The Emperors of Chocolate: Inside the Secret World of Hershey and Mars Essay
The companies I’ve chosen for my individual project are Hershey and Nestle. Both companies are large confectionery producers (one of them is not only a confectionery but also a food and nutrition producer as well).
Hershey Company is the largest chocolate producer in North America. It is also one of the oldest US manufacturers of chocolate and non-chocolate confectionery and chocolate-related grocery product. It’s headquartered in Pennsylvania and employs about 13,700 people around the world.
Nestle S.A. is headquartered in Europe (Switzerland) and it is one of the largest food and nutrition companies. According to the Forbes magazine (Burkitt L., 2010, May 24) Nestle ranked 20th among the most respected companies in the world. Nestle employs 283,000 people and operates in 86 countries around the world.
Comparative analysis
Let’s start the comparison with latest sales results, as these companies are direct competitors in chocolate confectionary market. As for the global competition, according to the latest results of the confectionery industry’s global survey, Hershey Foods Corp. (USA) is number 5 among the top 100 international Сonfectionery brands rating with 4,881 US($) millions sales volume figure. The main competitors in the global market are Mars Inc (USA), Cadbury Schweppes PLC (UK), Nestle SA (Switzerland) and Ferrero SpA (Italy). (The Big Get Bigger, 2011, Jan. 10).
Nestle has a stronger position on the global market in general, incl. such regions as Europe, Latin America and Asia Pacific, while Hershey keeps a leading position in US (Hershey’s market share is 22.6% vs. Nestle’s 3.3%), but its global position needs to be strengthened
Political, social and ethical issues
Ethical issues are very important both for Hershey and Nestle as producers of chocolate related products. Among the social/political issues a problem of child labour and unfair trade can be named. For example, these huge confectionery producers criticized for not having programs to ensure sustainable and ethical cocoa purchase, lagging behind its competitors in fair trade measures. (Hershey Dominates US Market, 2010, Sep.13).
Ethical issues include ineffective farming techniques and poor environmental management. Trying to find the way to improve the situation, Nestle and other chocolate companies has founded formed the World Cocoa Foundation which focuses on boosting farmer income, encouraging sustainable farming techniques and environmental and social programmes.
Besides it, Nestle is a founding participant in the International Cocoa Initiative. This major goals of this foundation are ending child and forced labour in cocoa industry, and eliminating child trafficking and unfair labour practices.
Legal issues
In regards the legal issues, both producers have its headquarters based in free democratic states with the developed legal base. But besides US plants, Hershey manages the plants in Ontario, Canada, two plants operate in Mexico, and one is based in Sao Roque, Brazil. Therefore Hershey has a qualified legal team that knows the labour legislation in the mentioned countries.
International business law and the local legislation are used by both teams intensively, in order to operate successfully on many different markets. The commercial legislation of each market/country has its own specific conditions.
Hershey feels much more comfortable regarding the legal issues, because confectionery business is not that risky, while Nestle has experienced some kind of trouble mostly due to the problems with nutrition products.
For example, I can mention the problem with Nestle milk product in Hong Kong that appeared in 2008. Nestle affirmed that all its products were safe. But later Health ministry of Taiwan has stated that six types of milk powders produced in China by Nestle contained traces of melamine. After that the company has announced the recall of milk products produced in China.
Conclusions
One of the main complications for the chocolate confectionery industry seems to be the limited number of suppliers and ethical issues connected with it. It’s a substantial risk for the producers and therefore I would recommend both Nestle and Hershey to look for alternative (non-West African) locations or different methods for obtaining cocoa beans should be recommended for both companies. This would allow Hershey and Nestle to have a secure control over their raw materials.
As far as these companies are the global players and they have their plants all over the globe, they need to pay a huge attention to labour conditions in their local plants. The strong knowledge of local labour legislation will help companies to prevent any kind of social risk.
There are also substantial political and legislation risks of producing and selling products in highly regulated countries that have strict government policies. For example, among these markets are China and Middle East markets. So the major goal there is to adapt the companies’ global strategy following all the required legislative restrictions.
