Quest for a New Chocolate Bar

The Home Front Phase - The Heritage

William E. Dearden was a true believer in marketing. Having been a salesman, he knew all too well the importance of advertisement for positioning a product. However, when he became Hershey's CEO in 1976, the compnay was over 75 years old and it hardly advertised. He changed that by making marketing a required activity in Hershey. He also set up a process to begin strategic planning. He charged some newly hired managers to develop marketing strategies for all brands. Brent Thomas was one of these managers. When he was hired as brands manager in 1979, he inmediately set to work on marketing his brands.

In one particular meeting, while brainstorming about incremental sales and income, a vice president approached Brent with concerns some senior managers had about a particular company entering the U.S. with a totally new chocolate flavor. At the time, Brent was the brand manager of the milk almond bar, which is a Hershey bar, plain with almonds. Hershey certainly owned the lion's share of that part of the business in the United States. Being the Unites States the largest confectionary market in the world, it was apparent to some senior executives that Hershey's leadership was going to be challenged by this company. A well respected company around the world for the quality of its products, this company was strong everywhere but the U.S., and it was known to be a fearless rival. Hershey executives were all but certain that Cadbury was coming into the United States in a big way.

Brent gathered sufficient intelligence to assess the extent of the new threat. He found out that Cadbury had begun testing some products in New England. They had already started setting up a plant in Hazleton, Pennsylvania. They were already selling Dairy Milk, and they had several bars on the works. All of their chocolate bars were different to the Hershey bars in one particular respect. Cadbury's products had a distinct European flavor, a flavor that Hershey had not attempted to introduce in America in all of its history. Cadbury did not have much of a presence yet, but Brent knew that the Hershey flavor was going to be challenged soon. Brent did not have to develop a product concept. What he needed was a product with this flavor to beat Cadbury to the marketplace.

The decision was made that Hershey would develop a bar of its own with a unique European flavor. At that time, Brent reasoned, "... we would rather cannibalize ourselves than have somebody else do it, very simple... if we are very successful, we will probably lose part of our Hershey bar business, but we would gain in the long end."

Through the process of looking for this "new" flavor, Brent insisted that the consumer be put first. Therefore, numerous focus groups and central location tests were being planned to evaluate the chocolate flavors that were going to be developed. The intention was to lay out everything in qualitative and quantitative terms. As Brent was quick to explain, "I really believe that what gets measured gets managed and we are measuring a lot of different things..." Brent's group had numerous chocolate pastes to choose from. One of those was a recently developed paste named "Hershey Lite V." Right around this time, this new paste was being used in the chocolate products that were being introduced with much expectation in the Canadian market.

Test after test, American consumers clearly demonstrated their preference for the "Hershey Lite V" when tested against other products. Brent felt very lucky that this paste had already been developed in Canada. This was a fortuitous coincidence which Brent was more than happy to profit from. It cut the product development cycle to a few months. It quickly became evident that the "Hershey Lite V" was the product they were looking for.

Brent's task now was to define the products that this chocolate paste would go into. But the more he thought about this, the more confused he felt. Was Hershey now going to have two chocolate bars: the regular "Hershey" bar -- what Hershey employees fondly call "the heritage" -- and a "European" bar? If that were so, were there going to be two expense tracks, two advertising strategies, two types of customers, two of this... two of that...? This was confusing indeed!

Hershey never had to face anything like this in the past. Brent knew that the decisions that needed to be made at this critical moment had the potential for changing the company for ever. He needed to make sure that the changes worked to Hershey's interests. But he suspected that something had to be given in exchange. He would repeat to himself: "... we would rather cannibalize ourselves than have somebody else do it..." Was this a sound strategy to follow? If Americans became extremely fond of this European-like chocolate flavor, what would happen to the unique American brand of chocolate? This was Hershey's mainstay! Would this introduction by the Hershey Foods Corporation -- the same company that introduced the American public to the pleasures of the milk chocolate with its unique flavor -- make it easy for Americans to migrate to other European-like bars? Others at Hershey would ask a different question: "Is there another way to face the Cadbury threat?"

There were other considerations that also needed as much attention. The "Hershey Lite V" paste was about 5% more expensive than the regular Hershey paste. Was this product going to be sold at a higher price than an equivalent Hershey bar? Launching a new product costs millions of dollars. What were the chances of this new bar succeeding if it was already handicapped by a higher price tag? How could Hershey get around this hurdle?

There were also brand issues that needed to be resolved. Was this new product going to have the Hershey name on the package and, literally, on the chocolate bar itself? Or, was the new chocolate simpy going to be overbranded with the Hershey name? Or, were the products going to be introduced with a brand of their own? Someone would ask, "What's in a name anyway?" Brent, on the other hand, would ask, "How far can you take your brand without causing irreperable damage to it? How strong is the Hershey brand?" Senior managers already had had time to debate those issues after Hershey Canada introduced the "Hershey Lite V". But that was Canada, a small division that at the time was struggling for survival, and the Canadians were given what they asked. This battle was now in the home front.

Another concern was production. The only facility that could produce the "Hershey Lite V" was Smiths Falls. Due to slow sales in Canada at the moment, there was some extra capacity. Was this going to be enough to sustain U.S. market needs? The Canadian market was about 10% what the U.S. was. If the product became really successful, could the Canadian operation still be able to deliver the chocolate to the largest confectionary market in the world, as well as Canada's own market? Could this same flavor be reproduced somewhere else... quickly? Brent knew very well that the capital restrictions the Canadians faced when developing and launching the "Hershey Lite V" were still in place.

While brainstorming on a launch strategy with his group, Brent was faced with the decision about promotion. Would the product be promoted at the national level, or regionally? Would it be distributed nationwide, or in selected markets? If the latter choice was made, what would those markets be? One basic question kept coming back, "Who exactly was Cadbury likely to target with their upcoming products?"

As a brands manager, Brent was going to make the most important recommendations of his Hershey carreer yet. He was about to face Hershey senior managers with what he thought should be the "Hershey Lite V" launch plans. Extraordinary circumstances require extraordinary plans. Brent knew he was taking the company to unchartted waters. His launch strategy was ready.