strategic-management

198 ANNE WALSH AND ELLEN MANSFIELD
EXHIBIT 4 Hershey versus Cadbury (January 2009)
Many of these acquisitions appear to reflect increased health consciousness
among consumers as well as preferences for healthy products in both established and
emerging markets. Consumers are increasingly aware of the nutritional value of various
product ingredients with purchase decisions reflecting a preference for organic and
nonadulterated products. Consequently, organic foods products are one of the fastest
growing sectors in the United States with a projected value of $26.3 billion by 2011.
Hershey’s organic line includes Dagoba Organic, a company with a strong product line
of high-quality organic chocolates and baking products that are sold via natural food
and gourmet stores. Hershey also continues to appeal to consumers with its premium
line of dark chocolates that promote the antioxidant benefits of flavonoids found in
these products. Despite the dominance of major companies such as Cadbury, Mars, and
Nestle, the major 50 firms in the industry control less than 40 percent of the market.
The confectionery industry is fragmented with consumer tastes that drive the diverse
demand for products in the industry which range from gums and jelly beans to chocolate
products. Exhibit 4 provides some key comparative information on Hershey versus
Cadbury and the candy industry overall.
Key Competitors in the Industry
Confectioners
Hershey Cadbury Industry Average
Market Cap 8.91B 51.24B 1.32B
Employees 12,800 45,000 2.20K
Qtrly Rev Growth 5.90% 13.40% 0.10%
Revenue 5.27B 9.29B 505.67M
Gross Margin 36.73% 45.61% 33.89%
EBITDA 1.03B 1.38B 88.79M
Oper Margins 15.46% 11.71% 10.91%
Net Income 353.89M 466.89M N/A
EPS 1.549 0.679 0.68
Source: Based on information at www.finance.yahoo.com.
Note: B = Billion; M = Million
Nestle
Nestle, one of the largest food and beverage companies in the world, is headquartered in
Vevey, Switzerland. It has operations in the Americas, Europe, Asia, and Africa. The
company has six business divisions that are organized along product groups including the
beverage division (Nescafe coffee, Libby fruit juices, and Nestle waters), prepared dishes,
and cooking aids division (Stouffer’s, Lean Cuisine, breakfast cereals), milk products,
nutrition and ice cream division (Nido, Everyday, Haagen Dazs, Dryers, Power Bar, and
Jenny Craig products), pet care division (Purina Dow Chow and Purina One), a pharmaceutical
products division (ophthalmic drugs and surgical equipment, contact lens solutions),
and their confectionary division (Kit Kat, Butterfinger). Nestle brands enjoy
worldwide recognition, and the company has the 63rd position in the Top Global Brands
ranking by BusinessWeek. Nestle recently entered the organic products segment with
projected sales of $24 billion by 2010. Company acquisitions include the medical nutritional
business of Novartis, Gerber baby foods, and Jenny Craig, a company with an
established brand of nutritional weight-management products. Nestle’s image, however,
has suffered within the global community due to allegations about sourcing of cocoa from
farms that employed children in Africa, as well as its marketing tactics used to promote
its infant milk substitutes in developing nations. Consolidated sales of the Nestle Group
for 2008 were CHF 109.9 billion, an increase of 2.2 percent increase from the previous
year (www.marketline.com).