slowed Hershey’s growth. In response, Hershey announced a restructuring in late 1994, taking a $106.1 million aftertax charge. Over the next 15 months, the company cut its staff by more than 400 and consolidated its operations in the United States, Canada, and Mexico into a Hershey Chocolate North America division. Earlier in 1994, Hershey had formed a Hershey Grocery division to give special attention to the company’s various baking and grocery products. These two divisions, along with Hershey International and Hershey Pasta Group, comprised the four main areas in which Hershey operated. The company also raised its prices for the second time in ten years and launched a stock repurchase program to bolster its stock price.

In the mid-1990s, Hershey added partnering to its arsenal of corporate strategies. In 1994, Hershey partnered with General Mills to introduce Reese’s Peanut Butter Puff’s Cereal. In 1995, a partnership with Good Humor-Breyers resulted in Reese’s Peanut Butter Ice Cream Cups. That same year a cross-marketing deal with MCI offered free long-distance telephone calls to purchasers of selected Hershey’s chocolate products. Having celebrated its 100th anniversary in 1994, Hershey looked forward to a bright future in its second century. By that time, Hershey had increased its share of the U.S. confectionery market to 34.5 percent, while Mars had seen its share fall to 26 percent, and Hershey’s nonchocolate confectionery and pasta operations were growing.

Under the leadership of Kenneth Wolfe—named chairman and CEO in 1994—Hershey’s success continued into the latter half of the 1990s. During 1996, the company launched its first hard candy product, TasteTations, and the reduced-fat Sweet Escapes product line. That year, the company acquired Leaf North America in a $440 million deal that added Jolly Rancher, Good & Plenty, Whoppers, and Milk Duds to its product arsenal.

Hershey continued its dominance of the U.S. market by continuing to introduce new, successful products, including the Reese’s Crunchy Cookie Cups, Classic Caramels, and the Mini Kisses Semi-Sweet Baking Pieces. The company also revamped its business operations once again, divesting its European operations in 1996, and then selling its pasta division in 1999 to New World Pasta LLC for $450 million in cash. Wolfe commented on the sale in a 1999 Prepared Foods article claiming that “after a thorough review of our strategic direction, we have concluded that we can generate a better return for our shareholders by focusing on our confection, related grocery, and foodservice businesses.”

Hershey continued to add to product line in 2000 with the purchase of RJR Nabisco Inc.’s mints and gum business. The acquisition included the Ice Breakers and Breath Savers Cool Blast mints, and the Ice Breakers, Carefree, Stickfree, Bubble Yum, and Fruit Stripe gums. Wolfe retired in 2001, leaving industry veteran Rick Lenny at the helm. That year, the company sold its Luden’s throat drop business and began a $275 million restructuring effort that included 400 job cuts, closure of three Hershey plants, and the outsourcing of cocoa powder production. While net income fell during 2001, sales increased by eight percent to $4.5 billion.

A Surprise Announcement: 2002

During 2002, Hershey dealt with a labor strike—the first one since 1980. Just as the labor issues were resolved, Hershey faced yet another blow. In July 2002, the Milton Hershey School Trust, which controlled 77 percent of Hershey’s voting power, announced that it wished to diversify its holdings and that a sale of the company would be beneficial to the school. At the time, over half of the Trust’s $5.4 billion portfolio consisted of Hershey stock. While Hershey’s board was opposed to a sale, it agreed to work with the Trust on viable options. The announcement however, left the citizens of Hershey, Pennsylvania, in an uproar. Nearly half of the city’s residents were employed by Hershey and feared a sale of the company, especially to a foreign firm, would negatively impact their jobs as well as the city. As such, the state’s attorney general and potential governor filed a petition against the Trust that would call for court approval of any offers made for Hershey. The possible sale received negative reviews throughout the business world. In fact, an August 2002 article in The Economist went as far to say that “Milton Hershey must be turning in his grave.”

In September, Wm. Wrigley Jr. Co. offered $12.5 billion bid for the company, outbidding Nestlé and Cadbury Schweppes, who had teamed up to make a $10.5 billion play for the company. Both offers were turned down, leaving Hershey independent for the time being. While Hershey’s future remained up in the air, one thing was certain. With well over 100 years of history behind it, the Hershey name would remain a favorite among chocolate lovers around the world for years to come.

Principal Subsidiaries

Hershey Chocolate & Confectionery Corporation; Hershey Chocolate of Virginia, Inc.; Hershey Canada, Inc.

Principal Divisions

Hershey Chocolate North America; Hershey International.

Principal Competitors

Cadbury Schweppes plc; Mars Incorporated; Nestlé S.A.

Hershey Foods Corporation

views updated May 29 2018

Hershey Foods Corporation

100 Mansion Road East
Hershey, Pennsylvania 17033
U.S.A.
(717) 534-4000

Public Company
Incorporated: 1908 as Hershey Chocolate Company
Employees: 12,100
Sales: $2.17 billion
Stock Index: New York

The name Hershey is synonymous with chocolate, yet the company’s founder made his first fortune by manufacturing caramel. Today, Hershey makes and markets chocolate and licorice candies, grocery products like cocoa, unsweetened chocolate, chocolate drinks and mixes, and fudge sauce, as well as eight regional pasta brands that account for about 10% of Hershey’s sales. Hershey is the largest confectionery company in the United States, the maker of half of the top 20 candy brands in the country. It was pushed to number two in the 1970s by Mars, Inc., but recently won top spot again after its 1988 purchase of the American confectionery business of the British company Cadbury Schweppes.

Milton S. Hershey was born in 1857 in central Pennsylvania. As a young boy Hershey was apprenticed to a Lancaster, Pennsylvania candymaker for four years. When he finished this apprenticeship in 1876, at age 19, Hershey went to Philadelphia to open his own candy shop. After six years, however, the shop failed, and Hershey moved to Denver, Colorado. There he went to work for a caramel manufacturer, where he discovered that caramel made with fresh milk was a decided improvement on the standard recipe. In 1883 Hershey left Denver for Chicago, then New Orleans and New York, until in 1886 he finally returned to Lancaster. There he established the Lancaster Caramel Company to produce “Hershey’s Crystal A” caramels that would “melt in your mouth.” Hershey had a successful business at last.

In 1893 Hershey went to the Chicago International Exposition, where he was fascinated by some German chocolate-making machinery on display. He soon installed the chocolate equipment in Lancaster and in 1895 began to sell chocolate-covered caramels and other chocolate novelties. At that time, Hershey also began to develop the chocolate bars and other cocoa products that were to make him famous.

In 1900 Hershey decided to concentrate on chocolate, which he felt sure would become a big business. That year he sold his caramel company for $1 million, retaining the chocolate equipment and the rights to manufacture chocolate. He decided to locate his new company in Derry Church, the central Pennsylvania village where he had been born, and where there would be a plentiful milk supply. In 1903 Hershey broke ground for the Hershey chocolate factory, which today is still the largest chocolatemanufacturing plant in the world.

Before this factory was completed, in 1905, Hershey produced a variety of fancy chocolates. But with the new factory, Hershey decided to mass-produce a limited number of products that he could sell at a low price. The famous Hershey’s Milk Chocolate Bar, the first mass-produced chocolate product, was born.

In 1906 the village of Derry Church was renamed Hershey. The town was not simply named after the man or the company: it was Milton Hershey’s creation, the beneficiary of and heir to his energy and his fortune. Hershey had begun planning a whole community that would fulfill all the needs of its inhabitants at the same time that he planned his factory. A bank, school, recreational park, churches, trolley system, and even a zoo soon followed, and the town was firmly established by its tenth anniversary. One of Hershey’s most enduring contributions was the Hershey Industrial School for orphans, which he established in 1909 with his wife Catherine. After Catherine’s death in 1915, the childless Hershey in 1918 gave the school Hershey company stock valued at about $60 million. Today the school, which became the Milton Hershey School in 1951, still owns 42% of Hershey Foods Corporation’s stock and controls 77% of the company’s voting stock.

In 1907 Hershey’s Kisses were first produced, and the next year, in 1908, the Hershey Chocolate Company was formally chartered. In 1911, its sales of $5 million were more than eight times the $600,000 made ten years earlier at the company’s start.

The Hershey company continued to prosper, producing its milk chocolate bars (with and without almonds), Kisses, cocoa, and baking chocolate. In 1921 sales reached $20 million, and in 1925 Hershey introduced the Mr. Goodbar Chocolate Bar, a chocolate bar with peanuts. In 1927 the company was incorporated as the Hershey Chocolate Company and its stock was listed on the New York Stock Exchange.

By 1931, 30 years after the company was established, Hershey was selling $30 million worth of chocolate a year. As the Great Depression cast its shadow on the town of Hershey, Milton Hershey initiated a “grand building campaign” in the 1930s to provide employment in the area. Between 1933 and 1940, Hershey’s projects included a 150-room resort hotel, a museum, a cultural center, a sports arena (where the Ice Capades was founded), a stadium, an exotic rose garden, and a modern, windowless, air-conditioned factory and office building. Hershey liked to boast that no one was laid off from the company during the Depression.

Though Hershey’s intentions seem to have been wholly sincere, there was always some suspicion about his “company town.” Labor strife came to the company in 1937, when it suffered its first strike. Though bitter, the strike was soon settled, and by 1940 the chocolate plant was unionized.

In 1938, another famous chocolate product was introduced: the Krackel Chocolate Bar, a chocolate bar with crisped rice. The next year Hershey’s Miniatures, bite-sized chocolate bars in several varieties, were introduced.

During World War II, Hershey helped by creating the Field Ration D, a four-ounce bar that provided 600 calories and wouldn’t melt, for soldiers to carry to sustain them when no other food was available. The chocolate factory was turned over to the war effort and produced 500,000 bars a day. Hershey received the army-navy E award from the quartermaster general at the war’s end. He died soon after, on October 13, 1945.

After Milton Hershey’s death, the chocolate company continued to prosper and maintain its strong position in the chocolate market. By the 1960s, Hershey was recognized as the number-one chocolate producer in America.

With the growth came expansion. In 1963 Hershey broke ground for the construction of two new chocolate factories, in Oakdale, California and Smiths Falls, Ontario. Expansion for Hershey also meant looking for acquisitions, the first of which was the H.B. Reese Candy Company that same year. Also in 1963, the company’s president and chairman, Samuel Hinkle, arranged for the founding of the Milton S. Hershey Medical Center of the Pennsylvania State University in Hershey, Pennsylvania.

While the company played a hand in many developments within Pennsylvania, its main endeavor continued to be the food industry—and for the first time non-confectionery food. Among its acquisitions were two pasta manufacturers, San Giorgio Macaroni Inc., in Lebanon, Pennsylvania and Delmonico Foods Inc., in Louisville, Kentucky, in 1966. In 1967 the Cory Corporation, a Chicago-based food-service company, was acquired. Due to its expansions beyond chocolate, the company changed its name in 1968 to the Hershey Foods Corporation. The name change also marked the passing of an era when in 1969 it raised the price of Hershey’s candy bars, which had been 5¢ since 1921, to 10¢.

As the 1970s unfolded, changes in American culture forced Hershey Foods Corporation to change also. Before the 1970s the company, heeding the words of its founder that a quality product was the best advertisement, had refused to advertise. Thousands of people who came to tour the chocolate factory each year had spread the world about Milton Hershey and his chocolate—a visitors bureau had been established as early as 1915 to handle tours of the facilities, and by 1970 almost a million people a year visited Hershey.

Word of mouth had served as a valuable source of advertising for Hershey during most of its existence. But as people became more health conscious and the consumption of candy declined, the influence of advertising became a greater factor in the candy business. By 1970, Mars had deposed Hershey as the leader in candy sales, provoking Hershey to launch a national advertising campaign. On July 19, 1970 Hershey’s first consumer advertisement, a full-page ad for Hershey’s Syrup, appeared in 114 newspapers. Within months, the corporation was running ads on radio and television as well. Also that year, under an agreement with British candymaker Rowntree Mackintosh, Hershey became the American distributor of the Kit Kat Wafer Bar. Hershey introduced a second Rowntree candy, Rolo Caramels, the next year.

In 1973, Hershey’s Chocolate World Visitors Center, was opened to educate people about chocolatemaking, with exhibits about tropical cocoa-tree plantations, Pennsylvania Dutch milk farms, and the various stages of the manufacturing process. The facility was established to replace tours of the actual plant, which were discontinued in 1973 due to an overload of traffic.

The Hershey Foods Corporation imports its cocoa beans from cocoa-producing countries around the world and cleans, roasts, and extracts the meat of the bean for processing inside its two-million-square-foot chocolate factory. To produce milk chocolate, the company purchases milk from over 1,000 nearby farms whose cows supply its daily needs. Hershey also is the largest single user of almonds in the United States.

Under the direction of its chief executive officer, William E. Dearden, Hershey adopted an aggressive marketing plan in 1976 to offset its shrinking market share. Dearden, who had grown up in Milton Hershey’s orphanage, joined forces with his chief operating officer, Richard A. Zimmerman, to implement a campaign aimed at customers in grocery stores, where half of all candy is sold. Specialty items such as a wide line of miniatures, holiday assortments, and family packs were marketed. A national ad campaign promoting Hershey’s Kisses, and the introduction of the Giant Hershey’s Kiss in 1978, tripled sales of the product between 1977 and 1984. The Big Block line of 2.2-ounce bars and premium candies such as the Golden Almond Chocolate Bar were also introduced, as were Reese’s Pieces Candy and Whatchamacallit and Skor Candy Bars.

Hershey also made plans to diversify, to lessen the company’s vulnerability to unstable cocoa-bean and sugar prices. In 1977, Hershey acquired a 16% interest in A.B. Marabou, a Swedish confectionery company, and bought Y&S Candies Inc., the nation’s leading manufacturer of licorice. The following year, it bought the Procino-Rossi Corporation (P&R), and in 1979, it acquired the Skinner Macaroni Company to add to its stable of brand-name pastas. In 1984, Hershey purchased American Beauty, another pasta brand, from Pillsbury and formed the Hershey Pasta Group.

Another 1979 acquisition, the Friendly Ice Cream Corporation, a 750-restaurant chain based in New England, tripled the number of employees on Hershey’s payroll. After experiencing major structural changes owing to its 1970s expansion, the company implemented an intensive values study to pinpoint and communicate the principles inherent in its corporate culture and history.

In 1982 Hershey opened another plant, in Stuarts Draft, Virginia. The next year it introduced its own brand of chocolate milk, and in 1984 it introduced Golden Almond Solitaires (chocolate-covered almonds). In 1986, in addition to introducing two new products, the Golden III Chocolate Bar and the Bar None Wafer Bar, Hershey acquired the Dietrich Corporation, the maker of the 5th Avenue Candy Bar, Luden’s throat drops, and Mello Mints. Not content with such a year—the first to top $2 billion in sales—in December Hershey purchased G&R Pasta Company, Inc., whose Pastamania brand became the eighth in Hershey’s pasta group.

But the acquisitions did not stop there. In June, 1987 Hershey acquired the Canadian candy and nut operations of Nabisco Brands for its subsidiary Hershey Canada Inc. The three main businesses Hershey acquired were Lowney/Moirs, a Canadian chocolatemanufacturing concern; the Canadian chocolate manufacturer of Life Savers and Breath Savers hard candy; and the Planters snack nut business in Canada.

The biggest acquisition of all came in August, 1988, however, when Hershey made a $300 million deal for Peter Paul/Cadbury, an American subsidiary of the British candy and beverage company Cadbury Schweppes PLC. Hershey purchased the operating assets of the company and the rights to manufacture the company’s brands, including Peter Paul Mounds and Almond Joy Candy Bars and York Peppermint Patties, and Cadbury products including Cadbury chocolate bars and Cadbury’s Creme Eggs, an easier specialty candy. Hershey’s economies of scale and clout with retailers will bring an increased profitability to its newly acquired Cadbury lines. This purchase pushed Hershey’s share of the candy market from 35% to 44%, and Hershey to the top of the American candy business. At the same time, Hershey decided to sell the Friendly Ice Cream Corporation to concentrate on its core confectionery businesses. The company was sold to Tennessee Restaurant in September for $374 million.

The decline in candy consumption that began after World War II, as a prosperous America found its waistline expanding uncomfortably, accelerated during the 1970s as the fitness craze began. But in the 1980s, this trend has reversed. Candy consumption increased from 16 pounds per capita in 1980 to 19.5 pounds in 1988. Hershey’s highly successful marketing strategy, based on Milton Hershey’s contention that a quality product is the best advertising and bolstered by aggressive and successful new product introductions, has put the company in a very strong position to take advantage of this trend.

Principal Subsidiaries:

Hershey Canada Inc.; Fifth Avenue Confectionery Co.; Luden’s, Inc.; Queen Anne, Inc.

Hershey Foods Corporation

views updated Jun 11 2018

Hershey Foods Corporation

100 Crystal A Drive
Hershey, Pennsylvania 17033
U.S.A.
(717) 534-6799
Fax: (717) 534-4078

Public Company
Incorporated: 1927 as Hershey Chocolate Corporation
Employees: 14,000
Sales: $3.61 billion (1994)
Stock Exchanges: New York
SICs: 2052 Cookies & Crackers; 2064 Candy & Confectionery Products; 2066 Chocolate & Cocoa Products; 2098 Macaroni, Spaghetti, Vermicelli & Noodles; 5145 Confectionery Wholesale Trade

The name Hershey is synonymous with chocolate, yet the company’s founder made his first fortune by manufacturing caramel. Today, Hershey Foods Corporation holds the top position in the U.S. confectionery market and makes several of the top 20 candy brands in the country. Hershey makes and markets chocolate and nonchocolate candies; grocery products such as cocoa, unsweetened chocolate, and peanut butter; and several regional pasta brands that comprise the Hershey Pasta Group and leads the U.S. market for retail dry pasta. In addition to its operations in Canada and Mexico through the Hershey Chocolate North America division, Hershey’s Hershey International division exports to more than 60 countries and manufactures and/or markets confectionery products in Italy, Germany, Belgium, the Netherlands, and Japan.

Milton S. Hershey was born in 1857 in central Pennsylvania. As a young boy Hershey was apprenticed to a Lancaster, Pennsylvania candymaker for four years. When he finished this apprenticeship in 1876, at age 19, Hershey went to Philadelphia to open his own candy shop. After six years, however, the shop failed, and Hershey moved to Denver, Colorado. There he went to work for a caramel manufacturer, where he discovered that caramel made with fresh milk was a decided improvement on the standard recipe. In 1883 Hershey left Denver for Chicago, then New Orleans and New York, until in 1886 he finally returned to Lancaster. There he established the Lancaster Caramel Company to produce “Hershey’s Crystal A” caramels that would “melt in your mouth.” Hershey had a successful business at last.

In 1893 Hershey went to the Chicago International Exposition, where he was fascinated by some German chocolate-making machinery on display. He soon installed the chocolate equipment in Lancaster and in 1895 began to sell chocolate-covered caramels and other chocolate novelties. At that time, Hershey also began to develop the chocolate bars and other cocoa products that were to make him famous.

In 1900 Hershey decided to concentrate on chocolate, which he felt sure would become a big business. That year he sold his caramel company for $1 million, retaining the chocolate equipment and the rights to manufacture chocolate. He decided to locate his new company in Derry Church, the central Pennsylvania village where he had been born, and where there would be a plentiful milk supply. In 1903 Hershey broke ground for the Hershey chocolate factory, which today is still the largest chocolate-manufacturing plant in the world.

Before this factory was completed, in 1905, Hershey produced a variety of fancy chocolates. But with the new factory, Hershey decided to mass-produce a limited number of products that he could sell at a low price. The famous Hershey’s Milk Chocolate Bar, the first mass-produced chocolate product, was born.

In 1906 the village of Derry Church was renamed Hershey. The town was not simply named after the man or the company: it was Milton Hershey’s creation, the beneficiary of and heir to his energy and his fortune. Hershey had begun planning a whole community that would fulfill all the needs of its inhabitants at the same time that he planned his factory. A bank, school, recreational park, churches, trolley system, and even a zoo soon followed, and the town was firmly established by its tenth anniversary. One of Hershey’s most enduring contributions was the Hershey Industrial School for orphans, which he established in 1909 with his wife Catherine. After Catherine’s death in 1915, the childless Hershey in 1918 gave the school Hershey company stock valued at about $60 million. In 1996, the school, which became the Milton Hershey School in 1951, still owned 42 percent of Hershey Foods Corporation’s stock and controled 77 percent of the company’s voting stock.

In 1907 Hershey’s Kisses were first produced, and the next year, in 1908, the Hershey Chocolate Company was formally chartered. In 1911, its sales of $5 million were more than eight times the $600,000 made ten years earlier at the company’s start.

The Hershey company continued to prosper, producing its milk chocolate bars (with and without almonds), Kisses, cocoa, and baking chocolate. In 1921 sales reached $20 million, and in 1925 Hershey introduced the Mr. Goodbar Chocolate Bar, a chocolate bar with peanuts. In 1927 the company was incorporated as the Hershey Chocolate Company and its stock was listed on the New York Stock Exchange.

By 1931, 30 years after the company was established, Hershey was selling $30 million worth of chocolate a year. As the Great Depression cast its shadow on the town of Hershey, Milton Hershey initiated a “grand building campaign” in the 1930s to provide employment in the area. Between 1933 and 1940, Hershey’s projects included a 150-room resort hotel, a museum, a cultural center, a sports arena (where the Ice Capades was founded), a stadium, an exotic rose garden, and a modern, windowless, air-conditioned factory and office building. Hershey liked to boast that no one was laid off from the company during the Depression.

Though Hershey’s intentions seem to have been wholly sincere, there was always some suspicion about his “company town.” Labor strife came to the company in 1937, when it suffered its first strike. Though bitter, the strike was soon settled, and by 1940 the chocolate plant was unionized.

In 1938, another famous chocolate product was introduced: the Krackel Chocolate Bar, a chocolate bar with crisped rice. The next year Hershey’s Miniatures, bite-sized chocolate bars in several varieties, were introduced.

During World War II, Hershey helped by creating the Field Ration D—a four-ounce bar that provided 600 calories and would not melt—for soldiers to carry to sustain them when no other food was available. The chocolate factory was turned over to the war effort and produced 500,000 bars a day. Hershey received the Army-Navy E award from the quartermaster general at the war’s end. Hershey died soon after, on October 13, 1945.

After Milton Hershey’s death, the chocolate company continued to prosper and maintain its strong position in the chocolate market. By the 1960s, Hershey was recognized as the number-one chocolate producer in America.

With the growth came expansion. In 1963 Hershey broke ground for the construction of two new chocolate factories, in Oakdale, California, and Smiths Falls, Ontario. Expansion for Hershey also meant looking for acquisitions, the first of which was the H.B. Reese Candy Company that same year. Also in 1963, the company’s president and chairman, Samuel Hinkle, arranged for the founding of the Milton S. Hershey Medical Center of the Pennsylvania State University in Hershey, Pennsylvania.

While the company played a hand in many developments within Pennsylvania, its main endeavor continued to be the food industry—and for the first time nonconfectionery food. Among its acquisitions were two pasta manufacturers, San Giorgio Macaroni Inc., in Lebanon, Pennsylvania, and Delmonico Foods Inc., in Louisville, Kentucky, in 1966. In 1967 the Cory Corporation, a Chicago-based food-service company, was acquired. Due to its expansions beyond chocolate, the company changed its name in 1968 to the Hershey Foods Corporation. The name change also marked the passing of an era when in 1969 it raised the price of Hershey’s candy bars, which had been 50 since 1921, to 100.

As the 1970s unfolded, changes in American culture forced Hershey Foods Corporation to change also. Before the 1970s the company, heeding the words of its founder that a quality product was the best advertisement, had refused to advertise. Thousands of people who came to tour the chocolate factory each year had spread the world about Milton Hershey and his chocolate—a visitors bureau had been established as early as 1915 to handle tours of the facilities, and by 1970 almost a million people a year visited Hershey.

Word of mouth had served as a valuable source of advertising for Hershey during most of its existence. But as people became more health conscious and the consumption of candy declined, the influence of advertising became a greater factor in the candy business. By 1970, Mars had deposed Hershey as the leader in candy sales, provoking Hershey to launch a national advertising campaign. On July 19, 1970, Hershey’s first consumer advertisement, a full-page ad for Hershey’s Syrup, appeared in 114 newspapers. Within months, the corporation was running ads on radio and television as well. Also that year, under an agreement with British candymaker Rowntree Mackintosh, Hershey became the American distributor of the Kit Kat Wafer Bar. Hershey introduced a second Rowntree candy, Rolo Caramels, the next year.

In 1973, Hershey’s Chocolate World Visitors Center, was opened to educate people about chocolate-making, with exhibits about tropical cocoa-tree plantations, Pennsylvania Dutch milk farms, and the various stages of the manufacturing process. The facility was established to replace tours of the actual plant, which were discontinued in 1973 due to an overload of traffic.

Under the direction of its chief executive officer, William E. Dearden, Hershey adopted an aggressive marketing plan in 1976 to offset its shrinking market share. Dearden, who had grown up in Milton Hershey’s orphanage, joined forces with his chief operating officer, Richard A. Zimmerman, to implement a campaign aimed at customers in grocery stores, where half of all candy is sold. Specialty items such as a wide line of miniatures, holiday assortments, and family packs were marketed. A national ad campaign promoting Hershey’s Kisses, and the introduction of the Giant Hershey’s Kiss in 1978, tripled sales of the product between 1977 and 1984. The Big Block line of 2.2-ounce bars and premium candies such as the Golden Almond Chocolate Bar were also introduced, as were Reese’s Pieces Candy and Whatchamacallit and Skor Candy Bars.

Hershey also made plans to diversify, to lessen the company’s vulnerability to unstable cocoa-bean and sugar prices. In 1977, Hershey acquired a 16 percent interest in A.B. Marabou, a Swedish confectionery company, and bought Y&S Candies Inc., the nation’s leading manufacturer of licorice. The following year, it bought the Procino-Rossi Corporation (P&R), and in 1979, it acquired the Skinner Macaroni Company to add to its stable of brand-name pastas. In 1984, Hershey purchased American Beauty, another pasta brand, from Pillsbury and formed the Hershey Pasta Group.

Another 1979 acquisition, the Friendly Ice Cream Corporation, a 750-restaurant chain based in New England, tripled the number of employees on Hershey’s payroll. After experiencing major structural changes owing to its 1970s expansion, the company implemented an intensive values study to pinpoint and communicate the principles inherent in its corporate culture and history.

In 1982 Hershey opened another plant, in Stuarts Draft, Virginia. The next year it introduced its own brand of chocolate milk, and in 1984 it introduced Golden Almond Solitaires (chocolate-covered almonds). In 1986, in addition to introducing two new products, the Golden III Chocolate Bar and the Bar None Wafer Bar, Hershey acquired the Dietrich Corporation, the maker of the 5th Avenue Candy Bar, Luden’s throat drops, and Mello Mints. Not content with such a year—the first to top $2 billion in sales—in December Hershey purchased G&R Pasta Company, Inc., whose Pastamania brand became the eighth in Hershey’s pasta group.

But the acquisitions did not stop there. In June 1987 Hershey acquired the Canadian candy and nut operations of Nabisco Brands for its subsidiary Hershey Canada Inc. The three main businesses Hershey acquired were Lowney/Moirs, a Canadian chocolate-manufacturing concern; the Canadian chocolate manufacturer of Life Savers and Breath Savers hard candy; and the Planters snack nut business in Canada.

The biggest acquisition of all came in August 1988, however, when Hershey made a $300 million deal for Peter Paul/Cadbury, an American subsidiary of the British candy and beverage company Cadbury Schweppes PLC. Hershey purchased the operating assets of the company and the rights to manufacture the company’s brands, including Peter Paul Mounds and Almond Joy Candy Bars and York Peppermint Patties, and Cadbury products including Cadbury chocolate bars and Cadbury’s Creme Eggs, an Easter specialty candy. Observers predicted that Hershey’s economies of scale and clout with retailers would bring increased profitability to the newly acquired Cadbury lines. This purchase pushed Hershey’s share of the candy market from 35 percent to 44 percent, and helped Hershey back to the top of the American candy business. At the same time, Hershey decided to sell the Friendly Ice Cream Corporation to concentrate on its core confectionery businesses. The company was sold to Tennessee Restaurant in September for $374 million.

The decline in candy consumption that began after World War II, as a prosperous America found its waistline expanding uncomfortably, accelerated during the 1970s as the fitness craze began. But in the 1980s, this trend reversed. Candy consumption reportedly increased from 16 pounds per capita in 1980 to 19.5 pounds in 1988, coincidentally the same period during which Hershey regained the top spot in U.S. candy through its acquisitions of Dietrich Corporation and Peter Paul/Cadbury. In the early 1990s, Hershey maintained its confectionery position in the United States through several successful introductions: Hershey’s Kisses with Almonds chocolates in 1990; Hershey’s Cookies ’n’ Mint chocolate bars in 1992; Hershey Hugs white chocolate-covered kisses in 1993 (which had become a $100 million brand by 1995); and Reese’s NutRageous bar in 1994, which quickly moved into the top 20 candy-bar list.

Outside of its chocolate realm, Hershey continued to bolster its pasta business while also attempting to capture more of the nonchocolate confectionery market. In 1990 it acquired the Ronzoni Foods Corp., yet another regional pasta brand, and in 1993 the Hershey Pasta Group opened a new plant in Winchester, Virginia. Through such moves, Hershey became the leader in dry pasta in the United States by 1995. Meanwhile, continuing fierce competition with Mars and the low inflation of the period—both of which made increasing prices untenable—put pressure on Hershey’s chocolate earnings. One of the company’s responses to this pressure was to increase its offerings in nonchocolate confections. Among the 1990s introductions were Amazin’ Fruit gummy bears in 1992, Twizzlers Pull-n-Peel candy in 1994, and Amazin’ Fruit Super Fruits in 1995. By going after the nonchocolate confectionery business, Hershey aimed to capture more market share among youthful shoppers, who generally prefer nonchocolate candy. It also made sense in the overall U.S. market, where nonchocolate candy sales were increasing faster than chocolate candy sales.

In the early 1990s, Hershey attempted to lessen its dependence on the North American market by cautiously moving into overseas markets. In 1990 the company introduced the Hershey brand to the Japanese market through a joint venture with Fujiya. The European market, a difficult market for foreign firms to penetrate given differing European tastes and such entrenched firms as Nestle, was targeted next although less than successfully, at least at first. In 1991 Hershey acquired the German chocolate maker Gubor Schokoladen, which in the first few years after the takeover failed to meet Hershey’s expectations. In 1992 the firm purchased an 18.6 percent interest in the Norwegian confectionery firm Freia Marabou, but then promptly sold the stake the following year after it was outbid for majority control by Philip Morris. Later in 1993 Hershey acquired the Italian confectionery business of Heinz Italia S.p.A. for $130 million, which primarily gave it the Sperlari brand, a leader in nonchocolate confectionery products in Italy. Shortly thereafter, Hershey acquired the Dutch confectionery firm Oversprecht B.V. for $20.2 million, which under the Jamin brand manufactured confectionery products, cookies, and ice cream. Although primarily distributed in the Netherlands and Belgium, Jamin gave Hershey its first penetration of the potentially lucrative Russian market when it began to distribute chocolate there after the Hershey takeover.

Meanwhile, back in North America, Hershey was being hurt by results in Canada, where too many competitors were chasing too few customers, and in Mexico, where political and economic turmoil slowed Hershey’s growth. In response, Hershey announced a restructuring in late 1994, taking a $106.1 million aftertax charge. Over the next 15 months, the company cut its staff by more than 400 and consolidated its operations in the United States, Canada, and Mexico into a Hershey Chocolate North America division. Earlier in 1994, Hershey had formed a Hershey Grocery division to give special attention to the company’s various baking and grocery products. These two divisions, along with Hershey International and Hershey Pasta Group, comprised the four main areas in which Hershey operated.

In the mid-1990s, Hershey added partnering to its arsenal of corporate strategies. In 1994 Hershey partnered with General Mills to introduce Reese’s Peanut Butter Puff’s Cereal. In 1995 a partnership with Good Humor-Breyers resulted in Reese’s Peanut Butter Ice Cream Cups. That same year a cross-marketing deal with MCI offered free long-distance telephone calls to purchasers of selected Hershey’s chocolate products.

Having celebrated its 100th anniversary in 1994, Hershey looked forward to a bright future in its second century. By 1994 Hershey had increased its share of the U.S. confectionery market to 34.5 percent, while Mars had seen its share fall to 26 percent. Hershey’s nonchocolate confectionery and pasta operations were growing. Hershey’s biggest challenge remained to transfer its North American successes to other markets; Latin America and the Pacific Rim were seen as the regions Hershey was most likely to target.

Principal Subsidiaries

Cadbury Beverage Inc.; Luden’s Inc.; Queen Anne Candy Co.; H.B. Reese Candy Co.; Hershey Canada Inc.; Ideal/Mrs. Weiss Noodle Co; Spelari, S.R.L. (Italy); Hershey Japan Co., Ltd.; Hershey Mexico, S.A. de C.V.; Overspecht B.V. (Netherlands).

Principal Divisions

Hershey Chocolate North America, comprised of Hershey Chocolate U.S.A., Hershey Mexico, and Hershey Canada groups; Hershey Grocery; Hershey International; Hershey Pasta Group.

Hershey Foods Corporation

views updated Jun 08 2018

Hershey Foods Corporation

founded: 1908

Contact Information:

headquarters: 100 crystal a dr.
hershey, pa 17033-0810 phone: (717)534-6799 fax: (717)534-6724 url: http://www.hersheys.com

OVERVIEW

Hershey Foods Corporation manufactures, distributes, and sells chocolate-related products and candies as well as grocery and pasta products. In 1997 the company controlled one-third of the U.S. candy market, making it the leading manufacturer in North America of chocolate, confectionery, and chocolate-related grocery products. Hershey's nearest competitor, Mars Inc., held just over 20 percent of the market. The company also is the leading producer in North America of brand-name dry pasta products. In addition, Hershey Foods Corporation has international interests and exports its products to more than 90 countries worldwide.

Although once content to rely on its products' quality to generate revenue, the company has gradually revised its policy and has sought to improve its prospects through new product introductions, corporate acquisitions, and specialized marketing campaigns, including thematic merchandising.

COMPANY FINANCES

Hershey Foods Corporation had record sales and earnings in 1997. Sales totaled $4.3 billion in 1997, compared to $3.99 billion in 1996, resulting in profits of $336.3 million and earnings of $2.25 per share. Hershey Foods corporate stock outperformed the S&P 500 during the first three quarters of 1997 by increasing 25.6 percent; its P/E ratio was 115 percent. The stock had a closing price of $62 on December 31, 1997. Hershey Foods' confectionery business is growing at a rate of 6.7 percent. The corporation has paid a dividend on its common stock every quarter since the first quarter of 1930. The increase paid in September 1997 was the twenty-third consecutive annual increase of the corporation's common stock.

ANALYSTS' OPINIONS

Analysts with Morgan Stanley, Dean Witter expect the company's Hershey Chocolate North America division to provide 87 percent of the company's operating profit in 1998. They project Hershey's gross profit should rise in 1998 primarily due to volume growth.

HISTORY

Milton S. Hershey was born in Pennsylvania and was apprenticed to a candy maker as a teenager. His first candy business was a failure but a later venture with caramels was a success. It wasn't until Hershey visited the 1893 World's Columbian Exposition in Chicago that chocolate became a business interest. He decided then that the future was in chocolates, not caramels: he started the Hershey Chocolate Company the following year. Hershey sold his Lancaster Caramel Company in 1900 and returned to Derry County, his birthplace, to build his chocolate empire. His chocolate factory was completed in 1905. By 1911 the company was posting sales of $5 million and was a pioneer in confectionery mass-production techniques. The name Hershey would become synonymous with chocolate—even though the company did not advertise its products until the 1970s, adhering instead to Milton Hershey's policy of letting the quality of the products vouch for themselves.

In the 1960s Hershey Foods Corporation began expanding beyond its traditional product lines and making acquisitions. Toppings and a liquid baking product were among the line extensions. The company's first acquisition, made in 1963, was the H. B. Reese Candy Company, which had been founded by a former Hershey employee. Hershey Foods further expanded its chocolate and nonchocolate confectionery lines through the 1977 purchase of Y&S Candies, whose products included Twizzlers; the 1988 purchase of Peter Paul/Cadbury, whose products included Almond Joy and York peppermint patties; and the 1995 purchase of Henry Heide, Inc., whose products included Jujyfruits and Wunderbeans jelly beans. In 1996 Hershey purchased Leaf Inc., the leading company in the nonchocolate confections market, from Huhtamaki Oy of Finland. This acquisition, the largest ever by Hershey, added Good & Plenty, Heath, Jolly Rancher, Rain-Blo bubble gum, Whoppers malted milk balls, and other popular candy and chewing gum brands to the Hershey line, and reportedly enhanced the company's position in the chocolate candies market as well. Hershey Foods saw an increase in its 1996 net sales of 8 percent over 1995 sales.

Hershey Foods entered the pasta market with the 1966 purchase of San Giorgio Macaroni Company. Since then the company has become the manufacturer of a number of regional pasta brands, the producer of an extensive line of food service pasta products, and the supplier of private-label pasta products to large retail chains and wholesalers. In 1996 Hershey Foods integrated its pasta and grocery operations into a single group. In addition to pasta, the division makes baking products, ice cream toppings, chocolate syrup, peanut butter, and milk products.

STRATEGY

After losing a big chunk of its market share to Mars in the 1970s, Hershey Foods began advertising for the first time and diversifying its product lines. In 1997 the company increased summer candy sales by 20 percent through what was called the "largest and most complex [promotion] ever attempted in the candy industry." The promotion, a tie-in with the movie Lost World, encompassed several Hershey brands and featured dinosaur-themed candy. A similar campaign tied in with the 1998 movie Godzilla featured "Godzilla" packaging and novelty items. The company also has thematic merchandising programs tied to NASCAR, the NFL, and the NCAA Final Four.

INFLUENCES

Late in 1995 Hershey Foods increased wholesale prices on its candy bars and king-sized candy bars by 11 percent to offset higher costs for raw materials and packaging. The increase was the first in more than five years. Also in 1995, the company repurchased stock from the Milton Hershey School Trust. (Hershey Foods repur-chased another 9.9 million shares from the trust in 1997.) These and other actions helped boost the company's stock value 40 percent. Hershey Foods' pasta business had a slight decline due to higher durum wheat costs in 1996, and experienced further decline in 1997 due in part to the trend toward away-from-home eating.

FAST FACTS: About Hershey Foods Corporation

Ownership: Hershey Foods Corporation is a publicly owned company traded on the New York Stock Exchange since 1927. The Milton Hershey School Trust is the company's majority shareholder.

Ticker symbol: HSY

Officers: Kenneth L. Wolfe, Chmn. & CEO; Joseph P. Viviano, Pres. & COO; William F. Christ, Senior VP, CFO, & Treasurer; Michael F. Pasquale, Pres., Hershey Chocolate North America; Jay F. Carr, Pres., Hershey Pasta & Grocery Group

Employees: 16,200 (1997)

Principal Subsidiary Companies: Hershey Chocolate North America, Hershey Pasta and Grocery Group, and Hershey International are the three operating divisions of Hershey Foods Corporation.

Chief Competitors: The company's primary competitors are: Mars Inc.; Nestle; and Philip Morris.

In April 1996 Hershey unveiled Sweet Escapes, a reduced fat and calorie candy line, spurred by the consumer demand for such food products. Hershey Foods claims the line is its "most successful new product introduction to date." Also in 1996, Hershey Foods introduced its first hard candies, called TasteTations, and its boxed candies, Hershey's Pot of Gold. In 1997 Hershey Foods introduced Reese's Crunchy Cookie Cups. Reese's is the corporation's largest and most successful brand.

PRODUCTS

The Hershey Chocolate North America division produces chocolate and nonchocolate candies for consumers in the Americas under the Hershey brand name, as well as other candies, such as Almond Joy, Mounds, Cadbury Creme Eggs, Twizzlers, Reese's peanut butter cups, Sweet Escapes candy bars, Milk Duds, Jolly Rancher, Jujyfruits, and York peppermint patties. One of the company's core brands, Hershey's Kisses chocolates, was introduced in 1907. The candy has been packaged with the trademarked tissue paper plume since a mechanical wrapping machine was put into use in 1921. On July 26, 1971, Hershey's Tropical bar was sent to the moon with Apollo 15 astronauts.

The Hershey Pasta and Grocery group makes a wide range of grocery items, including eight regional pasta brands—American Beauty, Ideal by San Giorgio, Light 'n' Fluffy, P&R, Mrs. Weiss, Ronzoni, San Giorgio, and Skinner—and Hershey's and Reese's baking products and hot cocoa mixes. Hershey's hot chocolate was introduced in 1940, and its instant cocoa mix in 1956. The division holds the leadership position in the chocolate syrup and unsweetened cocoa categories in the United States.

Hershey's product line is diverse, comprising assorted flavors of Luden's throat drops, introduced in 1992; Reese's peanut butter ice cream cups, Hershey's Great American Cafe non-dairy creamers, and Amazin' Fruit drink boxes, all introduced in 1995; two flavors of Hershey's classic caramels, introduced in 1997; and ReeseSticks wafer bars, which appeared in 1998.

CORPORATE CITIZENSHIP

Milton S. Hershey, founder of Hershey Foods Corporation, established a tradition of corporate philanthropy. According to corporate literature, "Mr. Hershey's belief that an individual is morally obligated to share the fruits of success with others resulted in significant contributions to society."

Hershey returned to Pennsylvania's dairy country in 1903 because of the large supply of fresh milk for his products. Once there, he built a plant and developed the community around it. "Some people were suspicious of Mr. Hershey's motives in founding the town and feared that he would take advantage of people who lived there, as had happened in other 'company towns'," writes a Hershey biographer in a corporate history. "But though Mr. Hershey could certainly be autocratic and was criticized for deciding what was important, often without consulting the town's inhabitants, his concern for his workers' welfare was genuine."

Hershey found work for the community even during the Depression, when he built a hotel, a community building, a sports arena, and new corporate headquarters. No employees were laid off from Hershey during the Depression.

Hershey and his wife, who were childless, established the Hershey Industrial School in 1909. The school for orphaned boys was the primary recipient of Hershey's benevolence, just as it is today. Currently the Milton Hershey School Trust owns 35.5 percent of Hershey Foods common stock and more than three-fourths of the company's voting shares.

CHRONOLOGY: Key Dates for Hershey Foods Corporation

1894:: Milton Hershey starts Hershey Chocolate Company
1900:: Hershey sells Lancaster Caramel Co.
1905:: Chocolate factory is completed in Derry County, Pennsylvania
1907:: Hershey's Kisses are introduced.
1909:: Hershey Industrial School is established for orphaned boys
1927:: The company incorporates as the Hershey Chocolate Company
1933:: Hershey initiates a building campaign to provide jobs during the depression
1945:: Milton Hershey dies
1963:: Acquires the H.B. Reese Candy Co.
1966:: Purchases San Giorgio Macaroni Company
1971:: Hershey's Tropical bar goes to the moon on Apollo 15
1988:: Acquires Peter Paul/Cadbury
1992:: Hershey's introduces Luden's throat drops.
1995:: Acquires Henry Heide, Inc.
1996:: Purchases Leaf Inc.; introduces Sweet Escapes fat free line and TasteTations hard candies.
1997:: Acquires Y&S Candies

Hershey Foods is involved in community philanthropy to this day, primarily through Hershey's Track & Field Youth Program and the Children's Miracle Network.

GLOBAL PRESENCE

Hershey International exports Hershey's branded confectionery and grocery products to more than 90 countries. It also markets these products, some of which are designed specifically for their markets. The company has licensing agreements with companies in several Asian nations. Hershey's strongest market outside North America is the Philippines. Products are sold there both at retail and in duty-free shops. The company plans to concentrate its expansion into the Far East, Russia, and China.

EMPLOYMENT

The company attributes much of its success in the mid-1990s to the team concept it promotes. It credits one such team with the development of Sweet Escapes. Other teams have developed means to control quality in Peter Paul Almond Joy candy bars, thereby eliminating missing almonds, and a corporatewide purchasing plan. In 1997 Hershey Foods became one of the few companies with more than 100 employees to extend stock options to every fulltime employee, regardless of position.

LET THEM EAT CHOCOLATE

Chocolate is a product that is largely derived from cocoa beans, which are imported from warm climate countries such as Brazil, Venezuela, Mexico, Ghana, and Nigeria. Initially, the beans are white when they are harvested, but turn brown when left to dry in the sun. Beans from different countries have different flavors, so they are stored by country of origin when they arrive at the Hershey plant for processing. Hershey has 25 cocoa bean silos, which can hold up to 90 million pounds of cocoa beans. That's the equivalent of 5 1/2 billion chocolate bars or other tasty treats. And remember, as the good folks at Hershey assure us, "Chocolate milk is a good source of many nutrients."

Hershey Pasta in Louisville, Kentucky, has employed hearing-impaired people since the 1950s; about 10 percent of all production employees at the Louisville facility are hearing-impaired. Most employees use sign language to circumvent the noisy equipment. Sign language is also taught at the plant.

SOURCES OF INFORMATION

Bibliography

adding value: hershey foods corporation summary annual report 1996. hershey, pa: hershey foods corporation, 1996.

"hershey foods corporation. hoover's online, 10 march 1998. available at http://www.hoovers.com.

"hershey foods corporation."international directory of company histories. detroit: st. james press, 1996.

"hershey foods corporation announces 1997 record sales and earnings." pr newswire, 28 january 1998.

"hershey foods posts record sales, earnings." knight-ridder/tribune business news, 19 january 1998.

"hershey will make 'godzilla' chocolate bars in movie tie-in." knight-ridder/tribune business news, 12 march 1998.

hershey's home page, 16 february 1998. available at http://www.hersheys.com.

heuslein, william. "timid no more." forbes, 13 january 1997.

the man behind the chocolate bar: an introduction to milton s. hershey 1857-1945. hershey, pa: hershey foods corporation, nd.

moody's investors service. "hershey foods corporation," 10 february 1998.

morgan stanley, dean, witter. "hershey foods - company report," 13 november 1997.

profile of hershey foods corporation. hershey, pa: hershey foods corporation, april 1996.

warner, mary. "hershey foods offers stock options plan to all employees." knight-ridder/tribune business news, 26 february 1997.

warner, mary. "hershey foods reaches the non-chocolate lead among candymakers." knight-ridder/tribune business news, 30 april 1997.

For an annual report:

write: hershey executive offices, 100 crystal a dr., po box 810, hershey, pa 17033-0810

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. hershey foods corporation's primary sics are:

2064 candy & other confectionery products

2066 chocolate and cocoa products

2098 macaroni spaghetti

Company Profiles for Students

Hershey Foods Corporation

views updated May 14 2018

Hershey Foods
Corporation

100 Crystal A Drive
Hershey, PA 17033
(717) 534-6799
www.hersheys.com

For many Americans, the word chocolate makes them think of Hershey's. Milton Hershey, the founder of the Hershey Foods Corporation, made his first milk chocolate bar an affordable treat customers could buy almost anywhere. Today, Hershey's chocolate comes in all forms, from bite-size "kisses" to chocolate syrup and chocolate milk. Hershey Foods, however, is more than just chocolate. By purchasing other companies Hershey expanded and now sells gum, licorice, breath mints, and hard candy, with many of its products marketed around the world. In the Unites States, Hershey has become the country's leading chocolate and candy maker.

From Caramel to Chocolate

Milton Hershey spent many years trying to succeed in the candy business before he perfected the milk chocolate bar. As a teenager, he worked with a confectioner (candy maker) in Lancaster, Pennsylvania, not far from his hometown of Derry Church. In 1876, Hershey opened his own candy business in Philadelphia, but that and several other efforts in other cities failed. Finally, in 1886, he opened the Lancaster Caramel Company, making the chewy candy with milk, unlike most confectioners of the time. Hershey's "Crystal A" caramels were an immediate hit.

For some of his caramels, Hershey added a bit of cocoa powder, which came from the same beans used to make cocoa butter, the main ingredient in chocolate. In 1893, Hershey watched a German manufacturer of chocolate-making equipment produce chocolate bars. He bought the same machinery for his company to make chocolate coatings for his caramels. Soon, however, he decided to sell chocolate and cocoa as separate products. The next year, the Hershey Chocolate Company started as a division of the Lancaster Caramel Company.

To sell his new candies, Hershey hired William Murrie. To advertise the products, he bought an electric car—one of the first in Pennsylvania—and painted "Hershey's Cocoa" on each side. Hershey not only made plain bars, he also molded his chocolate to look like cigars, miniature bicycles, and many other items. By 1900, he decided to get out of the caramel business and devote himself to chocolate. Hershey sold the Lancaster Caramel Company for $1 million and kept the Hershey Chocolate Company. He also began plans to build a new factory.

Hershey at a Glance

Employees: 14,300
CEO: R. H. Lenny
Subsidiaries: Hershey Chocolate & Confectionery Corporation; Hershey Chocolate of Virginia
Major Competitors: Mars, Inc.; Nestlé; Russell Stover Candies, Inc.; William Wrigley Jr. Company; Tootsie Roll Industries
Notable Products: Hershey's chocolate bar; Hershey's Kisses; Reese's Pieces; York Peppermint Patties; Twizzler's Licorice; Hershey's syrup; Hershey's cocoa; Jolly Rancher Fruit Chews; Reese's NutRageous; Skor bar

Chocolate for Everyone

For several years, Hershey made chocolate out of a rented factory while he looked for the land for his new plant. Finally, he chose a site in Derry Church. The area had many dairy farms, which was handy since Hershey needed fresh milk to make his milk chocolate. Adding milk to chocolate gave it a light color and smooth taste. The process had been discovered in Europe in 1875, but Hershey spent several years developing his own recipe for milk chocolate. When his factory opened in 1905, Hershey concentrated on selling chocolate bars at five cents each.

At the time, most Americans had never tasted either milk or dark chocolate. Chocolate was expensive and sold only at candy shops or in drugstores. Hershey believed everyone should be able to afford chocolate, and they should be able to buy it anywhere. Joël Glenn Brenner, author of The Emperors of Chocolate, quotes Hershey as saying, "It is more than a sweet, it is a food." By producing huge numbers of chocolate bars, Hershey kept his prices low. He also convinced grocery stores, newsstands, diners, and other businesses to carry his bars. Then, unlike most chocolate makers, Hershey sold his bars across the United States, not just in one region.

Timeline

1894:: Candy maker Milton Hershey sells his first milk chocolate bars.
1905:: The Hershey Chocolate Company opens its first factory in the town of Hershey, Pennsylvania.
1918:: Milton Hershey donates most of his wealth to the trust that runs the Hershey Industrial School for orphaned boys.
1931:: Annual sales at Hershey reach $31 million.
1945:: Milton Hershey dies.
1963:: Hershey buys the H. B. Reese Candy Company.
1968:: Hershey changes its name to the Hershey Foods Corporation.
1970:: Hershey runs national advertising for the first time.
1988:: Hershey buys Peter Paul/Cadbury candies.
2001:: Hershey announces record quarterly sales.

Directly around his plant Hershey built a new town, with homes for his workers. The town of Hershey grew to include a school, stores, an amusement park, and a zoo. Hershey provided the heat, water, and electricity to the town's residents, and no one paid taxes. In 1909, Hershey and his wife Catherine opened the Hershey Industrial School, which educated orphaned boys. With his town and school, Hershey became known as one of America's most generous businessmen.

The success of Hershey's chocolate bars fed that generosity. So did a new product introduced in 1907: Hershey's Kisses. By 1911, annual sales at the company reached $5 million. Hershey was not involved in most daily operations, leaving that to Murrie, his first salesman and close friend. After November 1918, Hershey did not even own the company bearing his name. When his wife died, he gave his estate to the Hershey Trust, which had been set up to run the Industrial School. The Hershey Company sold shares to the public starting in 1927, but the trust remained the principal owner.

More Products, New Companies

The Hershey company introduced several new chocolate candies during the 1920s and 1930s. First was Mr. Goodbar in 1925, a chocolate bar with peanuts. Krackel, chocolate and crisped rice, hit store shelves in 1938, and Hershey Miniatures appeared the next year. The company also provided the raw chocolate used by other confectioners for their candies. Sales grew even as the United States struggled through the Great Depression of the 1930s, the economic downturn that threw millions of people out of work and left many hungry and homeless.

When it opened in 1905, the Hershey plant was the most modern candy factory in the world. By 1915, the company was producing more than 100,000 pounds of chocolate every day. The plant remains the world's largest chocolate factory.

The Depression stirred some industrial workers who did have jobs to form unions. The unions tried to win higher pay and better working conditions for workers. Strikes and violence broke out at some factories, including Hershey's. Workers closed the plant and demanded the company let them join a national union. The strike ended several days later when area dairy farmers, angered because they were losing money as the factory sat idle, attacked the strikers. Hershey eventually agreed to let the workers unionize.

More changes followed in the 1940s. Hershey died in 1945, and Murrie retired two years later. By then, the Hershey Chocolate Company controlled 90 percent of the milk chocolate market in the United States. During the 1950s, however, the company seemed to lack direction. Competition increased, and companies in Europe were streamlining their production with new equipment. Hershey also did not advertise, following the long-held belief of Milton Hershey: "Quality is the best kind of advertising."

The company finally began to modernize in the early 1960s, under the leadership of Samuel Hinkle. Hinkle added new equipment to speed up production and opened Hershey's first foreign plant in Canada. In 1963, Hershey grew with its purchase of the H. B. Reese Candy Company, famous for its chocolate-and-peanut butter cups. The company also moved beyond candy in 1966, with the purchase of pasta makers San Giorgio and Delmonico Foods. To reflect its new products, the company changed its name in 1968 to Hershey Foods Corporation. Two years later, Hershey advertised for the first time, placing ads in newspapers and broadcasting ads nationally on radio and television.

Rivalry with Mars

The advertising was a response to Hershey's slipping sales, primarily to its major U.S. competitor, Mars, Inc. Advertising and marketing increased under William Dearden, who took over as chief executive officer (CEO) in 1976. Dearden also continued to move the company beyond chocolate manufacturing. By 1979, Hershey had bought several more pasta companies, the largest U.S. licorice manufacturer, and Friendly's, a chain of family restaurants that specialized in ice cream. (Hershey sold Friendly's in 1988). By 1982, about 30 percent of Hershey's $1.5 billion in sales came from non-candy products.

In 1982, Hershey Foods scored a major victory in its chocolate "war" with Mars. The competitor turned down a chance to have its M&M candies featured in a new movie by director Steven Spielberg (see Dreamworks SKG entry). Hershey's, however, jumped at the opportunity to promote a relatively new product, Reese's Pieces. The movie was E.T: The Extra-Terrestrial, which became one of the most popular films ever. One Hershey executive said in The Emperors of Chocolate, "It was the biggest marketing coup in history.… We got immediate recognition for our product, the kind of recognition we would normally have to pay fifteen or twenty million bucks for."

The success of Reese's Pieces and several other new products, plus the 1988 purchase of the U.S. interests of British candy maker Cadbury Schweppes PLC, helped Hershey regain its spot as the top American candy company. Hershey also expanded its presence in Europe, buying a plant from a German company in 1991.

Fighting to Stay on Top

Since the early 1990s, Hershey has continued to battle Mars for the top spot in chocolate manufacturing. It has introduced successful new products, such as Hershey's Hugs (Kisses made from white chocolate) and Reese's NutRageous bar. The company has also bought other candy companies, including Leaf North America, the maker of Jolly Rancher hard candies. And Hershey's has sometimes worked with other companies to market products with the Hershey name.

In 2001, an economic downturn hurt sales in many industries. Hershey, however, announced record sales in the third quarter of that year, a little more than $1.3 billion. Still, the company announced job layoffs and the closing of several plants. Hershey's and other chocolate makers also faced bad publicity that year. Several newspapers reported that some of the raw cocoa used to make chocolate is picked and processed by children held as slaves on farms in several African nations. In November 2001, Hershey and other U.S. chocolate companies announced they would start a program to eliminate the abuses.

Hershey Goes to War

During World War II (1939-45), Hershey played an important role in giving U.S. soldiers the energy they needed on the battlefield. After World War I (1914-18), the company worked with U.S. officials to design a chocolate-based bar loaded with nutrition and calories. The end result was the Field Ration D, a bar that mixed oat flour and vitamins with chocolate. Unlike regular chocolate, the new bar would stay solid at up to 120 degrees Fahrenheit, and inside its special packaging it stayed dry for up to an hour when placed in water. Hershey's made more than one billion of these rations, and U.S. soldiers carried the Hershey name all over the world. The military continued to use the Field Ration D until the 1970s.

Hershey chocolate went to war again in 1990, as U.S. soldiers prepared to fight in the Persian Gulf War (1991). Hershey developed a chocolate bar that would stay solid at temperatures up to 140 degrees Fahrenheit—perfect for the hot desert climate of the Persian Gulf area. Unlike the World War II bars, however, these "Desert Bars" tasted just like a regular Hershey bar. The company sent almost a million Desert Bars overseas and also sold them at home.

Despite its problems, the Hershey Foods Corporation remains on top in the chocolate and candy industry. It continues to expand its efforts overseas and roll out new products designed to tempt the sweet tooth of candy buyers everywhere.

Leading American Businesses

Hershey Foods Corporation

views updated May 23 2018

HERSHEY FOODS CORPORATION

Milton S. Hershey, the founder of Hershey Foods Corporation, was born in 1857 in central Pennsylvania. As a young boy Hershey was apprenticed to a Lancaster, Pennsylvania, candy-maker for four years. When he finished this apprenticeship in 1876, at age 19, Hershey went to Philadelphia to open his own candy shop. After six years, however, the shop failed, and Hershey moved to Denver, Colorado. There he went to work for a caramel manufacturer, where he discovered that caramel made with fresh milk was a decided improvement on the standard recipe. In 1883 Hershey left Denver for Chicago, Illinois, then New Orleans, Louisiana, and New York, New York, until in 1886 he finally returned to Lancaster. There he established the Lancaster Caramel Company to produce "Hershey's Crystal A" caramels that would "melt in your mouth." Hershey had a successful business at last.

In 1893 Hershey went to the Chicago International Exposition, where he was fascinated by some German chocolate-making machinery on display. He soon installed the chocolate equipment in Lancaster and in 1895 began to sell chocolate-covered caramels and other chocolate novelties. At that time Hershey also began to develop the chocolate bars and other cocoa products that were to make him famous.

In 1900 Hershey decided to concentrate on chocolate, which he felt sure would become a big business. That year he sold his caramel company for $1 million, retaining the chocolate equipment and the rights to manufacture the chocolate products he had developed. He decided to locate his new company in Derry Church, the central Pennsylvania village where he was born, and where he would have a plentiful milk supply. In 1903 Hershey broke ground for the Hershey chocolate factory, which today is still the largest chocolate-manufacturing plant in the world.

Before this factory was completed in 1905 Hershey produced a variety of fancy chocolates. But with the new factory he decided to mass-produce a limited number of products, which he would sell at a low price. The famous Hershey's Milk Chocolate Bar was born, the first mass-produced chocolate product in the United States.

In 1906 the village of Derry Church was renamed Hershey. The town was not simply named after the man or the company: it was Milton Hershey's creation, the beneficiary of and heir to his energy and his fortune. At the same time he planned his factory, Hershey began planning a whole community that would
fulfill all the needs of its inhabitants. A bank, school, recreational park, churches, trolley system, and even a zoo soon followed, and the town was firmly established by its tenth anniversary. One of Hershey's most enduring contributions was the Hershey Industrial School for orphans, which he established in 1909 with his wife Catherine. After Catherine's death in 1915 the childless Hershey gave the school Hershey stock, valued at about $60 million. Today the school, which became the Milton Hershey School in 1951, still owns 31 percent of Hershey Foods Corporation's stock and controls 76 percent of the company's voting stock.

In 1907 Hershey's Kisses were first produced, and the next year the Hershey Chocolate Company was formally chartered. In 1911 it had sales of $5 million, more than eight times what it had earned 10 years earlier. The Hershey company continued to prosper, producing its milk chocolate bars (with and without almonds), Kisses, cocoa, and baking chocolate. In 1921 sales reached $20 million, and in 1925 Hershey introduced the Mr. Goodbar Chocolate Bar, a chocolate bar with peanuts. In 1927 the company listed its stock on the New York Stock Exchange.

By 1931, 30 years after the company was established, Hershey was selling $30 million worth of chocolate a year. As the Great Depression (1929–1939) cast its shadow on the town of Hershey, Milton Hershey initiated a "grand building campaign" in the 1930s to provide employment in the area. Between 1933 and 1940 Hershey's projects included a 150-room resort hotel, a museum, a cultural center, a sports arena (where the Ice Capades was founded), a stadium, an exotic rose garden, and a modern, windowless, airconditioned factory and office building. Hershey liked to boast that no one was laid off from the company during the Great Depression.

Though Hershey's intentions seem to have been wholly sincere there was always some suspicion about his "company town." Labor strife came to the company in 1937, when it suffered its first strike. Though bitter, the strike was soon settled, and by 1940 the chocolate plant was unionized.

In 1938 another famous chocolate product was introduced, the Krackel Chocolate Bar, a chocolate bar with crisped rice. The next year Hershey's Miniatures were introduced, bite-sized chocolate bars in several varieties.

During World War II (1939–1945), Hershey helped by creating the Field Ration D for soldiers, to sustain them when no other food was available—a four-ounce bar that provided 600 calories and would not melt easily. The chocolate factory was turned over to the war effort and produced 500,000 bars a day. Hershey received the Army-Navy E award from the quartermaster general at the end of the war. Hershey died soon after, on October 13, 1945.

After Milton Hershey's death, the chocolate company continued to prosper and maintain its strong position in the chocolate market. By the 1960s Hershey was recognized as the number one chocolate producer in the United States. In the middle of that decade the company began expanding beyond candy for the first time, acquiring two pasta manufacturers, San Giorgio Macaroni and Delmonico Foods Inc., in 1966. The company changed its name to Hershey Foods Corporation in 1968. An end of an era was marked in 1969 when the company raised the price of Hershey's candy bars to 10 cents. The bars had been priced at five cents for the past 48 years. Another key change came in 1970, when Hershey launched its first-ever national advertising campaign, having previously relied mainly on word of mouth advertising.

In 1977 Hershey bought Y&S Candies, Inc., the nation's leading manufacturer of licorice. Hershey acquired Peter Paul/Cadbury in 1988, thereby gaining such brands as Peter Paul Mounds, Almond Joy Candy Bars and York Peppermint Patties. Through the 1996 purchase of the North American operations of Leaf, Inc., Hershey gained the Good and Plenty and Jolly Rancher brands. By 1999 the company decided to concentrate solely on chocolate and candies, and it sold its pasta business that year. At the end of the twentieth century Hershey Foods was the number one candy manufacturer in the United States.

Hershey Foods Corporation

Hershey Foods Corporation

Company Origins

Hershey Makes His First Chocolate Sale: 1895

Continued Success: 1920s-1940s

Hershey Begins Expansion: 1960s

Company Perspectives:

Growth Through Acquisition: Late 1970s and 1980s

Key Dates:

Diversification and International Expansion: Early 1990s

Strategic Changes: Mid- to Late 1990s

A Surprise Announcement: 2002

Principal Subsidiaries

Principal Divisions

Principal Competitors

Further Reading

Hershey Foods Corporation

Hershey Foods Corporation

Principal Subsidiaries:

Further Reading:

Hershey Foods Corporation

Hershey Foods Corporation

Principal Subsidiaries

Principal Divisions

Further Reading

Hershey Foods Corporation

Hershey Foods Corporation

Contact Information:

OVERVIEW

COMPANY FINANCES

ANALYSTS' OPINIONS

HISTORY

STRATEGY

INFLUENCES

FAST FACTS: About Hershey Foods Corporation

PRODUCTS

CORPORATE CITIZENSHIP

CHRONOLOGY: Key Dates for Hershey Foods Corporation

GLOBAL PRESENCE

EMPLOYMENT

LET THEM EAT CHOCOLATE

SOURCES OF INFORMATION

Bibliography

For an annual report:

For additional industry research:

Hershey Foods Corporation

Hershey Foods Corporation

From Caramel to Chocolate

Hershey at a Glance

Chocolate for Everyone

Timeline

More Products, New Companies

Rivalry with Mars

Fighting to Stay on Top

Hershey Goes to War

Hershey Foods Corporation

HERSHEY FOODS CORPORATION

FURTHER READING

More From encyclopedia.com

About this article

Hershey Foods Corp

You Might Also Like

NEARBY TERMS

Hershey Foods
Corporation