Hershey: A taste for change | KPMG | UK

Hershey: A taste for change

Hershey: A taste for change

Confectionery giant Hershey has come a long way since its founder made caramels by hand, but the business still has an appetite for innovation. Incoming CEO Michele Buck shares its recipe for success.

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Hersheys chocolate bars

Understanding the customer

No one could accuse The Hershey Company of complacency, despite its enviable position as the leading chocolate company in the US in 2015 with a market share of over 44%. Digital innovation and imaginative new approaches to the way consumers experience and engage with its products are just two of the core ingredients to a business strategy designed to keep mouths watering and pockets full.

Operationally, the international confectionery giant has a clear line of sight from the factory to the store to maintain a continuous flow of stock. If consumers’ tastes change, Hershey is one step ahead, primed by its real-time window on social media activity. The historic brand is equally committed to perfecting the basics, using the latest consumer insights to help retail partners reinvent the treats aisle and create new experiences that better suit today’s appetites.

“The first touchpoint is knowledge of the consumer,” says Michele Buck, Hershey’s current EVP and COO (and President and CEO as of March 2017), on digital transformation’s impact on the market.

It was 2008 when Hershey first recognised the need to distance itself from its traditional supply-based model (what the company could sell) and become more focused on demand (understanding what customers actually want) across all of its business functions.

Five years ago, the business went a step further, declaring that knowledge would be central to Hershey’s competitive differentiation, enabled by the latest technology.

“Advances in technology and data have made a real-time market, possible” Buck says. “We used to look at mixed models to understand the impact of our marketing with the consumer – on an annual basis – and adjust accordingly. Now we do that in real time.”

Strategic partnerships

Joining up systems across the product lifecycle has been part of the drive to maximise the commercial advantage of data-related opportunities. “We’ve moved from disparate, isolated databases to fully integrated data,” Buck explains. This has involved partnering with data specialists. “We now have a tool where we can look end to end, all the way from the plant, supply chain, procurement and manufacturing to retail, in a closed loop system,” she says.

Hershey is now sharing this insight with its retail partners, helping them to review store layouts and displays and optimise the product mix based on current consumer behavior and local customer profiles.Up-to-the-minute data helps inform marketing beyond the store, too – improving targeting and media purchasing. “We can better isolate the key metric that will enable us to reach the consumer most receptive to our messaging,” Buck says.

Customer communication is now more of a dialogue, as a result. Hershey’s ‘H-Pulse’ center in Houston is part news room, part ‘mission control’ – with 12 video screens. “If somebody loves a product and wants to know where else they can get it, we can tell them,” Buck says. “If they have an issue, we have data on that too. We are reaching consumers across every touchpoint, engaging with them on a one-on-one basis.”

Hershey can do this in a more timely and geographically relevant way now too, using ‘geo-targeted’ messages to an individual’s mobile as they are sensed nearing a particular retail environment. The company can send messages about products all the way through to purchase – and ensure its products are available and front-of-mind – whether the consumer goes on to buy them in a bricks-and-mortar location, or via a click-and-collect order or home-delivered purchase. “I see it as an extension of how we create demand, leveraging the knowledge we have about impulse categories, to help retailers think about how consumers are purchasing and meet consumer demand in a different way.

“The challenge is how to create excitement in store,” Buck says. “We’re not just helping our category; it helps the retailer’s whole environment.” Just as Hershey’s S’mores combination kits inject new fun into confectionery by allowing consumers to get creative, Hershey helps retailers think laterally about their seasonal displays – for example by combining Easter baskets, grass and candy. “Not every retailer does things like that. They’ve been set up to buy by category,” Buck says.

Hershey’s most visible extension of the consumer experience can be seen in the spread of its Chocolate World stores (its flagship one in Pennsylvania is a full public ‘attraction’), with new ways for consumers to explore and engage with its products. Beyond select cities in North America, there are now Hershey-branded stores in Dubai, Shanghai and Singapore.

“First and foremost, they are marketing vehicles that help us to engage with consumers,” Buck says. It’s also a great way to test new retail concepts, such as a create-your-own chocolate bar area, where consumers can design their own label on a Hershey bar and decide what they want in the product.

 

Real-time data

“We used to analyse the impact of our marketing on an annual basis. Now we do that in real time”

Hershey also has a Global Customer Innovation Center, where it tests technology solutions. Certainly, technology innovation is high on the agenda for Hershey, which is trialing everything from artificial intelligence in manufacturing to auto-fulfilment via e-commerce (through a strategic partnership with a big-name internet retailer in the US).

Buck believes those companies that experiment with emerging opportunities early on will reap the rewards once the technologies move into the mainstream. “You can’t be last on the learning curve,” she says.

The ability to react to live data in real time is one of the biggest breakthroughs, she adds. “It’s something we’re very focused on; we’re evolving to make everything as real-time as possible. If we have a new product launch, we can quickly see if certain flavors or items are performing better than others and adjust fulfilment accordingly.” And when some consumers voiced concern about the shape of its Reese’s Christmas Trees, Hershey quickly turned this into lighthearted social dialogue about diversity under the hashtag #AllTreesAreBeautiful, which trended for a while. “In the past, we would have done a very corporate kind of thing – maybe issued a press release,” Buck says.

And what about public consciousness, for example around health and sugar? For Buck, there will always be a market for ‘treats’: the bigger issue is sustainability more broadly. “Consumers now care more about the companies they’re buying from, and what they are giving back to society,” she says. “Our founder left his company in trust to care for a school for disadvantaged children; about 30% of our dividends go directly to support that school. That central mission is a big piece of who we are.”

Hershey also has programs in West Africa, particularly around cocoa, to improve farmers’ yields. “Most farmers have mobile phones so we message them about best farming practices throughout the year – based on weather, what’s happening with the crops, etc. That merger of sustainability and technology has been powerful.”

Again it comes back to sharing knowledge. “If we were just a confection company, we’d be limiting our value,” Buck says.

At a glance

  • The Hershey Company (Hershey), is the largest chocolate manufacturer in North America. It was founded in 1894 by Milton S. Hershey in Pennsylvania.
  • The company makes chocolate and candy brands including Hershey’s Bars, Kisses and Reese’s peanut butter cups, as well as baking chocolate, cocoa mix, cookies and other snacks. Other popular brand franchises – including Twizzlers, Kit Kat, Ice Breakers, and Bubble Yum – come under Hershey’s sweets and refreshment business.
  • Hershey markets its products in about 70 countries. The US is Hershey’s largest market, followed by the Americas (Canada, Mexico, Brazil, Central America, Puerto Rico), then Asia, Europe, the Middle East, and Africa.
  • Beyond the usual retail channels, Hershey has a modest direct presence via its Hershey’s Chocolate World stores in major locations in the US as well as Canada, Dubai, Shanghai, and Singapore.

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