Hershey Foods Corporation: Confectionery Division Marketing Plan

The marketing plan has been formed on Hershey Foods Corporation’s confectionary division and the chosen product is Hershey chocolate which has taken the leading position in the world market. The macro-environments that influence an organization’s activities are demographic, economic, political-legal, ecological, socio-cultural, and technological. These factors influence the Hershey’s production and marketing of chocolates. Though mars have a huge allocation in advertising, and other sectors, but variety of selections have given Hershey the leading position in chocolates market. There are five modes of distributions, like railroads, truck, waterways, airways, and pipelines. But Hershey Corporation only uses waterways for raw materials, truck for finished products. Hardly they use airways for distribution. Hershey Corporation uses producer to wholesaler to consumer channel for distributing chocolates within a short distance whereas they use producer to wholesaler to retailer to consumer where the distance is long.

This organization has some strength, which leads them towards success, some weaknesses, which downgrade the company’s brands, some opportunities, which benefit the firm and threats also which prevent the firm from reaching the goals. All these things are the situations of SWOT analysis. To make a marketing plan, Hershey considers some issues like organization, product-market, and competitive and environmental situations. They consider financial and marketing objectives while developing marketing plan. Marketing strategy contains assumptions of deciding target market, positioning, product/service, pricing, distribution, market communication and market research. These factors further lead to a successful market plan. A well distribution of responsibilities can only ensure an organization’s success. Action program does this important job for an organization like Hershey Foods Corporation. Income statement that has been given reflects the revenues and corresponding expenses of chocolates, which give clear concept about the financial condition of Hershey Corporation. At the end of the planning, a good controlling can accomplish the ultimate goal of an organization. Hershey Foods Corporation has done this step and found some contingency. If they would be solved, then they will lead them towards a fruitful end of a marketing plan.

Introduction

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The Hershey Foods Corporation is the number one confectionery in North America. Milton Hershey who was born in 1857 of Pennsylvania Dutch decent was the founder of this company. At 15, he became an apprentice to a candy maker. By age 30, Hershey had begun the Lancaster caramel Company. Hershey manufactures more than fifty five brands of confectionary products including the familiar Hershey’s Milk Chocolate bar, Hershey’s Syrup, Hershey’s Cocoa, Almond Joy, Mr. Good bar, Hershey’s Kisses, Kit Kat, and Reese’s Peanut Butter Cups, Ready-to- eat puddings in four candy bar flavors. Its Hershey Chocolate U.S.A. division, the nation’s largest chocolate producer, makes up approximately 44 percent of the U.S. chocolate industry. His firm was built to reflect the utmost in integrity, honesty, and respect. Hershey also believed in treating consumers fairly and provided the highest quality mass-market product. Everything he did was based on the values, which influenced Hershey’s relationship with customers, employees, and the community. So the product that has been chosen for developing a marketing plan is Hershey Chocolate of Hershey Foods Corporation, which is categorized under Hershey Confectionary Division.

Market Situation

Current Hershey's principal products are chocolate candy products. Many people are familiar with HERSHEY chocolate bars, KISSES and other chocolate products now a day. Sales of seasonal chocolate confectionery through all channels are estimated to reach some $3.3 billion in 2005. Looking at 2004 sales, which include verified sales for all holiday products, the market stood at $3.4 billion. Between 1999 and 2004, sales of seasonal chocolate increased 1.4% at current prices, which reflects a decline of 10.5% at constant 2004 prices. The overall chocolate market increased 7.6% between 1999 and 2004, but at constant 2004 prices this represents a 5% decline from 1999-2004.
A number of factors have contributed to the decline in seasonal chocolate sales. This report focuses solely on confectionery products that can be assigned to a specific holiday, but some marketers are blurring seasonal lines by making products that can be used for more than one holiday. For example, Hershey’s kisses leverages a number of fourth-quarter holidays by selling bags of red, gold, brown, and orange. But Hershey believes that in accordance with changing tastes, they are making different flavor chocolates and giving gift items with that, which are achieving the national and international market.

Macro-environment

Macro-environment is the larger societal forces that affect the microenvironment- demographic, economic, natural, technological, political, and cultural forces. The company and all of the other actors operate in a larger macro-environment of forces that shape opportunities and pose threats to the company. In the following writings it will be examined that how these forces affect marketing plans of Hershey Foods Corporation.

Demographic Environment

Demography is the study of human populations in terms of size, density, age, gender, race, occupation, and other statistics. The demographic environment is of major interest to marketers because it involves people, and people make up markets . So when Hershey Foods develops marketing plan, they consider the population and other corresponding factors such as the population size, age of the customers who buy Hershey Chocolates, and occupation- as these factors affect the selling quantity, price, quality, market demand etc.

Economic Environment

Markets require buying power as well as people. The Economic Environment consists of factors that affect consumer purchasing power and spending patterns. Since the 1990s, American consumers fell into consumption frenzy, fueled by income growth, a boom in the stock market, rapid increases in housing values, and other economic good fortune. But now it is the age of “squeezed consumer”, which implies that people have been more careful about spending money as it is being costly to maintain a good standard of living[5]. So while Hershey Foods Corporation develops their marketing plan, they consider the economic condition of their existing consumers and their spending patterns; the people, who can’t effort their product because of high price and the people also, who might switch the commodity if the price changes or gets higher.

Political-Legal Environment

Marketing decisions are strongly affected by developments in the political environment. The political environment consists of laws, government agencies, and pressure groups that influence or limit various organizations and individuals in a given society. That’s why Hershey Foods Corporation is always concerned about the enforced and changing law and order, because their business policies and marketing plans are affected by those factors.

Ecological Environment

The ecological environment involves the natural resources that are needed as inputs by marketers or that are affected by marketing activities. Renewable resources like forests, foods have to be used wisely whereas nonrenewable resources like oil, coal, and various minerals create a severe problem. As a result the firms, which are manufacturing products using scarce resources, are facing high production cost. This type of situation often impedes firms for producing further as the rate of return and profit become uncertain and relatively low.

On the other hand, the existing industries also pollute environment. Disposal of chemical and nuclear wastes; dangerous mercury levels in the ocean; the quantity of chemical pollutants in the soil and food supply; and the littering of the environment with plastics, and other packaging materials cause a great damage to the environment . Sometimes it creates air and sometimes water pollution, which degrade the environment.

Hershey Foods Corporation is always aware of their reputation and public sentiments. For that reason they try to make chocolates and other foods without causing any pollution, and provide some social awareness program, which can directly or indirectly impress the chocolate consumers. 3M runs a Pollution Prevention Pays Program that helps prevent pollution at the source- in products and manufacturing processes. Between 1975 and 2002, the program prevented 857,282 tons of pollutants and saved $894 million .

Socio-Cultural Environment

Socio-cultural forces are the influences in a society and its cultures that bring about changes in attitudes, beliefs, norms, customs, and lifestyles. Profoundly affecting how people live, these forces help to determine what, how, and when people buy products. Socio-cultural forces present marketers with both challenges and opportunities. As a result, to accomplish goal, Hershey Foods Corporation has a special consideration and for what they examine the issues of demographic and diversity characteristics, cultural values, and the consumer movement.

Technological Environment

Technological environment is the force that creates new technologies, new product and market opportunities. The technological environment is perhaps the most dramatic force now shaping our destiny .  It has released such wonders as antibiotics, organ transplants, laptop computers, and Internet; horrors as nuclear missiles, chemical weapons, and assault rifles; mixed blessings as automobile, television, and credit cards.

Hershey Foods Corporation is a food manufacturer and distributor that also dependents on technological advancements. For an example, consumers may have ideas about the foods including their quality, price, and availability by traveling into their web site. On the other hand, customers can use credit cards to buy their food items or chocolates. In addition to that, they use another special security system to stop stealing of chocolates.

Competition

Although Mars is second best in chocolate sales, Milky Way is not focused upon as much as M;M’s or Snickers. Though Mars’s advertising at $164 million beats out Hershey’s $140 million, M;M’s share of advertising, at $78 million, is much heavier than Mars’, at $20 million.

In the past, the emphasis of Milky Way production did not include giving the public a variety of selections from which to choose10. As a result of this, Hershey’s has taken the lead in candy bar production. The Milky Way Dark campaign only brought about $10 million of the overall market scale of $150 million in 1999.
Hershey and Mars competitions have evolved from different views in the industry. Hershey has a more friendly relationship with the public as compared with Mars, which is a privately owned company and chooses to develop its own products. As a result of this, chocolate bar segment with 44% of sales, while Mars trails behind with 35%. In spite of this, Management Science Associates reported in Candy Industries July 2000 issue that Mars holds 62% share of volume in vending machine sales over Hershey’s 28%.

Distribution

Distribution means activities used to move products from producers to consumers and other end users11. A distribution mode implies the means of moving goods from one location to another. There are five major transportation modes or means of moving goods.

Railroads

Railroads carry heavy, bulky freight that must be shipped long distances overland such as minerals, sand, lumber, chemicals, farm products etc. Hershey Foods Corporation does not use railroads to carry their chocolates.

Trucks

Trucks provide the most flexible schedules and routes of all major transportation modes, because they can go almost anywhere. Trucks usually haul small shipments of high-value goods over short distances as trucks have a unique ability to move goods directly from factory or warehouse to customer. Hershey Chocolates are very famous all over the world and it needs to be carried over different countries and places12. That’s why Hershey Foods Corporation does not use trucks to distribute chocolates to different countries, but they use their own cargo service to distribute the chocolates within their own country.

Waterways

Water transportation is the cheapest method of shipping heavy, low-value, nonperishable goods, such as ore, coal, grain, and petroleum products.  Hershey Foods Corporation usually uses waterways to carry raw materials for chocolates. And sometimes this mode is used for carrying finished goods too.

Airways

Air transportation is the fastest and most expensive form of shipping. It is used most often for perishable goods; for high- value, low-bulk items; and for products requiring quick delivery over long distances, such as emergency shipments. As it is costly to distribute the good, Hershey Foods Corporation hardly uses this mode.

Pipelines

Pipelines, the most automated transportation mode, usually belong to the shipper and carry the shipper’s products. Most pipelines carry petroleum products or chemicals. Hershey Foods Corporation does not use this mode to distribute chocolates to different places or countries.

The selection of distribution levels is dependent on various factors. That’s why different companies consider different factors to select distribution levels related to their producing goods. For an example, Hershey Foods Corporation considers the following factors for choosing the levels of distribution and number of levels employed to distribute chocolates. They are:

•  Surety of remaining the goods well and hygienic and no damage during distribution.
• Cheap and less time consuming to reach the consumer.
• Simple distribution through simple distribution channel.

Naturally organizations are familiar with four numbers of levels or channels and three types of distribution to distribute the goods.  When Hershey Foods Corporation Distributes chocolates, then they basically use the channel or levels of three people that is from producer to wholesaler to consumer. But if it is the distribution from one country to another, then they have to select the longest one, which involves producer to wholesaler to retailer to consumer. As the distance increases, the channel gets longer.

Opportunities and Issues Analysis

Strengths and Weaknesses

This section of the marketing plan marks the first part of the SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats. The analysis of strengths and weaknesses focuses on internal factors that give the organization certain advantages and disadvantages in meeting the needs of its target markets. Like other organizations, Hershey Foods Corporation has strengths and weaknesses. Strengths that Hershey Foods Corporation has in marketing plan of making and distributing chocolates are given below:

• Hershey Foods Corporation has the utmost reflection in integrity, honesty, and respect.
• This organization believes in treating consumers fairly and to provide the highest quality product at a competitive price that will ensure an adequate return on investment and profit.
•  Good relationship with the customers, employees, community, shareholders, suppliers etc.
• Employees are provided specific written policies which contains policies on the use of corporate funds, resources, and conflict of interest, law prohibition on price-fixing, personal responsibilities of employees etc. that provide guidance for handling ethical issues
• Top-level management with Good number of skilled and efficient persons15.
• Adequate money supply for both making and distributing chocolates.

These are the strengths that are derived from the environmental analysis of Hershey Food Corporation which determine the good activities that work behind their success in business world.

Weaknesses refer to any limitations that a company might face in marketing strategy development or implementation. In accordance with strengths, Hershey Corporation has some weaknesses too, which actually downgrade the image of the company’s brands. Some of them are given below:

• Over reflection of integrity, honesty and respect sometimes make employee boredom and less interested in working.
• To maintain a good relationship with the employees, customers, shareholders, suppliers, community, Hershey Corporation has to spend a lot of money, which sometimes reduces the profit level. And when profit level goes down there is possibility of making inferior goods and services.
•  When the policies are not absolutely followed by the corporation, then it creates frustration, misunderstanding, which deteriorates the working environment for both the employers and employees that is also harmful for the consumers.
• Inadequate arrangements of transporting goods often cause less volume of supply, selling and less profit.
• Though frequent changes in flavor and tastes cause higher cost, but they have to do it to compete with the competitors and to satisfy the consumers.

These weaknesses often cause less profit and bad reputation for the company. For that reason, the Hershey family has to keep sharp eyes on these factors, which are difficult in some cases.

Opportunities and Threats

The second situation of SWOT analysis examines the opportunities and threats that exist in the environment. It focuses on factors that are external to the organization. Opportunities are situations that exist but must be acted upon in order to benefit the firm. Some opportunities that can stem from many sources are given below:

When a company is threatened by a competitor’s new-product introduction, a defensive strategy may be required. In some cases such a threat can be transformed into an opportunity if the firm can develop and launch a new product that meets or exceeds the competition’s offering17. Hershey Foods Corporation also transforms threatened into an opportunity by launching a new chocolate with a new flavor.

Threats, on the other hand, refer to conditions or barriers that may prevent the firm from reaching its objectives. If a company introduces a new concept to defeat another company, then it can be categorized as threatened18. To transform a threatened into opportunity, a company can hire outside consultants. Hershey Corporation often uses this technique to convert threatened into opportunity.

Issues Analysis

In issues analysis, sometimes called SWOT analysis, an organization identifies its internal strengths, and weaknesses as well as external opportunities and threats. Issues analysis search answers of two general questions

• Where is the firm now?
• In what direction is the firm headed?

These questions are answered by recognizing both company strengths and weaknesses relative to competitors, searching the environment for potential opportunities and threats, assessing the organization’s ability to capitalize on opportunities and to minimize or avoid threats, and anticipating competitors’ responses to company strategies.

In planning its marketing strategy, a firm should consider four factors. Hershey Foods Corporation also considers these issues while planning19. The issues are:

• Organizational Situation: What are the company’s objectives, capabilities, and     resources?
• Product-market Situation: Is the product category relative to the market place, growing, mature, or declining? What are the current size and expected future growth rate of the product category?
• Competitive Situation: How many competitors are there? What are their characteristics and marketing approaches? Can/should the firm be a leader, a market challenger, a market follower, or a market richer?
• Environmental Situation: What industry wide and company- specific environmental opportunities and threats are most important?

Objectives

Financial Objectives

The financial objectives deal with revenue, cost and profit, and sometimes credit. During making marketing plan an organization needs to collect information about the expected sales, ultimate consumers so that they can have expected amount of revenue or profit and the cost also do not exceed the expected amount. Financial objective also deals with credit. Because in some cases, sufficient money supply can only bring a company’s best output20.

Marketing Objectives

Marketing objectives are normally described in both quantitative terms like dollar sales, percentage profit growth, and market share, etc. And qualitative terms like image level of innovativeness, industry leadership role, etc Like Hershey Foods Corporation, other organizations set their objectives, which are specific, because vague objectives lead towards uncertainty and less amount of profit. The strategic objectives should be measurable by money or it should be in that form by which people can make monetary transactions. If the objective is real, relevant and achievable, then employee and related people get interested on that. Otherwise it seems impossible and people don’t get involved with this type of works. Time bound is a very important factor of making a marketing strategic plan. Doing work in right time, ensure maximized profit and reputation.

Marketing Strategy

Marketing strategy is the marketing logic by which the company hopes to achieve profitable relationships.

Target Market

Target marketing involves evaluating each market segment’s attractiveness and selecting one or more segments to enter. A company should target segments in which it can profitably generate the greatest customer value and sustain it over time. Hershey Foods Corporation considers demographic and geographic factors to target market. Demography is the study of human populations in terms of size, density, age, gender, race, occupation, and other statistics. So while Hershey Corporation sets target market for chocolates, they consider the demographic condition of the ultimate consumers as choices vary in accordance with these factors. On the other hand, different geographical environment, different situation cause difference in choice. That’s why before setting target market Hershey Corporation considers this factor.

Positioning

Market positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Thus, marketers of Hershey chocolates plan positions that distinguish their products from competing brands and give them the greatest strategic advantage in their target markets23. As it is the matter of customer satisfaction and company’s reputation, so company first identifies possible competitive advantages upon which to build the position. To gain competitive advantage, the company must offer greater value to target consumer. It may be by offering lower price compared to competitors or any other way which attracts the consumer.

Product/Service

The product/Market opportunity matrix explains market penetration, market development, product development, and diversification options. While Hershey Foods Corporation market chocolates, they consider the type of the product, its thickness, and its shape, used materials suitable temperature to select its packaging pattern. The packaging plays a vital role here as most of the consumers are kids and nice packaging attracts them very much24.

At the beginning, Hershey milk chocolate was in a big size, but evaluating the customers’ preferences, they found that customers prefer these chocolates in a smaller size so that it can be carried easily25. And Hershey Corporation did that showing respect to the customers’ opinion, which increased its demand more.

Pricing

Price is what a buyer must give up to obtain a product. Marketers can raise or lower prices more frequently and easily than they can change other marketing mix variables. Price is an important competitive weapon and very important to the organizations as it implies the total revenue of the firm.

Through pricing, people may have idea about the purchasing power, which also implies a country’s economic condition. Realistic pricing goals require periodic monitoring to determine the effectiveness of the company’s strategy. Pricing objectives can be divided into three categories:

• Profit oriented: Profit oriented objectives include profit maximization, satisfactory profits, and target return on investment.
• Sales oriented: Sales-oriented pricing objectives are based either on market share or on dollar or unit sales.
• Status quo: Status quo pricing objective maintains existing prices or meets the competition’s price.

Value cost must be an issue when establishing price, because many financial terms and conditions are dependent on it. It is very natural that price creates competition in most cases and it is also the main reason behind success and failure. But sometimes organizations choose break-even pricing when they found that it is not possible to ensure profit. It should be mentioned that break-even pricing is that point, where revenue and cost get equal26.

Distributing Outlets

Distribution outlets are concerned with making products available when and where customers want them. As mentioned earlier, distribution chain or channel, levels of distribution- all these things play a major role in marketing plan strategy of Hershey Foods Corporation.

Marketing Communications

Communication is the process of exchanging or sharing meanings through a common set of symbols. So marketing communication can be interpreted as the process of exchanging meanings of the people who are directly or indirectly involved in market.

Sales Force

Sales force conducts all the activities related to selling. For that reason, Hershey Corporation pays much attention to them, so that their desired sales can be achieved. In this purpose, they offer bonus, increment, sales commission, which play the role of communication between employer and employees27.

Sales Service

To give a higher quality services to the consumers, Hershey Foods Corporation up to date the employees with new policies of satisfying the customer.

Direct Marketing

Direct marketing includes snail mail, e-mail, telemarketing, and Internet presence. If needed, organizations may use these sources to communicate with ultimate consumers to up to date the product information. Organizations can communicate and send documents also if it is needed.

Sales Promotion

Sales promotion and advertising are not same. Sales promotion includes data sheet, product brochures, sales giveaways, sales incentive plans, trade shows, customer perks, etc which also used as marketing communication source of marketing strategy.

Public Relations

Public relation is the third-party print media that is unpaid, typically using press announcements. This also used as medium of communication, which can cover a large area than any other sources.

Advertising

Advertising is impersonal, one-way mass communication about a product or organization that is paid for by a marketer. It increases knowledge about a new product and sale volume as well. Hershey Foods Corporation spends much money in this sector that really attracts people to buy their chocolates.

Market Research

There are basically three types of researches. They are:

• Exploratory Research: It is one kind of research to gather preliminary information that will help define problems and suggest hypotheses.
• Descriptive Research: It is one kind of marketing research that is applied to better describe marketing problems, situations, or markets, such as the market potential for a product or the demographics and attitudes of consumers.
• Casual research: Casual research is one kind of marketing research to test hypotheses about cause-and-effect relationship29.

For the Hershey Foods Corporation, descriptive research carries fruitful output. By developing this type of research they gathers information about market condition that is market problems, market potential for a product, different attitudes of consumers, etc. This information helps their business to proceed further. One thing is that, Hershey Foods Corporation follows this research method to make marketing plan of their confectionary division and basically for chocolates.

Action Program

Marketing Strategy has been developed, but the responsibilities have not yet been distributed; at this moment, the marketing plan will not be successful, in some cases impossible. In respect of Hershey Foods Corporation, to develop the marketing strategy of the product of chocolates that is under confectionary division, Hershey has recruited different departments and persons. The market specialists who are recruited for market analysis identify their target market. It should be done first before doing any research but it is not much costly. Positioning refers to the customer opinion. Hershey Customer Care unit has done this job. It is necessary to do this job before developing the plan of producing further. This strategy cause some costs to the company, as it requires survey.

Hershey requires this strategy when they go for producing old chocolates in a different taste, package, or shape. Production and packaging unit of Hershey Corporation, which cost huge money, to develop has done this. Hershey Corporation is very conscious about pricing. That’s why they have to pay attention in pricing objective and methods to apply the appropriate one in their research30. Hershey Foods Corporation determines price combining all units’ decisions as it is determined by considering all the costs accumulated by different departments. The strategy has been applied before marketing the product and it does not cost much money.

Distribution, communication, and research are interrelated. To distribute, commodity communication is needed. Hershey Foods Corporation distributes their chocolates in an appropriate method and the selling and administrative unit decides it and customer care also as it is related with communication. These are the last strategies of marketing. Its cost depends on distance and aspects that are going to be considered while increasing marketing.

Controls and Contingency

Control is the last step of any kind of planning. Hershey Foods Corporation has applied controlling at the end of the planning before going to huge production. They have seen that everything is good, but if they can reduce distribution cost from 5.0 to 3.0 cents, then they can reduce the selling price by 2.0 cents, which can increase their selling by 5%. The steps that management would take in response to this contingency are- they can provide another new cargo of their own to distribute chocolates only or they can reduce exporting to those areas where it costs high to distribute commodity. If Hershey Foods Corporation can overcome this contingency in marketing plan of chocolates, then the long-lasting top most position in chocolates market will be more assured for Hershey Foods Corporation33.

References

1. Philip Kotler ; Gary Armstrong (2006) Principles of Marketing, 11th edition, Pearson Education, Inc.
2.  William M, Pride ; P. C. Ferrell Marketing Concepts and Strategies, 10th edition, Pride and Ferrell, 2000
3.  Joel R. Evans ; Barry Berman Marketing, 4th edition, Macmillan Publishing Company, 1990
4. Charles W. Lamb, Jr. ; Joseph F. Hair, Jr. ; Carl McDaniel, 5th   edition, South Western College Publishing, 2000
5. Hershey Foods Corporation webs Publication:  coinoptoday.com`

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