The Hershey Company

The Hershey Company 1

The Hershey Company: Milton S. Hershey to John P. Bilbrey

Heather Napolitano

Davenport University

Finance 620

December 8, 2013

Dr. Mitchell Miller

The Hershey Company 2

Abstract

Today The Hershey Company is the largest producer of quality chocolate in North America. CEO and company president John P. Bilbrey is leading the corporation to new heights with regards to sales growth, environmental impact and Corporate Social Responsibility (CSR). Although there was a small decrease in market size during 2009 and 2010, the overall increase in the chocolate confectionery industry has been substantial since 2007. The US federal government has made substantial contributions to the Chocolate Confectionery Industry illuminating their confidence in the strength of this market. As Hershey continues to sustain its strength the forecasts are very generous for the future years ahead.

The Hershey Company 3

The Hershey Company: Milton S. Hershey to John P. Bilbrey

Milton S. Hershey began making confections in Philadelphia, PA in 1876. There were many unsuccessful attempts at confections until his Lancaster Caramel Company hit a big success in 1890. The Hershey Company was born in 1893 after Hershey attended the Colombian Exposition. His idea was to make chocolate to cover his caramels. The chocolate was such a hit he sold Lancaster Caramel Company and put all his efforts into manufacturing chocolate. The first Hershey's chocolate sale was on April 17, 1895.

The Hershey Company (NYSE: HSY) was unique in that Hershey wanted to create a happy and healthy work environment for his employees. His philosophy was that creating a better environment for his workers to live in would increase their performance in the company. Enhancing the commitment to that philosophy was the commencement of the town of Hershey, PA. He had homes, schools, churches, parks, recreation facilities and a trolley system for commuting in his initial plans for his model community. Eventually it expanded to include a community building, department store, convention hall, amusement park, swimming pool and many more schools. Predominately he considered education the utmost importance since he did not have very much education himself. In 1918 Hershey transferred the better part of his fortune and ownership in the company to the Hershey trust to be held for the Hershey Industrial School. Financing for his programs still exist today.

Today The Hershey Company is the largest producer of quality chocolate in North America. His legacy is living on in ways he could not have imagined. Hershey, PA remains

The Hershey Company 4

the headquarters for the Hershey Company with approximately 14,000 employees worldwide. Internationally, Hershey retail stores are located in Canada, Mexico, Brazil. China, India, Korea and Japan. Hershey manufactures in five Pennsylvania towns, Virginia, Illinois and Guadalajara, Mexico. In addition to chocolates the Hershey Company produces many sugar confections, gum & mints, peanut butter, coconut, chocolate covered macadamia nuts and macadamia cookies under 80 different brand names and are licensed to manufacture and sell competitor's products in some international markets. Additionally they offer premium and artisan chocolate products through the Artisan Confections Company, a wholly owned subsidiary. They have increased their commitment to nutrition and well-being with kosher, gluten-free and sugar-free products. Their commitment to children includes a Children's Food and Beverage Advertising Initiative (CFBAI) which voluntarily commits not to advertise to children 12 years of age and under amongst other programs.

CEO and company president John P. Bilbrey is leading the corporation to new heights with regards to sales growth, environmental impact and Corporate Social Responsibility (CSR). In 2012 The Hershey Company generated US$6.6billion, earned a place on the DOW Jones Sustainability Index and ranked America's most community-minded company by The Civic 50. Environmentally they have committed to 100 percent certified coca by 2020 and are increasing their zero-waste-to-landfill (ZWL) production facilities to five by 2015. These efforts reduce emissions and water usage in addition to saving over US$25million since 2009 which is of great benefit to their stakeholders.

The Hershey Company 5

Hershey Financials

THE HERSHEY COMPANY CONSOLIDATED STATEMENTS OF INCOME (in thousands except per share amounts)

For the Three Months Ended

March 31, 2013

April 1, 2012 Net Sales $ 1,827,426

$ 1,732,064

Costs and Expenses:

Cost of sales 978,089

988,668

Selling. marketing and administrative

450,669

405,562

Business realignment and impairment charges, net 6,851

3,304

Total costs and expenses

1,435,609

1,397,534

Income before Interest and Income Taxes 391,817

334,530

Interest expense, net

23,633

24,024

Income before Income Taxes 368,184

310,506

Provision for income taxes

126,278

111,855

Net Income $ 241,906

$ 198,651

Earnings Per Share - Basic - Class B Common Stock

$

1.00

$

.82

Earnings Per Share - Diluted - Class B Common Stock $ 0.99

$ .81

Earnings Per Share - Basic - Common