Why-ology News: Trend Go beyond the what to the why of consumer behavior. August 2019

A Sweet Strategy

The Hershey Company (Hershey, Pennsylvania), which Milton S. Hershey founded in 1894, is one of the largest chocolate manufacturers in the world. As of 2017, Hershey's had more than 15,000 full-time employees and annual revenue of more than $7.5 billion. According to the company website, Hershey's manufactures about 85% of what the company sells in the United States in one of the company's eight US factories. In addition to its signature Milk Chocolate bar, other famous brands are recognizable: Hershey's Kisses, Reese's Peanut Butter Cups (and Pieces), Twizzlers, and KitKat. If, on occasion, you prefer to melt your chocolate, you can order a S'mores grilling basket. You can also order all your favorite candy online (from within the United States only) at https://www.hersheysstore.com.

The war against sugar, sweet treats, and high-fructose corn syrup has definitely had an impact on the candy industry. As a result, several years ago, Hershey considered selling the company to a competitor. The town of Hershey rose in mass protest against a sale—not only because it would mean a potential loss of jobs at the town's #1 employer, but also because revenue from the company supports (among other concerns) Hersheypark, Hershey Chocolate World, and an orphanage: The Milton Hershey School.

In late July 2019, Hershey's began to raise prices on instant consumables—items usually at the front of a retail store—as the final portion of price increases announced in summer 2018 go into effect. Next to see price increases are Halloween candies: increases of about 10% at the wholesale level; a company spokesperson told MarketWatch that "retailers set their own prices for their customers." The price hikes are part of a new, more flexible pricing strategy. A more agile strategy enables the company to protect its advantaged margin structure while "enabling continued investments in our brands and capabilities to drive category growth," says Michelle Buck, Hershey's CEO.

Figure: Trend: Bought Hershey's Milk Chocolate Bars in the Past 6 Months

The incidence of US adults who have bought an individual Hershey's Milk Chocolate bar in the past six months has not enjoyed a statistically measurable increase in a 14-year period (11% in 2004 to 13% in 2018), according to VALS™/GfK MRI. In total, sales of all Hershey candy consumables have remained remarkably stable at just less than 30% of all US adults. However because of population growth, total sales have increased in recent years (63.2 million in 2014 to 73 million in 2018.) Not surprisingly, sales of Hershey's Milk Chocolate bars vary by VALS type. The figure above shows millions of adults, because doing so shows the differences by type graphically.

Sugar-conscious Innovators are least likely to purchase Hershey's Milk Chocolate bars, probably because of the perceived lack of sophistication of the brand and Innovators' preference to invest in craft luxury consumables, such as Dick Taylor Craft Chocolate (Eureka, California). Experiencers, by contrast, enjoy the wide distribution of Hershey's products across the United States, including at bodegas and gas stations for a quick sugar fix. Similarly, cash-strapped Strivers enjoy the price-to-value ratio of Hershey's products and the ability to share a tasty treat with friends at the mall or while escaping into video games, at home or at the arcade. Middle-of-the-road Achievers appreciate Hershey's for a quick pick-me-up in the car, to appease the children, or as a fast treat from the office snack machine while at work.

Remarkably, despite some of the differences, the crossover appeal of the brand among various consumer groups and lifestyles remains strong—similar to that of household brands such as McDonald's.

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