While David J. West, president and chief executive officer of the Hershey Co., saw a bid to take United Kingdom confectioner Cadbury under Hershey ownership go to Kraft instead, he reportedly told the media that growth through a sizeable acquisition is still a possibility.
Despite any future acquisitions, though, West’s sights are focused clearly on the years ahead.
Embodying this outlook is the candy maker’s latest project, a supply chain modernization program appropriately titled “Next Century.” Bearing a price tag of close to $300 million, Next Century will bring significant changes, most notably to the company’s world-famous factory in Hershey, Pa. Production at that facility, located at 19 East Chocolate Ave., will transfer to a more automated, up-to-date plant in nearby West Hershey, resulting in the loss of 500 to 600 jobs.
It’s a tough proposition. But West understands that difficult decisions need to be made, and ties with the past cut, before a company can move forward.
“Our investment will create a highly flexible, cost-effective manufacturing facility that will enable us to remain competitive with global players while satisfying the needs of retail customers and consumers,” West said during the project’s announcement. “The 19 East Chocolate Ave. factory is a proud part of the company’s heritage, but the facility is over 100 years old, and simply cannot be modernized to meet the manufacturing needs of a 21st century business.”
Hershey also plans to move forward with a marketing strategy that centers on core-brand advertising and consumer insights. In February, West announced “Insights Driven Performance,” an initiative that allows the company to share its detailed consumer data with the retailers that carry its products. To keep awareness strong, Hershey’s increased advertising in the U.S. by 68% during the first quarter of this year, and plans to increase advertising expenses by 35% to 40% over the entire year. Much of this focuses on Hershey’s landmark brands, such as Reese’s, Kit Kat and Twizzlers.
“We will focus our efforts on brand-building initiatives and consumer insights that will ensure that the category and Hershey continue to perform well during the remainder of the year and into 2011,” said West, during this year’s first-quarter earnings call.
Under West’s leadership, Hershey will still continue to invest in new opportunities. Brands like Reese’s and Hershey’s have released dark chocolate varieties, and portion-control options loom on the horizon. The Next Century project, meanwhile, is set to be finished by 2014 and deliver annual savings of $60 million to $80 million.
“Savings from project Next Century will enable us to continue making investments that will deliver core business growth and position us for long-term success in the global confectionery marketplace,” said West. “We must continue to look at all options that provide flexibility to make the investments necessary to ensure that Hershey is as successful in this century as it was in the past century.”
