Hershey’s Marketing Strategy : Robust & Integrated, but is it good enough for today’s challenges?

In this article, we reflect on The Hershey Company’s global marketing strategy in terms of operations, performance, and improvement opportunities. Strategy execution is what finally matters to customers and to a company’s bottom line.

First, let’s go a few steps back and understand the main features of Consumer Packaged Goods (CPG) industry by understanding how its model operates and the underlying challenges to profitably grow in today’s world.

Consumer Packaged Goods Industry – Context & Challenges

According to McKinsey report in 2022, the CPG model depends on five pillars: Mass-market brand-building and product innovation, close partnerships with mass distribution channels, building growth momentum in emerging global markets, continuous drop in the cost of their operating model and finally, mergers and acquisitions to consolidate market positions.

While this industry has generated the second highest total return to shareholders in the 40 years prior to 2008 financial crisis, the profit growth dropped from 10.4% between 2000 to 2009, to 3.2% between 2010 to 2019. Further reduction in profitability is expected. Disruptive trends to the pillars above are (1) explosive digital access to consumers, (2) healthy eating trends, (3) productivity pressure from activist investors and (4) growth in the number of discounters in the grocery markets.

Hershey’s Overview, Marketing Strategy and Operations

Headquartered in Pennsylvania, USA, Hershey manufactures and distributes chocolate and non-chocolate confectionery including sugar confectionery, gum, and mint refreshment products and snacks. Its flagship brands are Hershey’s, Reese’s, Kisses, and Ice Breakers. Hershey’s range of customers include grocery stores, drug stores, department stores, mass merchandisers, and wholesale distributors.

The company has global presence across Asia, Latin America, the Middle East, and Europe. Below are two charts chart that shows their revenues over the last three years. There is clear slowdown in margin growth.

Hershey’s CEO, leading the company since 2017, Michele Buck, set the vision for the company to be an innovative snacking powerhouse based on five interconnected strategies.

Hershey’s Brand Strategy

Three pillars define Hershey’s marketing strategy: strong brand equities, product innovation and superior quality of products. Hershey products prices reflect its brand equity; they are not cheaper than other competitive products in the market, both in USA and globally. Hershey integrates what the brand stands for with its purposes and contribution to society.

In 2018, Hershey launched The Heartwarming Project & Summit for teens to overcome social isolation and its complications by sharing stories about defeating isolation, bullying, violence and suicide. In 2022, the project reached more than 9 million children through partnerships and benefitted over 615,000 children.

Hershey is built on the heritage of Milton Hershey, its founder, who started a free year-round boarding school in Pennsylvania for under privileged children in 1909. Commitment to addressing social inequalities, data strategy building on direct customers interactions and hybrid experiences that create more personalization and connection, are all effective marketing strategies to adopt.

Hershey’s Better for You (BFY) Snacking Strategy

BFY represents the company’s focus announced in 2021 to deliver on three promises to its consumers: (1) lower sugar, (2) more organic ingredients, and (3) more portion-controlled treats. Hershey acquired Lily’s whose low-sugar products include dark and milk chocolate style bars, baking chips and peanut butter cups – totally aligned with BFY strategy. Another step to support the snacking strategy was the partnership agreement signed with ASR Group, a leading global sweetener company, to co-invest in a start-up with breakthrough innovations in plant-based food ingredients and natural sugars.

Aligned with the above, and its original superior product quality focus in its marketing strategy, Hershey’s 2018 acquisition of Amplify Snack Brands highlights its commitment to the best, cleanest, and simplest ingredients. Amplify Snack Brands pages on Facebook and LinkedIn emphasize the premium ingredients message across all its snacking products. Hershey’s 2024 consumer report highlighted three consumer trends: prioritizing time with friends and family, cost cutting and focusing on well-being.

Hershey’s Advertising and Promotions

To define the promotion aspect of the marketing mix, the company implemented a variety of promotional programs towards its customers, in addition to advertising and promotional programs for consumers to stimulate seasonal sales. Looking into distribution and place, Hershey prides itself on strong distribution capabilities from their plants to distribution centers through common carriers – an effective optimization across marketing and supply chain.

Hershey designed advertising campaign that unites all Hershey branded treats under one commercial. One example of marketing strategy flexibility is demonstrated by Hershey’s decision to pull back advertising on a global scale because of the supply chain crisis between the third and fourth quarters of 2021.

Another proof of marketing strategy effectiveness is deploying the right advertising technique aligned with Hershey’s micro-marketing strategy. Hershey reached out to Amazon Streaming TV ads to run advertisement campaigns for KitKat and Reese’s brands for specific holiday seasons based on audience demographics and profiles.

Long Term Relationships – Social Media Successes through Brand Communities

One example that shows Hershey’s integration of social media in its global digital marketing strategy for a local country is the Friendship Day Instagram Campaign in India back in 2021. The company engaged younger age groups through Instagram influencers while creating an immersive virtual experience of sharing a chocolate bar with a friend online; the campaign was designed to encourage sharing the indulgent chocolate bars through the bonds of friendship in India. Hershey built on the importance of Friendship Day as a growing chocolate category occasion where friends want to make each other feel. The reach of the campaign was 3.5 million in August 2021 and 4 million later in October 2021.

Another success was Hershey’s #HappyAtHome digital campaign on Facebook, Youtube, and Instagram during the COVID19 lockdown in 2020-2022; the company ran a two months campaign to encourage the Indian people to create and share over 100 recipes created by a celebrity chef using Hershey syrups, spreads and cocoa Powder.

Hershey’s Digital Presence, Data Strategy and Artificial Intelligence

The virtual platform Hershey Insights Network (HIN) allows Hershey’s retail partners in USA to engage shoppers and enhance their experience physically in the stores and virtually. Another implementation of marketing strategy to support its distributors, Doug Straton, the company’s chief digital commerce officer, explained that digital investments with Hershey’s retailers have proven to grow the top line with the right focus on consumer behavior – the company’s digital strategy focuses on search, content, conversion, and community.

With the right analytics, companies can uncover hidden pockets of growth. A 2022 McKinsey & Company study showed that scaled up data-driven marketing can deliver to CPG companies between 3% to 5% growth in net sales and improve marketing efficiency by 10% to 20%. One example? Data analytics enabled Hershey to know that online trips by consumers are driving bigger online shopping baskets compared to standard trips.

This month, Hershy is utilizing AI capabilities through the AI services provider Chalice Custom Algorithms. The company is refining its media buying and planning. Through AI help it is shifting advertising focus from oversaturated markets to those underserved especially with Halloween and presidential elections happening only one week apart.

Hershey’s Growth Challenge

USA is Hershey’s largest market then Canada, Mexico and Brazil. Hershey has an extremely modest direct presence through its Hershey’s stores across the world except for a few countries. 83% of Hershey’s chocolate revenue is coming from North America consumers. Earlier, the challenging context of the overall consumer packaged goods was explained. Hershey is not isolated from these tough conditions.

Hershey has been losing market share to competitors, long-term sales growth targets have been reduced twice over the last 5 years and, unfortunately, cocoa prices continue to rise. Mondelez, the biggest competitor, has acquired big players in the USA and globally leading to a market cap of $95 billion (as of October 2024) while Hershey is at $37 billion.

And its not just the small players. There is now growing competition from the new brand Feastables launched by the famous YouTuber Mr. Beast in 2022. Who could have imagined that much smaller brands can threaten Hershey’s brand?

Final Reflections

Focusing solely on customer-mindset marketing metrics can be misleading when considering Hershey’s global challenges. The article showed different indicators that brand positioning continues to strengthen, and product quality perception remains superior, yet the overall context of the CPG especially in the confectionary categories needs more effective and quicker strategies from Hershey to revive a stagnant business model.

CPG companies must find opportunities in a digitally transforming world, accommodate increased awareness about the complications of unhealthy snacking and, finally, win against the growing strength of local brands. The list of wild ideas is not short – phygital experiences in retail stores, integrating their products into state-of-the-art video games or rethinking how they might gain more presence with BFY in the metaverse as a new marketing landscape.