Jenna Boyle, Kerry McDermott and Rob Whitehead

Name the Brand??



Taste the rainbow



Melts in your mouth, not in your hand



Gimme a break, gimme a break…



Nobody better lay a finger on my…



There’s no wrong way to eat a…

• Industry Overview • Advertising Analysis • Pivot Table Analysis • Target Market • Perceptual Map • Advertising Strategies • Mars Inc.

• The Hershey Company • “The Elegants” • Where the Industry is Going • Recommendations

Why is it relevant to us?

 65% percent of all American branded candy bars have been on the market more than 60 years.

 Americans eat approximately 25lbs of candy each a year (7.7 billion lbs total), about 60% of which is chocolate  Engrained in American culture.

 Candy is EVERYWHERE!!!

Industry Definition

 The Candy Production industry acquires raw materials such as cocoa, sugar, cornstarch, fruit, preservatives and flavorings to process them into a range of sugar and non-sugar based confectionery products.

Major Products:  Chocolate candies  Sugar candies  Sugarless candies  Gum

Product Segmentation

PRODUCTS AND SERVICES SEGMENTATION Product/Services Candy or chocolate bars Soft candy Block chocolates Industrial chocolate Hard candy Gum Chocolate spreads and drinking powders Box chocolates Share 32.70

% 23.40

% 12.20

% 9.40% 8.90% 4.70% 4.70% 4.00%

Market Segmentation

MAJOR MARKET SEGMENTS Market Segment Confectionery wholesalers Supermarkets and grocery stores Food manufacturers Hospitality trade Discount stores Direct to public Share 61.30% 16.70% 8.10% 5.70% 4.30% 3.90%

Cost Structure

COST STRUCTURE Item Purchases Wages SG&A Depreciation Rent Utilities Other Profit Cost % 58.30% 10.10% 6.80% 3.50% 1.20% 1.10% 6.70% 12.30%

The Production of Confectionery

Government Regulation

The level of regulation is heavy - All cocoa, chocolate and sugar manufacturers must meet the standards of the FDA. - Manufacturers also must comply with the hygienic regulation - Environmental regulation - Stricter labeling

Industry Structure

2,50% 1,00% 1,00% 2,00% 2,00% 3,00% 4,00% 21,60% Life Cycle Stage Revenue Volatility Capital Intensity Concentration Level 13,40% 49,50%

Mature Low Medium High

Regulation Level Technology Change Barriers to Entry Competition Level

Mars Incorporated The Hershey Company Tootsie Roll Industries Ferrara Pan Candy Company Jelly Belly Candy Company Russell Stover Candies Inc.

Kraft Foods Nestle Inc.

The Topps Company Other Heavy High Low High

CR₄ and HHI

 The HHI for just the top 4 companies in the industry is 2941.81.

 The CR ₄ for the industry is 78.1%.

 Therefore, the industry is highly concentrated with only a few major firms holding a majority of the market share.

HHI = 49.5²+21.6²+4²+3²=2941.81

CR ₄ = 49.5 + 21.6 + 4 + 3= 78.1% *Hershey and Mars Inc. alone hold 71.1% of the market share.

-Many mergers occur.

Concentration

 Concentration in this industry is high  This concentration of ownership is primarily a result of an increase in acquisitions, along with natural growth for a majority of major players encouraged by continued product innovation, strong brand loyalty and aggressive marketing.

Ways for companies to survive: - adaptability to new trends - economies of scale - product differentiation - successful supply chain management - powerful marketing strategies******

Competition

 Quality  Price  Distribution  Innovation and differentiation  Substitute Products  Imports

CANDY 1,00% 1,00% 2,00% 2,00% 2,50% 3,00% 13,40% 21,60% 49,50% 4,00% HHI (for top 4)= 2941.81

Cr ₄ = 78.1% High level of concentration 518 Businesses overall!!

Mars Incorporated

Candy v. Chocolate

The Hershey Company Tootsie Roll Industries Ferrara Pan Candy Company Jelly Belly Candy Company Russell Stover Candies Inc.

Kraft Foods HHI (for top 4) = 1141 CR ₄ = 59% Medium level concentration ->Concentration is increasing!

1,039 businesses overall !!

CHOCOLATE Nestle Inc.

The Hershey Company Mars Incorporated The Topps Company Nestle 25,00% Other 39,00% Russel Stover 20,00% 0,50% 0,50% 1,00% 4,00% 10,00% Lindt & Sprungli Guittard Chocolate Company See's Candies Other

20 15 10

Revenue for

5

candy v. revenue

-5 0

for chocolate

Chocolate -10 -15 Confectionary Production in US REVENUE GROWTH Candy Production in US REVENUE GROWTH 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 Revenue $ million Growth % 16,613.30N/A 16,563.30

15,700.10

16,074.00

2004 2005 2006 2007 2008 2009 2010 16,150.20

16,366.50

16,185.50

15,200.10

13,801.20

13,180.10

14,861.60

-0.3

-5.2

2.4

0.5

1.3

-1.1

-6.1

-9.2

-4.5

12.8

2000 2001 2002 2003 2004 Revenue $ million 7,079.60

7,201.60

7,240.50

6,504.50

6,621.70

Growth % 3.1

1.7

0.5

-10.2

1.8

2005 2006 2007 2008 2009 2010 7,610.90

6,763.10

6,919.40

7,082.60

7,298.10

7,621.20

14.9

-11.1

2.3

2.4

3 4.4

Candy Revenue Growth % Chocolate Revenue Growth %

Total Sales for Confectionery Industry

$22.6

$22.8

$24.0 $22.9

$22.1

$28.2

$20.5

$22.5

7.1

7.3

7.6

7.7

7.4

7.2

7.1

Dollars Sold at Retail, Billions Pounds Sold at Retail, Billions 2003 2004 2005 2006 2007 2008 2009 2010

Confectionery Seasonal Sales

(** in millions of dollars) 2006 2007 2008 Valentine’s Day - $971 Easter $1,884 Halloween $2,146 $1,036 $1,987 $2,202 $1,024 $1,846 $2,209 2009 $928 $1,990 $2,207 2010 projections * $935* $1,970* $2,225* Christmas $1,389 $1,420 $1,376 $1,401 $1,420* * – projections for 2010 2010 2009 2008 2007 2006 2005 VALENTINE’S +0.7%* -9.4% -0.2% +6.7% +0.1% -4.0% EASTER -1.0%* +7.9% -7.1% +5.4% +7.0% -7.6% HALLOWEEN CHRISTMAS +0.8%* +1.4%* Even +0.1% +2.6% +1.8% -3.1% +2.2% +2.8% +2.3% +1.0% +2.4% NCA projects a 0.4% increase in 2010 for total seasonal sales

2010 US Confectionery Market

Retail Sales Imports Exports $22.5B $4.7B $1.895B

Category Retail Sales $ Billions Imports $ billions Exports $ billions Total Confections Chocolate $22.5

$14.862

Non-Chocolate $7.621

$4.7

$3.0

$1.7

$1.895

$1.3

$.595

2008 Per Capita Retail Sales

$92.91

$100 $80 $60 $40 $20 $0

$52.46

$28.34

$9.54

Total Chocolate Non Chocolate Gum

Overview of Industry



The recent desire for healthy alternatives has required companies become more innovative.



Strong brands and customer loyalty.



Economies of scale and value addition during production.



Despite recession, consumers still continuously consume the same amount of candy because it is and inexpensive and feel good luxury.



Growth segments such as sugar-free confectionery and organic and fair-trade chocolate have shown considerable promise and are expected to continue in the next five years.

Demand Determinants



Changing Consumer Lifestyles



Pricing and Distribution



Presence of Substitutes



Product Innovation



Culture and Tradition

How to Reach Consumers: Advertising

2010 Total Advertising Expenditures for Top Players

Hershey $404,092,700 Mars Lindt Nestle Tootsie Roll Tootsie Pop Jelly Belly $422,510,500 $51,094,100 $743,163,800 $784,500 $3,939,900

0,00945%

The Hershey Company Advertising

9,19851% 0,00000% Magazines Sunday Magazines 30,52552% Newspaper 33,14173% National Newspaper0.8

23,99148% Outdoor Network TV 1,56180% Spot TV Syndication 34.46% 18.04%

Lindt's Advertising

0,00 18.71% 0,00 0,00 0.24% 0,00 0.12% 0.56% 27.86% Magazines Sunday Magazines Newspaper National Newspaper Outdoor Network TV Spot TV Syndication Cable TV 4,237% 0,754% 0,478% 35,279%

Mars Inc. Advertising

0,251% 30,119% 25,168% 2,786% 0,145% 0,583% 0,199% Magazines Sunday Magazines Newspaper National Newspaper0.8

Outdoor Network TV Spot TV Syndication Cable TV

Pivot Table Data

Adverting Based on Location

Total Spending on Advertising in Location

8000 7000 6000 5000 4000 3000 2000 1000 0 Total Spending on Advertising in Location

City

Advertising Expenditures based on Population

Price Paid Per 1000 Residents

25 20 15 10 Price Paid Per 1000 People 5 0

Advertising Based on Day of Week

Candy Ad. Spent on Days of Week

102000 100000 98000 96000 94000 92000 90000 88000 86000 84000 82000 Total SUN MON TUE WED THU FRI SAT

Total TV Advertising

0,25% 0,57% 1,99%

% of Total Ad. Expenditures

0,20% 2,95% 37,33% 14,46% 2,04% 4,23% 15,06% 3,95% 4,79% 0,16% 3,84% 7,10% 0,09% 0,42% 0,60% Animation Award Pageants/Parades Children's Entertainment College Sports Documentary Drama/Adventure Entertainment and Film Game Show Informercial Intruction/Advice Mini Series Music Videos News- All Types Sports Science Fiction Police/ Crim Show Situational Comedy Other

35000 30000 25000 20000 15000 10000 5000 0 Mars Inc DOCUMENTARY/SALUTE/TRIBUTE DRAMA/ADVENTURE FEATURE FILM INSTRUCTION/ADVICE SITUATION COMEDY SLICE-OF-LIFE SPORTSCAST TALK UNCLASSIFIED VARIETY - GENERAL VARIETY - MUSICAL

6000

Lindt Main TV Advertising Program Types

5000 4000 3000 2000 1000 DRAMA/ADVENTURE ENTERTAINMENT MAGAZINE FEATURE FILM INSTRUCTION/ADVICE NEWSCAST (LOCAL ONLY) SITUATION COMEDY SLICE-OF-LIFE 0 Chocoladefabriken Lindt & Sprngl Ag

Company

Target market (based on Pivot Table)

Majority of the Market  Children  Age 5-24 is main target  Health Conscious Parents- also a major target  Increased advertising to parents about healthier candy choices, may be why parents are still so heavily targeted Premium Producers  Target educated consumers  Sell luxury  Target all adults

Annual Advertising

Mars' Annual Advertising

450 000 400 000 350 000 300 000 250 000 200 000 150 000 100 000 50 000 0 600 000,00 500 000,00 400 000,00 300 000,00 200 000,00 100 000,00 0,00 2006 2007 2008 2009 2010 2006

Hershey's Annual Advertising

2007 2008 2009 2010

Advertising to Sales Ratio for 2010

Sales Advertising Expenditure Advertising to Sales Ratio

422,510,500 1.51%

Mars Inc.

The Hershey Company

28,000,000,000 5,670,000,000

Lindt

2,740,000,000 404,092,700 51,094,100 7.13% 1.86%

How we’re going to break it down:

Adventurous Mars Inc.

Free Spirited Lindt&Sprungli + Ghirardelli Classy The Hershey Company Family-Oriented

Brands

Skittles Free Spirited Kit Kat Twix Reeses Adventurous M&M Dove Hershey Kisses Hershey Bar Family-Oriented Classy Mars Inc.

Hershey Lindt Ghirardelli

Experience Attribute

 Don’t use informative  Don’t advertise place  Don’t advertise price  Don’t use combative/comparative  Don’t do comparisons to others MEMORY JAMMING HUGE

Types of Advertising Used in Industry

 Humor appeal  Holiday  Sweepstakes  Point of Sale  Pricing Strategy  Negative to Positive  Heritage Advertising  Product Differentiation  Brand Identity

Mars Overview

 Mars was founded in 1911 by the Frank C Mars, and the Mars Family remains privately owned to this day.

 Mars Inc. is one of the world's biggest private companies, with annual sales approaching $30bn.

 Candies included: Snickers, Twix, M&Ms, Skittles, Starburst, Milky Way, 3 Musketeers etc…  Seen as Adventurous and Free-Spirited  #18 Advertiser according to Advertising Age  Memory Jamming  Target Market:

Mars Incorporated Advertising

Mars now owns Wrigley as of April 2008



Similar strategies throughout



Heritage Advertising

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Product Differentiation



Brand identity



Sweepstakes Advertising

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Pricing Strategy

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Holiday Advertising

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Negative to Positive Advertising

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Humor Appeal

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Brand Identity



Stick to Roots



Spokescandy

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Huge in Differentitation



Melts in your mouth not in your hand

http://www.youtube.com/watch?v=4gtM_mmvDww http://www.youtube.com/watch?v=SMrLz9tUrew



What is real?



“Unreal” situations



Taste the Rainbow



America’s favorite candy bar!



Satisfies hunger



Celebrity

“You’re not you when you’re hungry”



Need a moment… … Chew it over with a Twix

General Conclusions about Mars Inc.



Stick to roots



Differentiation is key



Even among own products



Starburst: “It’s a juicy contradiction”



3 Musketeers: “A lighter way to enjoy chocolate”



Milky Way: “Life’s better the milky way”

The Hershey Company Overview

• •

Founded in 1894 Hershey Manufactures chocolate and confectionery products

•

Largest chocolate manufacturer Major brands include:

Why Hershey has been so successful?

 Strong financial performance  Leader in confectionery products in the US due to it’s well-known brands  Brand Equity  Marketing Strategies (Obtaining Sales)  Ability to determine consumer trends

Financial Performance

2010 Sales 1-Year Sales Growth 2010 Net Income $5.67B

7.03% $509.80M

2010 Sales US Other countries Total % of total 85 15 100

Hershey Products

Hershey’s Bliss Cookies ‘N’ Crème Hershey’s Milk Chocolate Hugs Kisses Nuggets Sticks Reese’s Fast Break Nutrageous Peanut Butter Cups Pieces Reesesticks Whipps Other 5th Avenue Almond Joy Cacao Reserve Caramello Eat More Good & Heath Jolly Rancher Kit Kat Milk Duds Mounds Mr. Goodbar Payday Pot Of Gold Rolo Special Dark Symphony Take5 Twizzlers Whatchamacallit Whoppers York Zagnut Zero Refreshment products Breath Savers Bubble Yum Ice Breakers York

Hershey’s Brand Equity

Harris Interactive Poll

RANK 25 Highest Ranked Brands

1 Hershey's Kisses Chocolate Candy 2 M&M Plain Chocolate Candy 3 Hershey's Milk Chocolate Candy Bars 4 Google.com

5 Duracell Batteries 6 Reese's Peanut Butter Cups Chocolate Candy 7 Heinz Ketchup 8 Kleenex Facial Tissues 9 Oreo Cookies 10 Neosporin Ointment 11 Cheerios Cereal 12 Ritz Crackers 13 Kraft Foods Inc.

14 Arm & Hammer Baking Soda 15 Campbell's Soups 16 Snickers Chocolate Candy 17 Coca-Cola 18 Sharpie 19 Dawn Dish Detergent 20 Johnson & Johnson 21 Energizer Batteries 22 UPS 23 Hershey's Chocolate Chips 24 M&M Peanut Chocolate Candy 25 Hallmark Greeting Cards

Advertising Strategies

 Brand Image/Identity  Holidays  Community  Amusement Park

Brand Identity

 Old-fashioned  Warm  Family-Oriented  Happy  Nostalgic  Love http://www.youtube.com/watch?v=EV0u08 SnL0g Rascal Flatts http://www.youtube.com/watch?v=Plf9bzri 6Rw&NR=1 Kisses

Sticking to Roots

1930s present

Hershey’s Slogans

 “There’s no wrong way to eat a Reese’s”  "Sometimes you feel like a nut, sometimes you don't" (Almond Joy)  "Makes mouths happy“ (Twizzlers)  "It's more than a mouthful - it's Whatchamacallit”  “There’s a smile in every Hershey Bar”  “Have a break, have a Kit Kat.”

Hershey’s Jingles

 “Hershey’s is the GREAT AMERICAN, GREAT AMERICAN chocolate bar!!!” http://www.youtube.com/watch?v=47-blY2vZMY  “Gimme a break, Gimme a break, break me off a piece of that Kit Kat Bar.” http://www.youtube.com/watch?v=DLJgyr-g3Ck&NR=1

Holidays

 Easter  Valentine’s Day  Halloween  Christmas

Community

 Milton Hershey School  American Red Cross  Habitat for Humanity of Central Pennsylvania  Children's Literacy Initiative - Lancaster, PA  Hershey partners with Children’s Miracle Network

Amusement Parks

Way for fans of Hershey to interact with the company.

Increases revenue for the company Annual Sales: $270.96M

Annual Net Income: $6.94M

Chocoladefabriken Lindt and Sprungli

 Founded in 1845 in Switzerland  Leading world producer of premium chocolate  Brands carry the name Lindt, Ghirardelli, Caffarel etc.

Strengths of the Company

 Strong brand name  Easily able to penetrate new markets  Strong Global Operation with diversified revenue base  Effective Use of Advertising

Lindt’s Main Marketing Strategies

 Product Differentiation  Premium  Luxury  Affordable  Public Relations  Point of Sale Advertising and Free Samples  Bundling

Product Differentiation



Premium quality = Premium Ingredients



Affordability



Public Relations

Upcoming Trends



Showcasing your value



Sugar-free



Who you can advertise too



Obesity



Healthy Lifestyle



Employee Morale



Darker Chocolate (higher cocoa content)



Exotic Flavorings (e.g. citrus, fruits, spices)



More upscale private label chocolate

Things Companies Need to Think About:

 Age Group  Cost of Advertising  Health Consciousness  Per Capita Disposable Income  Price of Inputs

Keys to Success in Future:

 Economies of Scale  Ability to adapt to change  Product Differentiation  Brand Loyalty  Customer Retention

Questions?