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.
Hershey has achieved historic revenue growth over the course of the last few years. Revenues climbed 8% to peak at a record-setting $7.2 billion in 2013, while profits jumped 24% to reach a company milestone of $820 million in 2013. Cash generated from operations also climbed during 2012 and 2013 after declining sharply in 2011.
The growth for 2013 reflected core brand sales increases and incremental sales of new products in the US and its international businesses. Higher sales of Brookside products also contributed to the historic growth. Its profit increase was driven by the bump in revenue coupled with a decline in interest expenses.
To drive sales growth, Hershey 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. As a result, the confectionery company aims to meet new long-term targets of sales growth in the 7% to 9% range.
It's also looking to build out its existing infrastructure in China and chase after the country's growing middle class there through a new initiative to grow its international operations to 25% of its business by 2017. As part of this effort, Hershey opened an Asia Innovation Center in Shanghai in mid-2013, and has announced plans to build a $250 million confectionery manufacturing plant in Malaysia. It also debuted the new Lancaster line of caramels in early 2013 and aims to roll out its US version, which is manufactured in Canada, in the states in 2014.
Mergers and Acquisitions
Hershey's strategic focus is on ex panding its global presence as it jockeys for market share from rivals Mars and Kraft, which owns Cadbury. In 2014 it 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.
In 2012 Hershey acquired Canadian confectioner Brookside Foods, producer of fruit pieces, nuts, and dark chocolate-covered exotic dried fruits. The $172.9 million deal extends Hershey's reach in North America, as well as complements its chocolate lineup. Hershey is looking to make more purchases during the next few years to capture these niche markets and expand overseas.
Sales and Marketing
Among its significant customers, wholesale distribution giant McLane Company accounted for 26% of Hershey's sales in 2013, up from 22% in 2012. 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.
In 2013 Hershey spent about $582 million on advertising compared to $480 million in 2012.