Quest for a New Chocolate Bar

The International Phase

When Larry B. Campbell was asked to write the final project report for a product named "Hershey Lite" -- a European-style milk chocolate originally targeted for the Canadian market -- in the conclusion, he made a recommendation that this chocolate product be considered for international marketing. Up to that moment, in 1984, Hershey's international presence was limited to North America, with a plant in Smiths Falls, Ontario, Canada, since 1963, and Guadalajara, Mexico, since 1969. In the rest of the world, Hershey's presence and market share was minuscule to nonexistent. Many critics say that Hershey has been too timid when it comes to market its product to the rest of the world, and thus it has missed untold opportunities.

In 1999, Hershey's presence in the world continues to be insignificant when compared to other foods companies like Nestlé, Cadbury, Mars and a handful of other major world players. Some of these companies have proven to be tough competitors, sometimes willing to squeeze the profitability of a whole sector of the market in one country in order to prevent newcomers like Hershey from gaining any meaningful ground. Despite Hershey's extraordinary resourcefulness and strength -- having maintained the number one or two spot in the confectionery market in the United States during the 20th century -- the company has not been able to translate this know-how to market share in the Pacific, Europe, Africa, or the rest of the Americas.

Traditionally, Hershey products have been marketed in places like Panama, the Philippines and Korea, where the US has had a continuous military presence. Emerging democracies in Eastern Europe, where high quality chocolate products are virtually unknown, may offer interesting opportunities. Developing economies in Latin America, where a growing population in the last decade has had a few more "pesos" to spend in nonessential food items, are beginning to develop a predilection for a particular chocolate flavor. As Mark Potts knows very well, after having worked for many years in Canada as brands manager and more recently as a product developer for Hershey's international division, once a generation starts to favor one particular brand of chocolate, the company owning the brand has the opportunity to shape that country's flavor profile for generations to come. All confectionery companies in the world regard China -- a country whose large population did not begin to consume chocolate products until recently -- as one of the largest opportunities.

However, where there is an opportunity, there is are many hurdles as well. In the late 90's, Eastern European economies, after much optimism, quickly became too unstable; Latin American economies tend to fluctuate wildly from one decade to the next; the distribution system in some Pacific countries, particularly in Japan, is a monumental barrier for entry; the Chinese hardly eat chocolate; some countries -- like Brazil -- are saturated with chocolate products coming from Europe, the US and from local companies; chocolate preferences within a country may be wildly fragmented... and the list goes on.

As Hershey continues to make modest inroads into some countries, its senior management continuously wrestle with many issues.

• Brand

Should Hershey use the "Hershey" name when marketing its products overseas? Or, should it use "Symphony" or "Smooth 'n Creamy"? Or, should it use something else?

• Product

What products should Hershey market first? Or most?

• Production

  Should the products be manufactured in the US and/or Canada? Currently, Hershey's plants in North America are some of the most efficient in the business. By exporting the product from the US, Hershey is penalized by tariffs and import barriers. On the other hand, manufacturing locally can compromise quality. As Mark Potts would say, "You cannot ship milk around the world."

• Flavor

  After having tried for twenty years to sell the "Hershey" flavor in Canada, Hershey senior management learned that what's liked in America, it's not necessary liked everywhere in the world. Only after a change in flavor was made, the Canadian division became profitable. On the other hand, even in Canada, about one third of the population did like the "Hershey" flavor. As Hershey managers look at the world they wonder, which flavor should Hershey use?

• Corporate values

  The Hershey Foods Corporation was founded with a very unique corporate mission. M.S. Hershey's vision of corporate ethics and social responsibility are to a large extent alive in Hershey today. But as Hershey personnel spread around the globe in search of opportunity, it may become more difficult to convey these unique cultural values to employees in local offices far from home.

• Growth

  Hershey has been the largest or second largest confectionery company in the United States during this century . Like any other company, Hershey needs to grow. Are there possibilities of growth for a company that dominates large segments of the chocolate business in the US? Could the international business be this source of growth? Most of Hershey's products consumed outside the US are being primarily produced by Hershey Canada. This division has grown from less than 200 employees in 1983 to close to 600 today to supply the growing demand for the "Symphony" flavor to the US and beyond. Its production capacity has increased as well. The Canadians, like Don Thomson, welcome the challenge of growth. Will Hershey Canada be prepared to support the growth of the international business?

Clearly, many questions cry for answers as Hershey attempts to become a major world player in the international chocolate business of today.