The Hershey Company works to inspire Almond Joy and lots of Kisses. As a global leader and North America's top chocolate producer, the company has built a big business manufacturing such well-known chocolate and candy brands as Hershey's, Kisses, Reese's peanut butter cups, Twizzlers licorice, and, under license, Mounds candy bar, York peppermint pattie, and Kit Kat wafer bar. Hershey also makes grocery goods, including baking chocolate, chocolate syrup, cocoa mix, cookies, snack nuts, breath mints, and bubble gum. Products from the chocolate king are sold to a variety of wholesale distributors and retailers throughout North America and exported overseas.
The company's operations consist of two business segments, in which more than 80 name brands are made, marketed, sold, and distributed. Many product types sold under the Hershey's, Kisses, and Reese's names are included in the company's chocolate business unit. Other popular brand franchises -- such as Twizzlers, Mounds, York, Kit Kat, Ice Breakers, and Bubble Yum -- fall within the company's sweets and refreshment business unit.
Hershey also has a retail presence. Referred to as The Hershey Experience, the company's retail operations comprise Hershey's Chocolate World (Hershey, Pennsylvania) and stores in New York City, San Francisco, Chicago, Niagara Falls (Ontario), Shanghai, Dubai, and Singapore.
Hershey's business focuses on three regions. The US is the company's largest market. The Americas, its second region, consists of Canada, Mexico, Brazil, Central America, Puerto Rico, and global exports. Hershey also operates a third region in Asia, Europe, the Middle East, and Africa. The company markets its products in about 70 countries worldwide. While the US is a top revenue generator, sales outside the US from developing regions have contributed about 17% of its total revenue.
After achieving historic revenue growth over the last few years, Hershey saw its revenues decline marginally from $7.42 billion in 2014 to $7.39 billion in 2015. In addition, its profits plunged 39% from $847 million in 2014 to $513 million in 2015. Cash flow from operations spiked by 44% during that same time period.
Hershey in 2015 was affected by volume declines and the unfavorable impact from foreign currency exchange rates, substantially offset by favorable net price realization as well as a benefit from net acquisitions and divestitures. Its drop in profits for 2015 was attributed to increased goodwill and other intangible asset impairment charges in addition to a spike in business realignment charges.
Upon experiencing a slight revenue and moderate profit decline in 2015, Hershey is planning for the consumer shopping habits in the US and volatile international markets to slow down in the years ahead. As such, it is investing in its five core brands -- Hershey's, Reese's, Hershey's Kisses, Jolly Rancher, and Ice Breakers -- in both the US and key international markets. It is also focusing on its existing snack products portfolio for growth.
Mergers and Acquisitions
Hershey's strategic focus is on expanding its global presence as it jockeys for market share from rivals Mars and Kraft, which owns Cadbury. In 2015 it picked up KRAVE Pure Foods, headquartered in Sonoma, California. KRAVE is a manufacturer of KRAVE jerky, an all-natural snack brand of premium jerky products. The transaction allowed Hershey to tap into the rapidly growing meat snacks category and further expand into the broader snacks space.
In 2014 Hershey purchased The Allan Candy Company, a North American manufacturer of confectionery products based in Ontario, Canada. Allan Candy is known across Canada for its iconic confectionery brands, including Allan, Big Foot, Hot Lips, and Laces. More than half of Allan Candy’s current manufacturing capacity is used to make Hershey Sweets & Refreshment products such as Jolly Rancher hard candy and Lancaster caramels for North America.
Also in 2014, Hershey significantly enhanced its Asian footprint when it obtained 80% of Shanghai Golden Monkey Food Joint Stock Co., Ltd. (SGM), a privately held confectionery company based in Shanghai, China. SGM manufactures, markets, and distributes Golden Monkey branded products, including candy, chocolates, protein-based products, and snack foods in China.
Sales and Marketing
Among its significant customers, wholesale distribution giant McLane Company accounted for 26% of Hershey's sales in 2015. It's the primary distributor of Hershey products to Wal-Mart. Hershey leverages a staff of full-time sales representatives and food brokers to peddle its products to customers. In general the confectionary company counts wholesale distributors, chain drug stores, vending companies, wholesale clubs, convenience stores, dollar stores, concessionaires, and department stores among its vast customer set. Hershey's distribution network ships its products from its manufacturing plants to strategically located distribution centers, using common carriers to deliver products from there to customers.
The company makes a point to launch new versions of old favorites, such as Jolly Rancher lollipops and bite-size bits of chocolate bars. Although chocolate bars take center stage, most recently premium dark varieties, it introduced sugar-free chocolate to tempt the growing number of diabetic and overweight consumers. Moving into the snack aisle, Hershey has rolled out cookies, 100-calorie treats, and granola bars.