Introduction of a New Product Line of Hershey Company - Term Paper Example

MARKETING HISTORY OF HERSHEY COMPANY Student name Subject Lecturer University Date Executive Summary The following report provides the information and analysis of Hershey Company. The company specialized in two units products both chocolates and sugar. As such, Hershey Company produces the most chocolates in North America, and it leads in sugar confectionery. Contrariwise, the confectionery market is highly competitive where numerous players are evidenced. Nevertheless, this analysis will be instrumental in analyzing the possible introduction of a new product line within the U.S. market. A SWOT analysis and a subsequent country analysis will be conducted, in support of the introduction. Hershey Company Contents 1.0 Introduction & Background 4 2.0 Confectionery Market of U.S. 5 3.0 SWOT Analysis 5 4.0 Target Market 7 6.0 Products Market Mix 8 7.0 Customer Value Proposition 9 8.0 Product Comparison with SWOT 10 Reference List 11 1.0 Introduction & Background The Hershey company markets its products over 70 countries worldwide (Hershey Co, 2012). The products are branded with various iconic like Hershey’s Bliss, Hershey’s Kisses, Kit Kat, Almond Joy, Twizzlers, Hershey’s and Reese. The marketing strategy is to produce quality products through innovations of new products in various procedures like identification of new products, development, testing, manufacturing, and marketing the products to customers. The main customers are wholesale distributors, chain drugstores, mass merchandisers, department stores, vending companies, and wholesale clubs. Financial growth is among the objectives of Hershey Company. The company, globally, distributes 42% of chocolate products in U.S.A and currently it has generated over $6 billion in annual revenues (Booton 2012). In 2001, the accountability of business sales for Hershey products outside U.S.A was 15.6%, 14.6% in 2010, and 14.3% in 2009 (Hershey 2012). Currently, the company has already launched international brands to boost its economy, the Lancaster candy brand in China (Hershey 2013). The product line is under strict laws. In order to maintain the quality of the products, the company follows the confectionery regulation from various government agencies, the main administrations of food and chemicals, department of commerce and the federal trade commission. . 2.0 Confectionery Market of U.S. Chocolates and sugar are highly consumed in U.S.A. In U.S.A, Confectionery market, Chocolates accounts for 62% of the value (New York 2012). The leading confectionery market is Hershey Company out of more than eight companies. Its sale was 31.2% (The Statistics Portal, 2014). According to Euromonitor International (2014) no other company, especially the private label brands penetrators in the market, in confectionery can account for 5% of its products in U.S.A hence showing no market concentration to compete with Hershey. The sale of the products depends on its branding hence Hershey wins it all. Indulgence of the company with its consumers also plays a role to win the heart of customers to shop in its retail shops. The forecast period indicates that between the years 2014-2019, the confectionery within U.S.A is expected to show a growth of 15% with the constant of current prices (Euromonitor Internationals, 2014). This indicates the sales of US$20.4 billion. 3.0 SWOT Analysis STRENGTH WEAKNESSES OPPORTUNITIES THREATS 1. Forefront in marketing company products sell. Diverse products of more than 80 brands are on sale (Hershey company, 2012). The company has also been in a market industry for more than 100 years with its products sold in more than 70 countries hence showing its skills in marketing. One of its products, kisser chocolate, was ranked the best according to Harris Poll. 2. Programs are in place for research and development. 1. Hershey relies heavily on U.S.A market. 1. Market opportunities in both India and China. 2. A high Consumer Demand for healthier products. 3. E-Commerce. With the integration of technology into business, companies can save its financial spending. 1. Availability of rivals. A new rival into the market is Nestle Company. Nestle has expanded its services to more than 80 countries worldwide. 2. Incoming private labels. Private labels come in with pricing suitability to attract customers. Strength New innovative products make the company competitive. The company products are developed based on consumer insights. It is mindful of its consumers hence its center for health and nutrition helps to create products of beneficial to consumers. Weaknesses This limits the company from expanding to other geographical locations. Less than 10% of revenue is collected from the international retail shop (fact book, p. 41, 2012). If economic meltdown hits the U.S.A, the chances of the company losing its customers are high hence other retail shops outside U.S.A will not be able to finance running the company. Opportunities The US has a ready market for confectionery product. These offer a wide opportunity for the development and expansion of new products. Customers prefer low-fat chocolates. With its increasing demand, the company should extend its territory by distributing the darker chocolates of good quality hence tapping new and more customers. Additionally, companies advertize their products in creative ways meeting the demands of any age-set group at a faster rate, through new media. Threat The company also runs healthy programs focusing on the of consumers to healthy products (Dernot, 2012). If Hershey does not change its strategies, it might lose its market to nestle. Hershey is recommended to come up with pricing strategies, even though, the raw materials for Hershey products show significant price increases (Hershey SWOT analysis, 2012) 4.0 Target Market A multi-segment marketing strategy will be incorporated given its significance in gaining effective market exploitations. A different product line extension that appeals to the different target market, nevertheless, the new products will be largely centered on children and adults. With respect to age, it is advised a segmented population over ten years old should encouraged, that is attributed to the children’s perception with respect to the product’s benefits. Tentatively, this group of consumers necessitates for a presentation of the products is entirely different from all other segments. The children demographics will consist of those aged between 10- 15 and young product aged between 20-25 years. For instance, the children are inclined to take the chunky chocolates. Demographics Type Children aged between 10-15 Chunky Chocolate Young Adults between 20-25 Crunchy Chocolate Various social class, on the other hand, will be targeted this includes; upper middle for almost 11 % of the population (professionals and business people); lower middle layer that consists of 20 % of the population and 36 % of the population. The common themes among these groups are; the benefits experienced from the products and quality appreciation for the product. These groups are all not sensitive to price in case of a quality improvement, hence would pay higher for the product. 5.0 New Product Description The product will contain an added crunch of peanuts into a mixture of caramel covered with milk and nougat. In differentiating the crunchiness of the bar, different amounts of peanuts will be used in differentiating the crunchy and Chunky chocolates. Nevertheless, all the products will assume a chocolate bar, which is essentially a common strategy used. Thus, the products will be packaged in a long bar or long form, with multiple layers. The bar will come in various standards sizes weighing from 49 grams up to 200g. The product will be packaged in a shiny black wrap with the engravings “Chunky Chocolate Bar and Crunchy Chocolate Bar”. 6.0 Products Market Mix Product The product anticipates gaining its success through units uniquely dual attraction- four finger chocolate bar that will; be marketed in the conventional shops. The products packaged will be suited for the different target market; where the children targeted chocolates will be colorful with appealing colors. Contrariwise, the adult chocolate will less colorful and have a professional tone to it. Promotions and Products Sales The product’s sales promotion will be geared towards the generation of interests and sales towards the new product. In this respect, a variety of promotion strategies will be employed in multifaceted constructs. These include online media and traditional campaigns on billboards and TV advertisement. The rise of new media, notably social media has changed the approach to the advertisement, where many consumers can be reached conveniently. Tentatively, promotions activities such as price coupons will be integrated with furthering its penetration in the market. The design of the content of promotion will be appealing given that chocolate is healthy and fun, that can quickly be shown as an improvement of gifts and mood. Emotional elements will be integrated –friendship, feeling of love, a pleasant surprise, where the product can be presented as a source of energy. Distribution The new product is consumer convenient hence the products will be sold in all available outlets such as convenient stores, gas stations, and hypermarkets. The availability of the product in various locations is instrumental in gaining competitive advantage in various aspects. In this way, the product can be purchased by many consumers. Price Considering that the price is important in addressing the scope and the structure o the sales, various attributes will be taken into consideration product life cycle of demand, positioning, and marketing mix. The procedure used will consolidate various steps namely; cost analysis, competitor price analysis and objectives of the price formation. A low cost-high quality strategy will be used in determining the price. Evidently, chocolate demand is not price elastic; hence an integration of the value for buyers can be realized through a conjoint analysis. 7.0 Customer Value Proposition Differentiation and positioning will offer a value proposition for the business and help in creating a competitive advantage over other products. An effective positioning will offer the company’s image in the minds of the consumers. The value proposition for the chocolate bar will be centered on increasing customer satisfaction through the production of flavors and differentiations that will accommodate all the consumers for the products. Evidently, a high quality and divergent flavors will offer more benefits to the consumers than it would from other competitors. A good position statement will be used in the increasing the customer numbers. 8.0 Product Comparison with SWOT The company is well renowned as a leading brand in the confectionary industry. In this respect, the introduction of the new products is well placed in competing with other products existing in the market. Evidently, the product will have a competitive advantage over other companies in the global market. Contrariwise, given its penetration in the market in the global market, it has an effective supply chain that works with suppliers and distributors in the region. Such availability reduces the propensity of introducing new products in the new market. The penetration of the new product will be easily realized, because the company has diverse brand products that attract different consumers. An additional inclusion of newer products range will augment customer value proposition in various constructs – newer customers are attracted to the products while existing ones have a variety of flavors to choose from. Reference List Booton, J 2012, ‘Hershey Stirs Up Stronger 3Q Profit, Says Halloween Off to Good Start,’ Fox Business, viewed 20th April 2015, . Euromonitor Internationals 2014, Chocolate confectionery in US : Companies fact information, viewed 20th April 2015, < www.icco.org/about-cocoa/chocolate-industry.html> “Hershey Fact-Book.” 2012, The Hershey Company. Hershey Company, viewed 20th April 2015, . The Hershey Company, 2012, Hershey Co 10-K Annual Report, Hershey company, viewed 20th April 2015, . The Hershey Company SWOT Analysis, 2012, Hershey Foods Corporation SWOT Analysis, Business Source Complete, viewed 20th April 2015, . ‎ The Statistics Portal, 2014, U.S Market share for leading companies, Statistics and Studies from more than 18,000 Sources, viewed on 20th April 2015 < www.statista.com/statistics/.../tesco-s-market-share-of-entertainment-retaill-great-britain-uk/>. ‎ New York, May 2, 2012, Consumer Trends in the Confectionery Market in the US. PR Newswire. ‎ Read More