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Hershey Foods Corporation

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 companys founder made his first fortune by manufacturing caramel. While famous for its major candy brandsHersheys, Reeses, Kit Kat, Kisses, Twizzlers, Jolly Rancher, Ice Breakers, Carefree, and Breath Saversthe company also markets grocery products including Hersheys baking chocolate, chocolate milk, ice cream toppings, cocoa, chocolate syrup, peanut butter, and Reeses and Heath baking pieces. Hershey operates with two main divisions, Hershey Chocolate North America and Hershey International, the latter of which exports the firms products to over 90 countries. The Milton Hershey School Trust controls 77 percent of Hersheys 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 Hersheys 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 Hersheys 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 Hersheys 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 Hersheys most enduring contributions was the Hershey Industrial School for orphans, which he established in 1909 with his wife Catherine. After Catherines 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 companys voting stock.

In 1907, Hersheys 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 companys 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, Hersheys 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 Hersheys 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 Hersheys Miniatures, bite-sized chocolate bars in several varieties, were introduced.

During World War II, Hershey helped by creating the Field Ration Da four-ounce bar that provided 600 calories and would not meltfor 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 wars end. Hershey died soon after, on October 13, 1945.

Hershey Begins Expansion: 1960s

After Milton Hersheys 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 companys 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 companys 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 Hersheys 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, Hersheys first consumer advertisement, a full-page ad for Hersheys 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, Hersheys 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 Hersheys 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 Hersheys Kisses, and the introduction of the Giant Hersheys 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 Reeses Pieces Candy and Whatchamacallit and Skor Candy Bars.

Growth Through Acquisition: Late 1970s and 1980s

Hershey also made plans to diversify, to lessen the companys 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 nations 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 Hersheys 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, Ludens throat drops, and Mello Mints. Not content with such a yearthe first to top $2 billion in salesin December Hershey purchased G&R Pasta Company, Inc., whose Pastamania brand became the eighth in Hersheys 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 companys brands, including Peter Paul Mounds and Almond Joy Candy Bars and York Peppermint Patties, and Cadbury products including Cadbury chocolate bars and Cadburys Creme Eggs, an Easter specialty candy. Observers predicted that Hersheys economies of scale and clout with retailers would bring increased profitability to the newly acquired Cadbury lines. This purchase pushed Hersheys 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: Hersheys Kisses with Almonds chocolates in 1990; Hersheys 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 Reeses 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:
Hersheys chocolate plant is unionized.
1963:
The H.B. Reese Candy Company is acquired.
1968:
The firm adopts the name Hershey Foods Corporation.
1970:
Hersheys 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 periodboth of which made increasing prices untenableput pressure on Hersheys chocolate earnings. One of the companys 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 Hersheys 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 Hersheys 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 Hersheys 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 companys 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 Reeses Peanut Butter Puffs Cereal. In 1995, a partnership with Good Humor-Breyers resulted in Reeses Peanut Butter Ice Cream Cups. That same year a cross-marketing deal with MCI offered free long-distance telephone calls to purchasers of selected Hersheys 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 Hersheys nonchocolate confectionery and pasta operations were growing.

Under the leadership of Kenneth Wolfenamed chairman and CEO in 1994Hersheys 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 Reeses 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 Ludens 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 strikethe 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 Hersheys 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 Trusts $5.4 billion portfolio consisted of Hershey stock. While Hersheys 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 citys 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 states 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 Hersheys 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.

Further Reading

Barrett, Amy, How Hershey Made a Big Chocolate Mess, Business Week, September 9, 2002.

Bitter Times for a Sweet Town, Economist, August 31, 2002.

Byrne, Harlan S., Hershey Foods Corp.: It Aims to Sweeten Its Prospects with Acquisitions, Barrons, May 6, 1991, p. 41.

Castner, Charles Schuyler, One of a Kind: Milton Snavely Hershey, 1857-1945, Hershey, PA.: Dairy Literary Guild, 1983, 356 p.

Gold, Jackey, How Sweet It Is, Financial World, November 13, 1990, p. 17.

Halpert, Hedy, Face to Face: Hersheys Next Century, U.S. Distribution Journal, September 15, 1993, p. 43.

Hershey FoodsPackaging Leader of the Year, Packaging Digest, October 1997, p. 91.

Hershey Foods Sells Pasta Business, Prepared Foods, January 1999, p. 26.

Hershey Foods Wolfe to Retire, Candy Industry, October 21, 2001, p. 12.

Hersheys 100 Years: The Ingredients of Our Success, Hershey, PA: Hershey Chocolate Corporation, 1994, 24 p.

Heuslein, William, Timid No More, Forbes, January 13, 1997, p. 98.

Koselka, Rita, Candy Wars, Forbes, August 17, 1992, p. 76.

Kuhn, Mary Ellen, Sweet Times in the Hershey Candy Kingdom, Food Processing, January 1995, p. 22.

A Profile of Hershey Foods Corporation, Hershey, Pa.: Hershey Chocolate Corporation, 1995, 24 p.

The Story of Chocolate and Cocoa, Hershey, PA: Hershey Chocolate Corporation, 1926, 30 p.

Workers Strike at Nations Largest Candy Maker, Food Institute Report, April 29, 2002, p. 1.

updates: David E. Salamie and Christina M. Stansell

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Hershey Foods Corporation

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 companys 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, Hersheys 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 Hersheys 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 Hersheys 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 Hersheys 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 Hersheys most enduring contributions was the Hershey Industrial School for orphans, which he established in 1909 with his wife Catherine. After Catherines 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 Corporations stock and controled 77 percent of the companys voting stock.

In 1907 Hersheys 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 companys 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, Hersheys 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 Hersheys 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 Hersheys Miniatures, bite-sized chocolate bars in several varieties, were introduced.

During World War II, Hershey helped by creating the Field Ration Da four-ounce bar that provided 600 calories and would not meltfor 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 wars end. Hershey died soon after, on October 13, 1945.

After Milton Hersheys 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 companys 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 industryand 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 Hersheys 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 chocolatea 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, Hersheys first consumer advertisement, a full-page ad for Hersheys 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, Hersheys 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 Hersheys 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 Hersheys Kisses, and the introduction of the Giant Hersheys 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 Reeses Pieces Candy and Whatchamacallit and Skor Candy Bars.

Hershey also made plans to diversify, to lessen the companys 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 nations 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 Hersheys 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, Ludens throat drops, and Mello Mints. Not content with such a yearthe first to top $2 billion in salesin December Hershey purchased G&R Pasta Company, Inc., whose Pastamania brand became the eighth in Hersheys 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 companys brands, including Peter Paul Mounds and Almond Joy Candy Bars and York Peppermint Patties, and Cadbury products including Cadbury chocolate bars and Cadburys Creme Eggs, an Easter specialty candy. Observers predicted that Hersheys economies of scale and clout with retailers would bring increased profitability to the newly acquired Cadbury lines. This purchase pushed Hersheys 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: Hersheys Kisses with Almonds chocolates in 1990; Hersheys 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 Reeses 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 periodboth of which made increasing prices untenableput pressure on Hersheys chocolate earnings. One of the companys 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 Hersheys 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 Hersheys 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 companys 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 Reeses Peanut Butter Puffs Cereal. In 1995 a partnership with Good Humor-Breyers resulted in Reeses Peanut Butter Ice Cream Cups. That same year a cross-marketing deal with MCI offered free long-distance telephone calls to purchasers of selected Hersheys 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. Hersheys nonchocolate confectionery and pasta operations were growing. Hersheys 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.; Ludens 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.

Further Reading

Byrne, Harlan S., Hershey Foods Corp.: It Aims to Sweeten Its Prospects with Acquisitions, Barrons, May 6, 1991, p. 41.

Castner, Charles Schuyler, One of a Kind: Milton Snavely Hershey, 1857-1945, Hershey, Penn.: Dairy Literary Guild, 1983, 356 p.

Gold, jackey, How Sweet It Is, Financial World, November 13, 1990, p. 17.

Halpert, Hedy, Face to Face: Hersheys Next Century, U.S. Distribution Journal, September 15, 1993, p. 43.

Hersheys 100 Years: The Ingredients of Our Success, Hershey, Penn.: Hershey Chocolate Corporation, 1994, 24 p.

Koselka, Rita, Candy Wars, Forbes, August 17, 1992, p. 76.

Kuhn, Mary Ellen, Sweet Times in the Hershey Candy Kingdom, Food Processing, January 1995, p. 22.

A Profile of Hershey Foods Corporation, Hershey, Penn.: Hershey Chocolate Corporation, 1995, 24 p.

The Story of Chocolate and Cocoa, Hershey, Penn.: Hershey Chocolate Corporation, 1926, 30 p.

updated by David E. Salamie

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Hershey Foods Corporation

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 companys 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 Hersheys 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 Hersheys 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 Hersheys 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 Hersheys 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 Hersheys most enduring contributions was the Hershey Industrial School for orphans, which he established in 1909 with his wife Catherine. After Catherines 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 Corporations stock and controls 77% of the companys voting stock.

In 1907 Hersheys 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 companys 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, Hersheys 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 Hersheys 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 Hersheys 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 wouldnt 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 wars end. He died soon after, on October 13, 1945.

After Milton Hersheys 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 companys 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 industryand 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 Hersheys 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 chocolatea 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 Hersheys first consumer advertisement, a full-page ad for Hersheys 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, Hersheys 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 Hersheys 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 Hersheys Kisses, and the introduction of the Giant Hersheys 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 Reeses Pieces Candy and Whatchamacallit and Skor Candy Bars.

Hershey also made plans to diversify, to lessen the companys 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 nations 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 Hersheys 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, Ludens throat drops, and Mello Mints. Not content with such a yearthe first to top $2 billion in salesin December Hershey purchased G&R Pasta Company, Inc., whose Pastamania brand became the eighth in Hersheys 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 companys brands, including Peter Paul Mounds and Almond Joy Candy Bars and York Peppermint Patties, and Cadbury products including Cadbury chocolate bars and Cadburys Creme Eggs, an easier specialty candy. Hersheys economies of scale and clout with retailers will bring an increased profitability to its newly acquired Cadbury lines. This purchase pushed Hersheys 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. Hersheys highly successful marketing strategy, based on Milton Hersheys 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.; Ludens, Inc.; Queen Anne, Inc.

Further Reading:

Castner, Charles Schuyler. One of a Kind, Hershey, Pennsylvania, Dairy Literary Guild, 1983.

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Hershey Foods Corporation

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 carone of the first in Pennsylvaniaand 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 Fahrenheitperfect 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.

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Hershey Foods Corporation

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 (19291939) 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 (19391945), Hershey helped by creating the Field Ration D for soldiers, to sustain them when no other food was availablea 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.

FURTHER READING

Altman, Henry. "Hershey's 'New' Ingredient." Nation's Business, June, 1983.

Brenner, Joel Glenn. The Emperors of Chocolate: Inside the Secret World of Hershey and Mars. New York: Random House, 1999.

Castner, Charles Schuyler. One of a Kind: Milton Snavely Hershey, 18571945. Hershey, PA: Derry Literary Guild, 1983.

Hershey Chocolate Corporation. Hershey's 100 Years: The Ingredients of Our Success. Hershey, PA: Hershey Chocolate Corporation, 1994.

. The Story of Chocolate and Cocoa: With a Brief Description of Hershey, "the Chocolate and Cocoa Town," and Hershey, "the Sugar Town". Hershey, PA: Hershey Chocolate Corporation, 1926.

Heuslein, William. "Timid No More." Forbes, January 13, 1997.

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