The Hershey Company: Cocoa Conundrum

Executive Summary

Hershey has become a household brand for chocolate lovers around the country, but there is a dark side to the chocolate giant. The Hershey Company released its first Corporate Social Responsibility Report in 2009 and it had no mention of any Company policies that ensure fair and humane labor practices are enforced on the cocoa farms in West Africa, where seventy percent of the world's cocoa is sourced. This leaves the door wide open for Hershey products to be manufactured with cocoa harvested by child and slave labor. The recommendation for Hershey to solve this problem is to have its entire cocoa supply certified though a third party organization. Certifying it cocoa supply gives Hershey one hundred percent transparency with stakeholders, child labor is eliminated from the supply chain, and keeps Hershey competitive in the chocolate industry. Hershey is already familiar with the certification process though its acquisition of the small organic fair trade chocolate company Dagoba, so certifying its core brands will be a matter of finding the best suited organization to partner with.

Position

The Hershey Company was founded by Milton S Hershey in 1894 and is one of the oldest chocolate companies in the United States. To date it is one of the largest chocolate manufacturer in North America and retails its products in about sixty country's, and employs 15,000 workers worldwide. The company engages in the production, marketing, selling, and distribution of various packaged types of chocolate, confectionary products, gum, baking ingredients, toppings, and beverages. Hershey's products are marketed under eighty brand names including Hershey's Cadbury, Reeses, Jolly Rancher, Kisses, Ice Breakers, Bubble Yum, Reese's and York (The Hershey Company).

The Hershey Company's mission statement is, "Bringing sweet moments of Hershey happiness to the world every day" (hershey.com). Hershey strives to stay on mission by following a set of core values centered on the idea of "One Hershey." Hershey defines that as " A global and diverse team, operating with integrity, working together, determined to make a difference and winning together while accepting individual responsibility for our results" (hershey.com). The company also strives to have organizational capabilities that not only compete in the present, but also are able to build on in the future. To ensure its competitive advantage The Hershey Company encourages and promotes healthy living, and keeps a diverse portfolio of brands that delivers growth worldwide.

Operating on a global platform creates several key stakeholders for the Hershey Company. First and foremost, the customers. The success of any company largely depends on the trust customers place in the product. In today's business environment customers are beginning to focus on not just where products are made, but how the products are made. This increased consumer consciousness has lead Hershey customers to demand more transparency of the corporate chocolate cyclopean. In addition to the customers, Hershey must consider its employees as key stakeholders. The satisfaction and engagement of a company's employees directly correlates to the financial success of the company. Hershey has a large network of employees globally which can create cultural & communication challenges across operations. However, Hershey has a responsibility to provide clear channels for communication and provide equal opportunities for all workers. The third major stakeholders of the Hershey Company are the business partners. Hershey has a complex network of interdependent companies, including customers and suppliers of raw materials, intermediates and technology. Hershey must bring focus, credibility, and resources to organizations that help further the company's interests, productivity, and profits. Business partners will continually evaluate the value of doing business with Hershey, so it is imperative to maintain responsible and fair business practices.

Sense

The chocolate industry is incredibly competitive, and Hershey's has some notable competitors, such as Mars, Kraft, and Nestlé. In 2010 Kraft beat out Hershey with a $19.4 billion bid for Cadbury, and in 2008 Mars Inc. bought Wrigley Jr. Company (Bart, 2010). Hershey's revenues are largely from domestic sales, but the opportunity for growth is limited due to the maturity of the chocolate market. The real growth opportunities are overseas, however Hershey's major competitors have a head start globally, "Mars and Kraft now command a near 15% share of global confectionery retail value sales each. Nestlé has less than an 8% global share, while Hershey barely accounts for 5%" (Pacyniak). This means Hershey must continuously transform consumer desires into a product that they would want to purchase time and time again.

In addition to industry competition Hershey faces problems related to a shift in societies health focus. The obesity epidemic has resulted in an increasing number of individuals becoming more health conscious, thus abstaining from high calorie and sugar products. At the Snack Food Associations 2010 Snaxpo data collected by Information Research Inc. reported, "Healthier snack sales in 2009 outpaced most other categories, including indulgent snacks, salty snacks and chocolate. Natural and organic snacks also showed strong growth, increasing 11.7 percent in 2009. While 78 percent of consumers are said to be attempting to eat healthier, 66 percent are looking for snacks with nutritional value, and 63 percent are trying to replace high-calorie snacks with healthier snacks" (Fleenor). This recent health food movement could adversely affect the chocolate and cocoa product industry by causing consumers to decrease their consumption of traditional high fat chocolate products. Further, consumers may search for healthier substitutes, such as fruits, health bars, and other health-conscious snacks. This potentially could lower sales of many product segments for Hershey. Hershey either will have to expand its product lines in order to recover current sales numbers and offer new healthy alternatives, which increase many costs, or the manufacturer does not offer a healthier alternative and takes a greater loss in sales. Both of these alternatives negatively impact Hershey financially. This, combined with some unrecoverable loss in sales from those who dismiss chocolate altogether poses a significant threat to the company.

Hersey has another problem it must address concerning its supply chain. Hershey is the largest chocolate manufacturer in North America and one of the necessities that