Hershey's Marketing Plan

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De La Salle University-Dasmariñas College of Business Administration Marketing Department

In Partial Fulfillment of the Requirements in Product Management c

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c c c Submitted by: Del Mundo, Jose Carl Mallanao, Roselyn Matienzo, Judith Navarro, Michelle Piche, La Purisma

Submitted to: Ms. Chona Bautista

2010 c

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c c c aershey¶s is the largest producer of quality chocolate in North America and a global leader in chocolate and sugar confectionery. Its principal product groups include chocolate and confectionery products; food and beverage enhancers, such as baking ingredients, toppings and beverages; and gum and mint refreshment products. aershey¶s operate as a single reportable segment in manufacturing, marketing, selling and distributing various package types of chocolate and confectionery products, food and beverage enhancers and gum and mint refreshment products under more than 80 brand names.

aershey¶s chocolate bar has been tagged as the ³Great American Chocolate Bar´ manufactured by the aershey Company, invented by Milton aershey.

aershey¶s will be reinventing itself by producing a low-calorie dark chocolate which will be tagged as a healthy snack in contrary to the recent issues that the confectionery industry has faced.

aershey¶s Company, although experienced flunking market share over the past years, continues to leverage the marketing and sales leadership in the Philippines. With a forecasted annual growth of 13%, aershey¶s believes on the success of this plan. c c

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c   is a confection in bar form comprising some or all of the following components: cocoa solids, cocoa butter, sugar, milk. The relative presence or absence of these components forms the subclasses of dark chocolate, milk chocolate, and white chocolate. It is also referred to as a ³candy bar´ in Australian English, British English, Canadian English, Indian English, Irish English and New Zealand English; it is a form of confectionery usually packaged in a bar or log form, often coated with chocolate, and sized as a snack for one person. Certain brands of chocolate bars are sold as being for nutritional supplementation purposes. These bars contain protein and various vitamins while still retaining a sweet taste.

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c The Philippines confectionery market reached a value of $164.8 million in 2005. It is one of the à
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c# c The dominance of the Sugar confectionery will continue over the next five years. Chocolate follows this with one quarter of the market held. But with a shift from 11.5% in 2005 to 13.4% in 2006, the product became more efficient over the 2006 fiscal year. 
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c At maturity stage, the product has experienced slow growth in sales due to its marketing mix and many key players in the industry. Also, it has shrunk in its market share which greatly affected the annual profit f the company. 
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 c The product is not seasonal since it offers one of the greatest snacks in the Philippines. Although it is very much purchased during the Valentine¶s and Yuletide Season, it is always available to the market for consumption any time of the year. 
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c c The annual profit rate of the confectionery industry is about 30% of the whole food industry, and has achieved a steady annual growth rate of the past ten years of 13% more or less. 
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c The bargaining power of buyers is increased by two factors: a number of large volume buyers and the buyers¶ relatively low profits from the product. aowever, the bargaining power of buyers is low to moderate because of the industry¶s differentiated products, the presence of switching costs, the lack of threat of backward integration and the reliance on the industry¶s product.c 
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c The bargaining power of suppliers is decreased because the industry is an important customer of the supplier group and the supplier does not pose a threat of forward integration. But the bargaining power of suppliers is moderate to high because the supplier group is concentrated; there are no substitute products, and the importance of the supplier¶s product to the industry. 
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c The chocolate and cocoa industry must compete with numerous substitute products that can threaten the industry¶s profitability. Alternate cooking flavors are a substitute product to chocolate and cocoa. These flavors include vanilla, lemon, butter, or mint flavoring. These flavors can be used by the industry¶s customers that use chocolate and cocoa products for industrial and cooking use. Another significant category of substitutes is à
 à. Many nonchocolate snacks are available, such as peanut butter, fruits, potato chips, ice cream, etc. There is no need to stick with a specific snack other than personal preference. Further, many consumers consider chocolate unhealthy and are willing to substitute it readily. 
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c $ c The confectionery industry has been one of the consumers¶ favorite; however, the trending issues of chocolate as an unhealthy snack make it hard for the company to penetrate the market. 
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c% c Although the chocolate and cocoa industry has partially differentiated products, the industry¶s intensity of rivalry among competitors is high. The industry has numerous, equally balanced competitors, is slowly growing, has high storage and fixed costs, and has high exit barriers. All of these conditions

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create price wars, advertising battles, new product lines, and higher quality of customer service in the chocolate and cocoa industry. 
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  c The chocolate and cocoa industry relies heavily on milk for their products. The modern milking machine is a technology that is used to milk cows efficiently, safely, and satisfies all milk hygiene requirements. The main benefit for the chocolate and cocoa industry is the ability to reduce time spent on traditional milking routines, which in turn reduces labor costs. We expect that the chocolate and cocoa industry will harvest financial benefits by reducing manufacturing costs through additional mechanical improvements and innovations. aowever, the chocolate and cocoa industry lacks support of Non Governmental Organizations (NGO) and Local Government Support, which limits the farmers¶ access to business guidance, funding, and continuing education. Due to the lack of resources, support, and education opportunities, farmers are unable to learn how to use new technologies (Whinney, 2007).

 c   c In recent years, the industrialized world has begun to focus more heavily on healthy eating habits. This is a direct result to the increased instances of diseases

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linked to poor eating habits, such as cancer, diabetes, and heart disease. This causes a great threat to the chocolate and cocoa industry. c

 c £c Gasoline has been increasing at a surprising rate in the past few years. This trend is more than likely going to continue in the coming years for many reasons, such as natural disasters reducing supplies, and oil becoming a scarcer natural resource not only in the nation, but as well as the whole world. This will affect the chocolate industry in multiple ways. First, production and transportation costs will increase as gasoline prices increase. Second, as gasoline prices rise, the demand for ethanol will also increase. Sugar is one primary ingredient for creation of ethanol. Therefore, as demand for ethanol increases, sugar demand increases. The added demand for sugar for other purposes either decreases the sugar supply to the chocolate industry or increases the price of the commodity. Both these effects create additional costs for the chocolate industry and will affect sales and/or profit margins.

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 c The trend has caused recent laws to be passed by the Bureau of Food and Drug that forces food manufacturers to post ingredient and health information for consumable items. These laws compelled food manufacturers to provide customers with previously unknown health information therefore discouraging sales of many unhealthy products, such as chocolate. Further, as new ingredients

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are found to be a health risk, the BFAD will most likely require food manufacturers to post the new information to the public.


c  c Consumers constantly change their preferences for products. It is no surprise that consumers¶ wants for chocolate products have changed to a desire for richer products, which has resulted in commercial bakeries using higher quality chocolate and cocoa product industry to produce its goods. Further, consumers also want a greater variety of chocolate products. This enables the industry to expand their product lines to meet the new needs of customers and provides an opportunity for greater sales of the new products. It has been a trend in recent decades for consumers to desire healthy alternatives to traditional foods. In recent years, studies have shown that dark chocolate provides several health benefits. ³The latest research indicates that the flavonoid-rich substance could have a protective effect on the cardiovascular system, at least in the  à


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(Chocolate Trading Co., 2005). This recent revelation adds to studies that have noted 
 



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. An increase in the importance of commercialized non-traditional holidays (e.g. monthsaries, grandparents¶ day, bestfriends¶ day) and traditional holidays (e.g. Christmas, Valentine¶s Day, Mother¶s Day, birthdays) presents an industry opportunity to market specialized products tailored for the holidays. The commercialization of these holidays encourages consumers to purchase more

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chocolate products than they would in an average day. This provides an opportunity for specialized gift products to increase sales.

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c c f.c Reinvent aershey¶s chocolate as a healthy low-calorie dark chocolate. g.c Encourage health-conscious people to consume such product provided the health and nutrition information they need to know about the new and improved product.

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c a.c Promote the health benefits of the product. b.c aelp people change their perspective that chocolate is an unhealthy snack, and therefore should be avoided.

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c a. Increase potential sales through promotional programs planned throughout the year. b. Repackage aershey¶s so that its new look will appeal to the consumer, considering that it will be tagged as ³low-calorie´.c c c

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c Ability to produce/manufacture )c or deliver the servicec Ability to market (£c c Ability to finance c Ability to manage

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*c The primary consumers of the product are: Œc Children Œc Students Œc Athletes Œc Coffee Shops c c



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c*c They buy chocolate bar as a snack. Some consider it as part of their daily diet like in the case of most athletes while others are just impulsive buyers. 3.c 

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c Since chocolate snack bars are very well distributed in the market, they are available. Many buys from grocery/stores while others on the Malls (Supermarket). å c 
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c*cc Some buy just whenever they like it, while others purchase during occasions like Christmas Day, Valentine¶s Day and even anniversaries. Also, a huge chunk of Filipino consumers purchase chocolate bars after coming home from abroad. üc

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*c A lot of consumers buy merely because it is a chocolate and Filipinos have always loved chocolates. Next comes the price. aealth-conscious people base their purchase activity of such product on the health and nutrition benefits.

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aershey¶s customers are divided according to their psychological profiles as well as their willingness to buy the product again, the price shifts, inflation and many others. £ c  c$c c  
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94, 000, 000

Estimated non-eaters of product

(3, 650, 000)



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Php 64, 111, 793

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c aershey¶s corporate level strategy is focused intently on 
 
 
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 . The aershey Company may take pleasure in the branding of its headquarters as ³The sweetest place on earth,´ however over the past year, it was said that investors and management confidence has had a more bitter taste residing in their palate. So, the company needed to do a major revamp on the company¶s market share by reaching a higher annual profit rate.

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The business level strategy for The aershey Company focuses on a combined strategy integrating 
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 . aershey is in the midst of an overhaul of their supply chain, reducing the number of production lines, outsourcing production of some of their products.  c  
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c Increased marketplace competition has significantly impacted aershey¶s business and as a result, The aershey Company has been required to 
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% à à. The foundation of the aershey marketing strategy is their strong brand equities, product innovation, superior quality of the products, manufacturing expertise, and mass distribution capabilities. aershey stimulates sales of certain products with promotional programs at various times throughout the year. c c  
c cc Leverage our marketing and sales leadership in the Philippines by maintaining 13% growth in sales.  c

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c Our plan is to achieve these objectives within this year 2010. Our new improvement of aershey¶s will require us two to three months to introduce to the market (may it be current/new).  c 
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c Build capabilities that capitalize on unique consumer and customer trends. Furthermore, restoring the brand equity of aershey¶s may not bec

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an easy task given the fact that nowadays, consumers are more practical and find substitutes from other product categories. c  
c c c  The product will be improved by: 1. catering the consumers with a low-calorie dark chocolate which also change their perception of chocolate as an unhealthy snack. 2. adding a ³flavonoid´ substance which helps protect the cardiovascular system immediately the next 3 hours upon consumption.   From a Php 40.00 retail price, we are very much willing to lower down its cost to Php 35.00 as part of our promotion. 
 The product is available in the stores/groceries and mall supermarkets, coffee shops, airport, movie houses, and etc.    The product will be marketed through the TVCs and print advertisements, particularly in magazine. Also, the company plans to accomplish promotional programs through sponsorship of events.

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c aershey¶s mainly targets the A, B, C market -- the children, teen agers young adults, professionals, and even the old ones. As chocolate products can be used as gift and give away in occasions like Birthdays, Valentines, Christmas, It is targeted to everyone. Furthermore, chocolates are also a source of quick energy for those people who need physical endurance (athletes).  c $
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c The main competitors of aershey¶s Cadbury and Toblerone targets are the same as the aershey¶s target market. They also target everyone in the society, only that lower-price offerings are targeted to the lower class level of the society.

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cc aershey¶s newly-discovered low-calorie dark chocolates will assure people especially those who are diabetic, with health benefits.c aershey will introduce to the market the dark chocolate that will lower blood pressure and maintain the body¶s normal blood sugar level. O

 Maltitol, cocoa paste, cocoa butter, cocoa powder, lecithin, vanilla.




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c ac The product may contain peanuts or other nuts. ac The product may contain peanuts or other nuts. ac

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Excess consumption may cause a laxative effect

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)c!  Serving Servings: Calories:

Size:25g/0.88oz 9 110

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13%

Saturated Fat: 5 g

25%

Trans Fat: 0 g

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: 12.5 g

4%

Dietary Fiber: 1 g Sugars: 0 g Sugar Alcohol: 12 g 
: 2 g Vitamin A:

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Vitamin C:

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Calcium:

2%

Iron:

10%

*Percent Daily Value (DV) is based on a 2,000 calories diet. Your daily values may be higher or lower depending on your calorie needs. Calories from Fat: 75


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INCLUDES ONLY TaOSE CARBS TaAT CAUSE A NOTED EFFECT ON BLOOD SUGAR c

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aERSaEY'S chocolate drink

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aERSaEY'S chocolate syrup

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GOOD & PLENTY candy

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aERSaEY'S SPECIAL DARK SYRUP

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JOLLY RANCaER hard candy

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c Statistics showed that Candy bars like chocolates today are more demanded than any other food ± whether it is a part of daily diet, or as a snack. Thus, aershey¶s will reinvent itself by presenting a low-calorie chocolate which eliminates the thought that it is a chocolate therefore it is rich in sugar and will make one fat and diabetic; and giving the people the fact that it is low in calorie and is an aid for protecting the cardio-vascular system by the aid of the ³flavonoid´ substance present in the product.

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c Advertising rates for 30 second ads: >c TV Commercial Oc GMA 7 and ABS-CBN 2 (thrice a day for 6 months) Php52, 199/30 seconds ad aired twice on  $

c (in Luzon only) Php153, 459/30 seconds ad aired once on $

(in Luzon only) >c Print Oc Magazine (Monthly full-page advertisements) aealth Today - (282mmx212mm) Php130, 342/month Food- (8.25´x11.25´) Php 86, 250/month Cosmopolitan- (8.25´x11.25´) Php 74,000/month Candy - (8.25´x11.25´) Php 121, 000/month

Oc Billboard 3c billboards within a year which costs Php300, 000/ billboard (12¶x14¶)

 c c c The company will endorse the product through advertising in events that will promote aershey¶s all-new and healthier chocolate, in-store displays, and many others. c

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c Price cut off, or no increase in prices but products¶ weight would be reduced. c  c  
c aershey 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. u
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ac Supermarket

Ɣ School canteens

ac Department Stores

Ɣ Commercial areas (7- Eleven, Mini Stop)

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Ɣ Amusement Areas

ac Convenience Stores ac Duty Free Outlets ac Groceries  c 
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c My aershey¶s aappiness Annual Photo Contest

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To maintain a growth in the sales of the product, we will be continuously implementing the ³My aershey¶s aappiness Annual Photo Contest´.

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c The aershey's main website www.hersheys.com consumers can find links to different products, recipes and downloads, including wallpapers for computers and cell phones, screen savers and e-cards, and a link to aershey's promotions. aershey's has set up a website dedicated to aalloween, TrickorTreats.com. It includes crafts and activities, from costume ideas to pumpkin-carving stencils to coloring-book pages. There are also recipes, decorating ideas, party-planning tips, resources for classrooms and downloadable extras such as screensavers, MySpace layouts, wallpapers and clip art.

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c aershey¶s and: Œc Duty Free Œc Selecta (Selecta¶s aershey¶s Collection) Œc Red Ribbon Œc Olympics Œc E-Bay Œc Starbucks Œc Coca-cola

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Seconds/size

Price Ad

TVC (ABS-CBN) (GMA) TVC

30s 30s

153,459 153,459

(ABS-CBN) (GMA)

30s 30s

52,199 52,199

PRINT MAGAZINES

FULL PAGE

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/ Frequency

PRIME TIME 1 x a day 1 x a day NON-PRIME TIME 2 x a day 2 x a day

Total

8, 593, 704/ 6 month 8, 593, 704/ 6 month

5, 846, 288/ 6 month 5, 846, 288/ 6 month

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(aEALTa TODAY)

282mm x 212mm (FOOD) 8.25" x 11.25" (CANDY) 8 3/4" x 11 1/4" (COSMOPOLITAN) 8 3/4" x 11 1/4"

130,342

Monthly

1,564,104/year

86,250 74,000 121,000

Monthly Monthly Monthly

1,035,000/year 888,000/year 1,452,000/year

BILLBOARD

300,000

3 billboards

900,000/year

12' x 24'

TOTAL BUDGET

34, 719, 088/ year

The above table shows the estimated budget for the implementation of the IMC PLAN. The total budget for the whole year is Php 34, 719, 088. Inclusive of the following: A 30 sec. TV ad for the 2 station (ABS-CBN & GMA) is Php 28, 879, 984. It is for a 3 times a day air time for the same broadcasting companies for 6months.Also, Print ads at 4 selected magazines which cost of Php 4, 939, 104 / year and 3 Billboards located in EDSA, SLEX, and NLEX for Php 900, 000 / year. It is the [ü. of the net sales of aershey¶s chocolate in the Philippines.

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Net Sales (43% from ASIAN sales)cc

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c c Since aershey¶s has a global position, we intend to redefine it locally. Also, we would most likely to increase the campaign for healthier chocolate snack and tie up with Public Relation firms.

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c c ßc http://www.washingtoniv.com/?p=65 ßc http://www.washingtoniv.com/?p=69 ßc http://www.washingtoniv.com/?p=71 ßc http://www.scribd.com/doc/38616935/The-aershey-Company ßc http://www.scribd.com/doc/38616705/Comparative-Valuation-Analyses-of-WrigleyWm-Jr-Co-Wwy-and-the-aershey-Company-asy ßc ³Chocolate Is Good For You.´ Chocolate Trading Co. July 13th, 2005. November 1st, 2007. ßc ³Chocolate Stops Cancer Cells.´ Chocolate Trading Co. March 5th, 2005. November 1st, 2007.

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