Corporations: Chocolate's Drop

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In the 65 years since Milton Snavely Hershey concocted the first of what were to become the nation's bestselling candy bars, Hershey has operated almost always at capacity and almost never with advertising. Founder Hershey's only concession to promotion was to turn over empty Hershey wrappers he spotted on the ground so that the brand name would show. His successors have also stuck to the soft sell. Their major promotion is openhanded hospitality to the 700,000 tourists a year who trek to Hershey, Pa.—"the town that chocolate built"— to smell the cocoa-scented air, photograph one another under the street sign at the Chocolate-Cocoa Avenue intersection, admire street lamps shaped like Hershey kisses and policemen uniformed in chocolate brown.

Now, with sales nearing $240 million, the company's conservative management has decided it is time for a major corporate change—a new name (Hershey Foods Corp.) and a modern company emblem. Even more surprising, it took a full-page advertisement in the Wall Street Journal to trumpet the news. The ad summed up a situation that has been gradually cooking in the Pennsylvania Dutch hills along with the ovens full of African cocoa beans: Hershey is becoming more than a candymaker. Since 1966, the company has acquired two macaroni firms (San Giorgio and Delmonico Foods), a French Canadian baking company (David & Frere, Ltée.) and, for $23 million two months ago, the Cory Corp. of Chicago, which makes coffee brewers, appliances, pens and automatic pencils. Non-candy operations will soon account for 35% of Hershey sales.

Not Likely. President and Chief Executive Harold S. Mohler, 48, insists that the changes are not meant to downplay the importance of chocolate. But serious fluctuations in the cocoa market did figure in Hershey's decision to expand into other fields. With purchases of some 100,000 tons a year, Hershey is the largest U.S. buyer of cocoa, and in Ghana, the principal provider, scarce supplies have pushed prices up 200% in two years, to 30¢ a pound. To combat such price rises and increased wages for its 6,800 employees, Hershey has already chopped one-eighth of an ounce off its popular 5¢ bars. Yet, in spite of higher sales, earnings are off 17%. "It is rather unusual for our earnings to go down," says Mohler.

While Hershey moves to offset the drop with other food products, the company is also expanding operations in its principal lines of chocolate. A second candy plant opened on the West Coast will save $1,000,000 annually in transportation costs; acquisition of 5,000 acres of almond ranches in California will provide Hershey with a source of cheaper nuts. Meanwhile, the company is test-marketing Hershey Chocolate Drink and a new candy bar called Rally. Will they be advertised? Not likely. "It's not necessary," says President Mohler, who keeps his grandfather's rocker in his office and frequently sways back and forth in it while he mulls over the changing times.