Hershey’s, one of the largest chocolate manufacturers in the world, has a product line of shareables, i.e., sweet goods sold in packages of several bite-sized morsels meant to be shared in a company. Upon analyzing the current market situation and addressing the company’s strengths, weaknesses, opportunities, and threats, it is suggested how new products can be launched to promote the line and attract new customer groups. Two significant marketing recommendations are proposed: introducing healthier products (to reach more audiences) and enhancing public relations activities (to improve the brand image and the company’s overall reputation that has been undermined within recent years).
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Current Market Situation
Five-Year Financial Overview
Table 1. Five-Year Overview of the Financial Performance of Hershey’s.
|At the end of Yr||2016||2015||2014||2013||2012|
|Stock Price||$ 103.43||$ 89.27||$ 105.27||$ 96.28||$ 71.44|
|Revenue||$ 7.442 B||$ 7.386 B||$ 7.421 B||$ 7.146 B||$ 6.644 B|
|Profits||—||$ 512.951 M||$ 846.912 M||$ 820.470 M||$ 660.931 M|
|Prof Margin, %||—||6.94||11.41||11.48||9.95|
|Growth Rate, %||—||-39.43||3.22||24.14||5.08|
Current ratio: 0.83 (current assets / current liabilities; $ 1.847 B / $ 2.218 B). Asset turnover: 1.02 (revenue / average total assets; $ 5.469 B / $ 5.344 B). Return on assets: 9.6 % (net income / average total assets; $ 512.951 M / $ 5.344 B) (“HSY company financials,” 2017).
Hershey’s operates in the sweet goods industry, producing mostly chocolate-based products. For such an industry, it is particularly challenging to define its customers in terms of demographic, social, cultural, or other characteristics because virtually anyone, regardless of his or her background, may be a sweet tooth or, on the contrary, not a big fan of sweets and candies. At the same time, the industry is intensive and involves a non-decreasing degree of competition. The reason is that, despite the advancement of technologies and the changes in various markets, many people are still likely to enjoy a candy bar or a bar of chocolate. From this perspective, the 20th century has not essentially changed the business in which Hershey’s has been for more than 120 years. Hershey’s has a competitive advantage due to its well-established image and the fame of some of its products, such as Hershey’s Kisses. The company satisfies its customers’ needs by offering a wide variety of goods, classic and new ones, with different flavors but a recognizable taste of Hershey’s chocolate.
An essential aspect of the market description is the segmentation-targeting-positioning (STP) marketing analysis. Segmentation means dividing potential consumers into groups based on specific relevant characteristics, such as demographic, geographic, behavioral, etc. Targeting means determining how certain identified segments can be reached, attracted, and satisfied. Positioning means marketing specific products or services to customers in a way that is aimed at targeted segments (Gbadamosi, Bathgate, & Nwankwo, 2013). As indicated above, Hershey’s products can be demanded by customers from significantly different backgrounds and segments. However, it does not mean that the company does not employ STP. For example, Hershey’s tends to target younger audiences, which is seen in its marketing activities.
Hershey’s products chosen for the STP analysis are so-called shareables, i.e., sweet goods sold in packages of several bite-sized morsels meant to be shared in a company. The market segments that the products are aimed at are constituted by mostly young urban people who plan for the day spending it together and stop at a store to get a snack. This segmentation is based on demographical and behavioral characteristics. Income is also a factor here: Hershey’s shareables are significantly more affordable than similar products of some competitors, such as Ferrero Rocher, but also somewhat less affordable than such alternatives as M&M’s (see Competitive Review). Hersey’s thus mostly targets the second and the third quarters of the income range. Concerning positioning, Hershey’s established position is that of an old, reputable chocolate manufacturer that is to be turned to when one looks for good and relatively affordable chocolate goods. The company has iconic products, such as Hershey’s Kisses, and constantly introduces new ones to keep up with the customers’ need for novelty and diversity. To address the selected segment more effectively, i.e., young people, Hershey’s strives to obtain an image of a modern company with a wide range of business interests and an understanding of current societal issues. The company pursues being seen as “cool” and responsible and dedicated to the customers’ needs.
Product positioning is also associated with product branding and its three components: brand vision, brand personality, and brand positioning. The brand vision is what a company wants to represent to customers. Brand personality is the appeal to the customers’ preferences and emotional characteristics. Brand positioning is distinguishing the company from its competitors. To ensure its business’s growth and success, Hershey’s has established a vision of a company that produces classical treats and new and diverse goods for people who may come from different backgrounds and have different lifestyles but are connected by the liking for chocolate goods. Brand personality is, therefore, not regulated by social factors but factors of personal preferences. Finally, Hershey’s brand positioning, especially in terms of its shareables, is based on providing target audiences with high-quality chocolate goods in various forms and flavors for anyone who would like to indulge in a sweet snack.
The product line selected for this marketing plan is Hershey’s shareables, i.e., sweet goods sold in packages of several bite-sized morsels meant to be shared in a company (“Hershey’s shareables,” n.d.).
Table 2. Shareables review.
|Name of Product||Package||Pcs||Cal||Sat. fat||Sugar||Proteins|
|Hershey’s Nuggets Milk Chocolates||12-ounce bag||4||210||8 g||23 g||3 g|
|Hershey’s Nuggets Special Dark Chocolates with Almonds||12-ounce bag||4||190||17 g||17 g||3 g|
|Hershey’s Milk Chocolate Drops||8-ounce pouch||13||200||22 g||22 g||3 g|
|Hershey’s Cookies ‘n’ Crème Drops||8-ounce pouch||14||210||20 g||20 g||2 g|
|Hershey’s Miniatures Assortment||12-ounce bag||5||210||22 g||22 g||3 g|
|Hershey’s Caramels in Dark Chocolate||7.2-ounce stand-up |
|3||210||24 g||24 g||1 g|
Table 3. Competitive Review.
|Competitor||Brand of product||Features|
|Cadbury||Marvelous Mix-Ups with Oreo|| |
|Godiva||Wrapped Caramel Nut Brownie Truffles|| |
|Ferrero Rocher||Family Box with 16 pieces|| |
|M&M’s||M&M’s Milk Chocolate|| |
An essential aspect of a competitive review is referring to the 5Ps marketing analysis of competitors. It includes five components: product, price, place, promotion, and positioning (Khan, 2014). The product component is to examine what exactly is being sold to customers. From this perspective, all products presented above are sweet shareable chocolate snacks.
The price perspective reveals significant competitive differences. The price ranges of all presented products are comparable. However, Ferrero Rocher can be considered as a more expensive solution to the same or similar needs of customers as those pursued by Hershey’s. In contrast, M&M’s can be considered as a cheaper solution.
The place component of the marketing analysis refers to distribution. All presented goods can be bought in the same places, i.e., customers may find themselves in a store choosing among Hershey’s and its four competitors listed above. Indirect online sales imply mixing these products, too, unlike direct online sales where customers are supposed to go to the Hershey’s website to purchase a particular product from the company or to a competitor’s websites to buy a different product.
Concerning promotion, all presented goods are successfully marketed through various media, including the Internet. Similar to Hershey’s, some of them appeal to customers through charity and corporate social responsibility activities. Public relations constitute a significant portion of this industry’s promotion efforts. All competitors try to build favorable images of themselves because they deal with a market that has already been explored and addressed for decades, which is why the competition is rather intensive.
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Finally, in terms of positioning, there are significant differences among competitors. For example, Ferrero Rocher positions its products as elegant and mainly suitable for being given to someone as gifts. In contrast to this, M&M’s positions its product as a quick snack for urban youths. Hershey’s should consider these and other examples of its competitors’ positioning to develop an adequate strategy to address a broader range of audiences. Having both a reputable image and appeal to young people, Hershey’s can address the needs of diverse customer groups, thus successfully competing with all the companies listed in Table 3. However, they are quite different in terms of positioning.
Channels and Logistics Review
Hershey’s goods, including the products selected for this marketing plan, are delivered to customers via the following channels: agents, wholesalers, retailers, and online channels. The latter category features two options: direct, i.e., via Hershey’s web store, and indirect, i.e., via retailers’ websites. Distribution channels are currently considered sufficient; however, there are still opportunities for making distribution more effective and efficient (see Distribution Strategy), thus contributing to improving the company’s entire operation and achieving identified business goals (see Objectives and Issues).
Table 4. Strengths, Weaknesses, Opportunities, and Threats.
|Strengths||The company’s image is strengthened and made more favorable by Hershey’s corporate social responsibility efforts, including contributing to the school for orphans. Overall, the brand name is strong due to the long history and reputation of one of the world’s most successful chocolate manufacturers. Besides famous and even iconic products, Hershey’s regularly introduces new product lines to ensure novelty and diversity and thus sustain the appeal to wider audiences. The company has an established customer base; loyalty is displayed in many customer groups. Ongoing technological development allows for introducing new products and increasing the volume of production and sales. The company’s infrastructure includes housing and schools for employees, which contributes to employee motivation, satisfaction, and loyalty, thus protecting the normal functioning of the entire company. Cases of incompliance with internal rules of conduct are relatively rare because corporate ethics are carefully enforced.|
|Weaknesses||The level of reliance on the existing mature market (primarily the United States) is rather high, while the number of distributors is relatively small. With the established reputation and recognized customer loyalty, fewer resources are spent on advertising than usually by companies of Hershey’s size, which means that a hypothetical decrease in loyalty is capable of dramatically damaging the company’s performance. Hershey’s has debts, which contributes to vulnerability, too. International reach and distribution are not controlled as effectively as domestic reach and distribution. Accusations of unethical operation also undermine Hershey’s image among potential customers. The company was accused of the lack of ethics as it allegedly purchased cocoa beans from suppliers who might have exploited child labor. This indicates that a large group of customers are against Hershey’s product, and they can influence other customers through such media as social networking services.|
|Opportunities||One of the main opportunities for development is currently seen in the emerging markets of China, India, and Southeast Asia. It is assessed that these countries may have a tremendous demand for Hershey’s products that are not adequately addressed now. Another opportunity is found in the changing attitudes of the public toward everything that is associated with food. There is a growing appreciation today for healthier products, and Hershey’s can win more interest in potential customers if it produces healthy goods and communicates their healthiness effectively. Also, Hershey’s is one of those companies capable of increasing their business by producing a wider variety of goods. People who buy chocolates from them may be interested in many other types of snacks or such products as mints and gum that these people can find in the same departments of stores. With this understanding, the company produces more diverse goods, and there are still opportunities in this area to attract more customers.|
|Threats||One of Hershey’s primary threats is the increasing base price of raw materials, such as sugar. This factor may be the driving force for raising products’ prices, which can decrease the number of customers because the demand for chocolate goods can be assessed as relatively elastic. Many other factors may make the company raise its prices, e.g., minimum wage increases, costs of new technologies and innovations, or the lack of agricultural areas where raw materials for production originate. Health problems trends can be a threat factor, too. With the increasing diabetes rates in the United States, the demand for sweets can go down.|
Objectives and Issues
First Year Objectives
The current sales volume is 7.44 billion USD (see Five-Year Financial Overview). Within the last three years, this indicator has not been demonstrating increases or decreases of more than 0.7 percent. Based on the SWOT analysis above (Table 4), it is suggested that growth is possible. The objective is to increase the sales volume to 7.45 billion USD and prepare for further growth.
Among chocolate manufacturers in the United States, Hershey’s market share of 32.2 percent makes it the largest chocolate company. However, based on the strengths and opportunities described above, it is suggested the company can increase its market share. The objective is to enhance the presence in the market and prepare a technological basis and reach that will allow increasing the market share.
Second Year Objectives
The sales volume objective is to hit the point of 7.5 billion USD. The market share objective is to achieve the point where Hershey’s will have a third of the market (33.3 percent).
A major identified issue is accusations of unethical behavior (Manza, 2014). It is a threat to reaching new audiences and a weakness of the company’s public image. A way to overcome it is to pay more attention to Hershey’s corporate social responsibility and charity efforts. Also, initiatives associated with increasing environmental friendliness and sustainability of production and operation should be promoted by the company’s leadership and management. An essential aspect of addressing the issues is effective communication. Messages about these initiatives and activities should be delivered to loyal, occasional, and potential customers. Increasing the market share and the sales volume is possible within the next two years if more people believe that Hershey’s not only makes high-quality chocolate but also cares about the environment, labor conditions of its employees and suppliers, and the well-being of the society within which it operates.
Positioning statement: For anyone who would like to enjoy a sweet snack in a company of friends, Hershey’s offers a line of affordable shareables that features convenient packaging, good nutrition indicators, and a range of different flavors for different tastes.
Product strategy describes how a company plans to sell a product in an identified market. One of the components of a product strategy is the description of target markets. As shown, in the case of shareables, targeting is challenging because the liking for sweet snacks may not correlate with demographic characteristics. However, the product strategy for shareables should mainly target young urban people whose lifestyles create more opportunities for them to enjoy shareables. They may often spend leisure time in a company of friends. It should also be explored what can be changed about the product to enable better market positioning. Based on the identified opportunities (see Table 4), Hershey’s should address wider audiences by offering healthier shareables in the product line (Falguera, Aliguer, & Falguera, 2012). An option with a lower level of saturated fat and sugar and a higher level of proteins (also, with fruit perhaps) could attract more customers. Moreover, implementing this recommendation could attract people who never buy any Hershey’s products because they think those products are unhealthy.
Two major and principally different pricing approaches are cost-based pricing and value-based pricing (Hollensen, 2015). Cost-based pricing primarily considers the cost of manufacturing a product or providing a service as a reference point in setting the price. Value-based pricing considers what value is provided to customers and specific products and services and examines how much customers are willing to pay for this value. Cost-based pricing focuses on the company and the costs it incurs; value-based pricing focuses on customers.
Since Hershey’s has an established reputation, recognition as one of the largest, oldest, and most reputable chocolate manufacturers in North America, and extensive international reach, it can employ value-based pricing, especially for its iconic products as Hershey’s Kisses. However, the company is also largely affected by competition, as many manufacturers produce similar products, which is why Hershey’s is forced to use cost-based pricing. Hershey’s is not a luxury brand; one of its competitors, Ferrero Rocher, is much more of a luxury brand. It positions its products as more exclusive, so it uses value-based pricing and high prices to a larger extent. In using the combination of value-based and cost-based pricing, Hershey’s demonstrates a wise strategy, as it allows the company to effectively address competition and strengthen the recognition of their brand at the same time.
Market-skimming pricing is the practice of initially setting high prices for a new product to skim the “cream” of high-value customers. Market-penetration pricing, on the contrary, is setting low prices to reach more customer groups. When introducing shareables, which is the product of interest, Hershey’s did not have to resort to penetration pricing because the brand is already established and recognized. Skimming allowed obtaining larger profits; further, the price can be lowered over time.
Hershey’s uses several different marketing channels (See Channels and Logistics Review). Retailers remain the company’s primary distribution and marketing channel. One of this channel’s main strengths is customer convenience: the products are made available and easy to access in various places. Also, customers may receive financial support from retailers when buying various products, including Hershey’s, which makes this distribution channel potentially more attractive. The channel’s weakness is that a part of revenues is lost through including intermediaries in the distribution process. Also, the manufacturer’s control, i.e., Hershey’s, over its products and communication, is reduced.
In distribution management, it is important to understand that distribution channels are more than just channels: instead of regarding them as simply connections between businesses and customers, it has been suggested to regard them as separate businesses having their operation and goals (Rosenbloom, 2012). Their primary goal is not different from the conventional goal of all businesses: to maximize value for customers and maximize profit for themselves at the same time. This perspective is more comprehensive and insightful in determining where costs can be cut and the increasing value. For Hershey’s, disintermediation, i.e., eliminating some intermediaries and some distribution components, can bring these benefits. For example, by reinforcing and promoting online sales, the company will be able to reduce costs. The value for customers will be increased because customers will be able to buy any of Hershey’s products, which is not always possible in a store.
Marketing Communication Strategy
The five elements of the promotion mix, also called marketing communication mix, are sales promotion, personal sales, advertising, public relations, and direct marketing (Armstrong, Kotler, Harker, & Brennan, 2012). Efforts in these five areas need to be combined to successfully promote products and services in the modern world. Hershey’s is engaged in all five processes, as the company encourages higher sales by constantly offering new products along with classic ones, employs direct distribution channels along with indirect ones, heavily advertises what it produces, and maintains a dialog with audiences through showing such initiatives as reducing environmental impact and adopting more sustainable practices, which can build a more favorable image among existing and potential customers. It is recommended to emphasize the public relations element of the marketing communication strategy. It is the area where the company’s most important threats (accusations of unethical behaviors) can be addressed.
Marketing research is conducted to design methods, collect data, and report findings to a company’s marketing team to ensure that marketing objectives can be met and recommend how it can be accomplished (Babin & Zikmund, 2015). Normally, methods employed for these purposes include surveys, focus groups, interviews, and observations. Under this marketing plan, it is suggested to Hershey’s to explore and examine the market to justify the proposed recommendations, such as including healthier products in the shareables line. It is important to acknowledge that market research activities are not occasional and linked to events like launching a new product. Instead, they should be ongoing, which ensures that constantly arising challenges are properly addressed, and new needs of the market are identified.
Action programs should be designed based on identified objectives to describe particular measures a company should take to meet the objectives. A conventional way of designing action programs is by describing necessary actions month by month. For Hershey’, the proposed action program is as follows:
- First month: A study is designed by employees responsible for marketing research, i.e., methods are determined, and tools are prepared (e.g., questionnaires). The study’s audience will include (but will not be limited to) Hershey’s followers and subscribers in social networking services, i.e., people who regularly receive content generated by the company.
- Second month: The study is conducted to identify the needs and desires of loyal, occasional, and potential customers. Data is processed, and the results are reported to the top management.
- Third month: The decision is made to introduce new healthier products and maybe other products, the need for which is revealed by market research. The product is designed, and the technological basis for manufacturing it is prepared.
- Fourth month: The new product or products are launched, which should be extensively covered by the company’s advertisers, marketers, and public relations practitioners. New customer groups are attracted.
- Fifth month: By continuing its efforts in reaching emerging markets, Hershey’s markets the new product or products to those markets, too, to address potentially uncontested demand.
- Sixth month: A portion of revenues is spent to continue the market research with the primary goal to reveal what additional customer groups can be reached by including new products in the existing lines. With established tools, marketing research specialists gather more data and generate new recommendations.
One of the approaches to budgeting is the break-even volume (BEV) analysis. It uses such indicators as fixed costs and variable costs to identify the necessary volume of production (Kaplan & Atkinson, 2015). A company incurs both costs that depend on the number of products it produces (e.g., raw materials) and costs that do not (e.g., advertising or operating and maintaining such facilities as plants). BEV analysis identifies what a minimal number of products should be sold to cover all the costs. As Hershey’s is a large international corporation with many products and many suppliers, BEV analysis is important and complicated because it involves complex calculations with many factors. However, the BEV analysis approach should consider that the company already has an established network of production, distribution, and marketing, which is why it can afford to launch a new product because variable costs are already largely covered.
A crucial consideration in launching a new product is control: what should be controlled and how? Controlling processes involves appointing people who will execute approved actions, match them to the strategy, and report results. The proposed action program should be primarily controlled in the product quality and brand image (Amini, Darani, Afshani, & Amini, 2012). As it is recommended to launch a healthier product, while healthy food is not the area in which Hershey’s specializes, enhanced control is needed to ensure that the new product complies with healthiness requirements. The brand image needs to be controlled because creating a more favorable image is one of the main reasons for implementing the actions proposed in this marketing plan. To control quality, healthiness standards need to be adopted and followed in production. To control brand image, it is necessary to enhance public relations efforts to communicate to existing and potential customers how Hershey’s is changing for the better while remaining classically good.