Case Study : Candy Is Dandy For Hershey

The battle was on ! Hershey and Mars two candy giants , dueling over the number one spot in $ 73 -billion -a year candy industry. Hershey lost its throne in the early 1970's and it took the company time to get back into the competitive arena. By 1985 however , Mars and Hershey were the manufacturers of the top 10 candy bars and together they shared 70% of the market. Cadbury held about 9% of the market and Nestle only 6%. Thereafter in 1988 Hershey acquired Cadbury and its share jumped from 36% to 44% of the candy market. The late 1980's and the early 1990s produced the introduction of such products as Hershey 's Kisses with Almonds , Hugs , Hugs with Almonds and the cookies and the mint chocolate bar. After facing problems in implementing a new distribution system in 1999 , Hershey restored sales , market share and earning growth in 2000 , marking its best year volume wise since 1996. For the fiscal year ending 2001 , total sales were $ 4. 5 billion which were 8% higher than the same time period for the previous year. As of 2002 Hershey was dominating the candy market with 30.3 % market share . The number two player M & M / Mars Inc's market share was 16 .8 % , while the number three competitor Nestle had 6.3 % of the market. One Factor that helped Hershey in their battle with M&M / Mars was its excellent marketing research department . Hershey 's research showed that the typical customer viewed candy as a luxury good or as a self indulgence . Because of these attitudes and beliefs , 70 % of the candy sales were attributed to impulse buying. Market research also informed Hershey that the population was getting older. In the 1970's and early 1980's young people from the age 13 to the late 20s were the dominant age group. In 1990's it was becoming the 35- 50 age group . For this reason candy industry decided to move upscale to attract the baby boom adults. For the year 2000 the median age of Americans were 40 . The national confectioners association believes that as American gets older , they tend to favor better things in life. A multiple cross sectional analysis of consumption patterns revealed that adults were consuming ever increasing percentage of candy. Therefore adult market has proven to be increasingly lucrative.

Candy Consumption by Age Group ( percent) Age Group 0 -17 years 18 34 years 35 45 years 46 + years 1980 46 percent 22 percent 20 percent 12 percent 1990 38 percent 23 percent 24 percent 15 percent 2000 33 percent 24 percent 26 percent 17 percent

For many reasons Hershey liked its competitors were looking toward the snack industry with the insight that sweet do not consist of candy. Today more sophisticated consumer look at ice cream bars , cookies and choc late granola bars when they crave something sweet. In 1999 Hershey teamed up with Breyers ice-cream to launch two item candy flavors line Breyers Hershey Milk chocolate with Almond chocolate ice-cream and Breyers Reese Peanut butter cup ice-cream with Fudge Swirls. In late 2000 Hershey acquired the breath mint and Chewing gum business of Nabisco of $ 135 billion. While Candy is Dandy for Hershey there is the shrewd realization that Candy bars alone may not give company its sweetest bottom line. Questions 1) What is the relevance of this information in Business Analysis? 2) If you are positioned as a marketing manager or operations manager of Herhsey, how this information is useful to you? 3) What quantitative techniques have been used Hershey Market Research team to identify actions to be taken against competitors.