Packaging not the top issue at Hershey

I promised myself that I wouldn't blog about The Hershey Company, but this week's news is just too incredible to ignore. For full disclosure, I retired from the predecessor Hershey Foods Corporation 5 ½ years ago after 28 years of service. I've never seen anything like the last 2 months – anywhere! Things are not sweet in Chocolatetown!

Sunday night, the controlling shareholder of The Hershey Company, The Hershey Trust, asked six board members to resign. Eight members resigned leaving only those who share roals as company executives or Trust board members. The final result is a change in 8 of the 11 seats. This comes after no fewer than 3 top executives, including the CEO and Chairman, have announced plans to leave the company. Major defections appear to be underway among the technical rank and file, just as Hershey is in the midst of closing six North American manufacturing plants, consolidating and expanding others, preparing to start up a new plant in Mexico and entering into manufacturing joint ventures in the far East. I'm sure that there are lots of packaging machinery challenges in this effort, but packaging probably isn't top-of-mind for anyone right now.

The newly-named board members include a former PA Attorney General, a former PA Governor, a former executive of Goldman Sachs, and former chairmen and CEO's of international packagers Kellogg's and Unilever NA. Several analysts have commented that this makeup indicates the Trust's intention to keep the company under local ownership, but I see it differently. If maintaining local ownership is a goal, just stick to the position that Hershey is not for sale and fill the board seats with experts in marketing and operations, not politics.

In 2002 I was in Bologna, Italy to speak at a packaging machinery conference. While awaiting my breakfast in the dining room of the Hotel Baglioni, I learned that the Hershey Trust had put the company up for sale. After receiving an offer of $12.5 billion from Wrigley, the Trust changed its mind about Hershey being for sale, due in large part to the community uproar and opposition from state government. Such a transaction would require the approval of the state's Attorney General and certainly the tacit blessing of the governor.

More recently, speculation has revolved around a deal with Cadbury. For years, Hershey has made and sold Cadbury products in the US, but not in Canada. In my opinion, the decision for Hershey to close all (3) of its Canadian manufacturing operations didn't make a lot of sense unless a deal was forthcoming with Cadbury. It wasn't that long ago that Hershey moved major US operations to Canadian plants where world-price sugar and the latest in continuous processing, robotics and mechatronic packaging systems were avaialble.

Much of the recent rumblings coming out of Chocolatetown have involved disagreements over whether Hershey should be sold or merge with another company; not to mention the loss of $1.9 billion in market value of the Trust's Hershey holdings. Some have speculated that a deal like the merger of equals between Coors and Molson might be a model for a Hershey / Cadbury marriage. This idea was fueled when the grandson of H.B. Reese (as in Hershey's number one selling peanut butter cup) was named to the Trust board after serving as chief legal officer for Coors.

Although the Trust's position continues to be that they intend to maintain control of the company, there are probably creative ways of weaving those semantics into a garment that everyone could wear. Is the role of the new board with its obvious political might and international food and consumer packaged goods experience to prevent or facilitate an alliance that could propel both companies forward?

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Comments Amen to the comment re importance of packaging. I agree they need mostly leadership that give a darn, as well as a background and interest in chocolate manufacturing. Posted by: Rod Noll on December 8, 2007 Post a comment (If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.) Name: Email Address: URL: Remember personal info? Comments: (you may use HTML tags for style)