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Hershey Media Report 9/30/16
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Hershey Uses SAP S/4HANA To Transform Its Way Of Business
Sep 29, 2016 | Forbes
By John Ward
For more than 120 years, The Hershey Company has successfully made great-tasting chocolates that you and your family have grown to love. Over the years, the company has added other candies, confectionaries, and snacks to its growing portfolio to meet the changing needs of consumers. -
Letter To The Editor - Response to Sept 22 Editorial
Sep 28, 2016 | The Hummelstown Sun
By C. Max Lang
I was completely astounded by your implications regarding The Milton S. Hershey Medical Center in your Editorial on September 22, 2016. As you know, the Pennsylvania Orphan’s Court (Aug. 23, 1963) authorized the transfer of $50 million from the accumulated income fund of the Milton Hershey School Trust to the M.S. Hershey Foundation (both were charitable trusts) for the purpose of establishing a medical school to be located in Derry Township, Pennsylvania. -
Lancaster city's insurer pays $21K to settle claim that woman was pepper-sprayed for no reason
Sep 28, 2016 | Lancaster Online
By Dan Nephin
Lancaster city's insurance company paid a woman $21,000 to settle her claim that a city police officer pepper-sprayed her for no reason after a First Friday event in the city, records obtained by LNP show. -
Mondelez May Seek Tuck-in Deals, China Growth After Hershey Dismisses $23 Billion Bid
Sep 28, 2016 | The Street
By Laura Berman
Mondelez International Inc.'s (MDLZ) failed $23 billion bid for Hershey Co. (HSY) has company followers wondering how the snack giant will fill the hole in its pocket.
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Hershey Uses SAP S/4HANA To Transform Its Way Of Business
Sep 29, 2016 | Forbes
By John Ward
For more than 120 years, The Hershey Company has successfully made great-tasting chocolates that you and your family have grown to love. Over the years, the company has added other candies, confectionaries, and snacks to its growing portfolio to meet the changing needs of consumers.
Hershey’s tradition of innovation goes beyond creating new products; it also involves reimagined systems and processes. Hershey understands that it takes innovation and evolution for continued growth in today’s marketplace.
In a recent video, J.P. Bilbrey, Chairman, President, and CEO of The Hershey Company, talks about how the company relies on knowledge and insights to drive business decisions in order to win in the marketplace.
Hershey is on a journey to providing an uninterrupted flow of information to employees across the company. Bilbrey sees this kind of enterprise connectivity as critical to Hershey’s future success.
Exactly how critical? Well, to quote from that same video, Bilbrey says, “Enterprise connectivity is going to be the single most important thing to be able to win in the marketplace. And we want to win.”
That’s a very strong statement, and off-screen, Bilbrey had even more to say about the topic.
During his 35+ year career in the industry, Bilbrey has seen tremendous change in the consumer products world – economic globalization, a growing digitalization of daily life, and the consumer’s own changing relationship with food.
“The speed at which these things are happening is more dramatic than ever before,” Bilbrey observes.
He believes businesses like Hershey must keep pace.
“Having access to information in a live business environment lets you act on insight at equally fast speeds,” says Bilbrey.
Bilbrey makes the point that a company’s information and its talent typically span the entire enterprise.
“An organization needs to be well-connected to take advantage of all the data that is available,” he says. “Tear down the silos and get that information to as many people as possible. You’ll discover some great insights from some surprising places.”
Knowledge is the Enabler
Such insights already help Hershey fine-tune its recipe for market success.
“We use SAP S/4HANA in our supply chain where we’ve been able to influence how we think about inventory, how we procure goods, and how they move through our system,” says Bilbrey, citing just one example.
And by “influence,” Bilbrey clearly means “improve.”
He describes a specific instance where deeper analysis and greater insight into the supply chain enabled Hershey to take out more than 20 million corrugated paper cartons from the production and shipping process.
“Twenty million cartons,” Bilbrey repeats for emphasis. “That’s a big number.”
It’s the CEO’s Job
Bilbrey notes that Milton S. Hershey built his business on the concept of “doing well by doing good.”
Hershey himself believed workers should be treated fairly, and he established a model community that included good housing, green space, arts, and entertainment. He was responsible for creating the Milton Hershey School for disadvantaged children, and decades later a US$50 million gift from the Milton Hershey Trust led to the renowned Penn State Health Milton S. Hershey Medical Center, which combines a medical school, teaching hospital, and research center.
This legacy of progressive thinking continues at Hershey.
Today, Hershey uses the knowledge gleaned from its data and analytic capabilities to explore new market opportunities, build value for its investors, and deliver the great tasting snacks loved by generations of loyal customers. In other words, to help the company identify all the right priorities.
“And that’s one of the most important things a CEO does,” says Bilbrey.
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Letter To The Editor - Response to Sept 22 Editorial
Sep 28, 2016 | The Hummelstown Sun
By C. Max Lang
I was completely astounded by your implications regarding The Milton S. Hershey Medical Center in your Editorial on September 22, 2016.
As you know, the Pennsylvania Orphan’s Court (Aug. 23, 1963) authorized the transfer of $50 million from the accumulated income fund of the Milton Hershey School Trust to the M.S. Hershey Foundation (both were charitable trusts) for the purpose of establishing a medical school to be located in Derry Township, Pennsylvania. (The Impossible Dream-The Founding of The Milton S. Hershey Medical Center of The Pennsylvania State University, C.Max Lang, Editor, 2010, Authorhouse). Subsequently (Dec, 1968) the Court agreed to transfer the funds to The Pennsylvania State University because of additional administrative difficulties and expense, and acknowledged hat such a transfer would not have any effect on the achievement of its charitable purposes.
I was the first faculty member hired by the founding Dean, George T Harrell (my interview was 1 week prior to groundbreaking) and can assure you that the emphasis has always been on teaching, i.e. a College of Medicine with a teaching hospital. Despite, the initial endowment, it has been a financial struggle. We started with no financial support from the Commonwealth, and even today their financial support is minimal. The academic (teaching and research) functions simply cannot be supported by tuition and research grants. The hospital is an integral part of our teaching curriculum; in fact, every patient is teaching material. At the time the hospital opened, we were $20 million in debt to the University. In fact, there was serious discussion by the Board of Trustees about returning the moneys to the Hershey Foundation and close the institution.
The arbitrary separation between the College and Hospital can be misleading. This is due, in part, to government regulations, insurance reimbursement, and yes, perhaps leadership egos. Financially, it is a single entity and neither part can survive without the other. There are NO shareholder dividends.
Although I am now retired, I am aware of continuing financial struggles. Perhaps perceptions are misinterpreted because of nomenclature, presentations, attempts to compare with other institutions using insufficient terminology, whatever. However, to imply the existence of a “profit” is unfair to the hardworking, talented men and women at the medical center and the wonderful patients being asked to share in that cost.
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Lancaster city's insurer pays $21K to settle claim that woman was pepper-sprayed for no reason
Sep 28, 2016 | Lancaster Online
By Dan Nephin
Lancaster city's insurance company paid a woman $21,000 to settle her claim that a city police officer pepper-sprayed her for no reason after a First Friday event in the city, records obtained by LNP show.
The March settlement by Travelers Insurance with Trina Howze, of Lancaster, isn’t an admission of wrongdoing by the city, according to Patrick Hopkins, the city’s finance director.
The city paid its standard insurance deductible of $25,000, which covered the cost of its legal defense.
Howze claimed in her lawsuit that she and a friend were walking to her vehicle after midnight Nov. 2, 2013, and were waiting for the light at Chestnut and Queen streets when police “began to argue with a group of African Americans.”
After several minutes of arguing, according to the lawsuit, an officer identified as “John Doe No. 1,” sprayed pepper spray in Howze's face and told her to shut up and move.
The suit was filed in March 2014 in U.S. District Court in Philadelphia.
An amended complaint named as defendants officers Erik Pannone, Richard Mendez and David Rachor, saying they either pepper-sprayed her or didn't prevent other officers from pepper-spraying her.
Howze claimed she was sprayed again when she told an officer she couldn’t move because of a crowd of people, according to the lawsuit.
Howze said officers with the department’s internal affairs division apologized to her and told her she was “in the wrong place at the wrong time” and that the officer who sprayed her was “pumped up from an earlier incident.”
Howze was seeking more than $75,000 for injuries including a chipped tooth, back pain and emotional distress.
An LNP analysis last year found that from 2005 to last fall, the city settled at least 21 lawsuits alleging excessive force by its officers. City payouts during the period amounted to $1.1 million.
During that time, another 10 excessive-force allegations were made against other county police departments, accounting for $1.3 million.
Howze also had sued Milton Hershey School, claiming her and her daughter’s civil rights were violated when the school strip-searched her daughter in June 2013.
However, the lawsuit was dismissed less then a month later.
A message left Wednesday for Howze’s attorney, who represented her in both cases, was not immediately returned.
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Mondelez May Seek Tuck-in Deals, China Growth After Hershey Dismisses $23 Billion Bid
Sep 28, 2016 | The Street
By Laura Berman
Mondelez International Inc.'s (MDLZ) failed $23 billion bid for Hershey Co. (HSY) has company followers wondering how the snack giant will fill the hole in its pocket.
Acquisitions seem like the most logical step, according to company followers, but large scale targets like Hershey may be hard to come by for the former Kraft arm. So much so that Edward Jones analyst Brittany Weissman predicted that Mondelez would pursue "very small acquisitions."
With the potential to spend billions, Mondelez "could easily do some smaller billion dollar deals. They generate a ton of free cash flow. That's not an issue," he said.
Hershey announced June 30 that it had rejected a $107 cash and stock bid from Mondelez, a 10% premium over the prior day's close. Two months later, Mondelez withdrew the bid, with Hershey reportedly unwilling to accept an offer below $125 per share.
"We remain disciplined in our approach to creating value, including through acquisitions," Mondelez CEO Irene Rosenfeld said in an Aug. 29 statement withdrawing the bid, which was fraught with complications including the potential opposition of the controlling Hershey Trust.
Sources have suggested that China was a big reason Mondelez went after Hershey and some company followers see it as a potential growth area. The company could also seek out smaller, health-focused options.
Mondelez is "so big, it's kind of hard to move the needle," said one analyst who asked to remain unnamed. "They don't have a big chocolate base in China. It's a market that's very, very fragmented."
The analyst added that Mondelez would most likely pursue "principally producers--if you're going to buy a producer it's going to come with a path to market."
Prior to the blockbuster Hershey bid, Mondelez had not been particularly acquisitive. In early 2015 the Deerfield, Ill.-based company scooped up gluten-free food company Enjoy Life Natural Brands LLC. Terms of the acquisition were not disclosed, although The Deal reported that the target was likely to fetch a multiple of its $40 million revenue. A few months prior, Mondelez paid about $370 million for an 80% stake in Vietnamese cookie company Kinh Do Corp.
John Baumgartner, an analyst at Wells Fargo, agreed that the company could pursue potential acquisitions in "developing markets to add some more scale," similar to Kinh Do stake.
Transformative acquisition opportunities within confectionaries are scarce, however, and confectionaries are where some sources said the company is likely to hone in on targets.
"They obviously had an investment thesis in confectionary in Hershey," said David Garfield, managing director and head of the consumer products practice atAlixPartners LLP. "The logic of confectionary makes sense to them."
Indeed, Edward Jones' Weissman noted that Mondelez CEO and chairwoman Rosenfeld, already acquired one of the main players in 2009, when as CEO of Mondelez predecessor Kraft Foods Inc. the company shelled out $19.5 billion for chocolate maker Cadbury plc.
"Irene has a track record of making acquisitions, back when they were at Kraft," she said. However, "they're very focused on staying in this snack and confectionary category, and that really limits their options. There's not a lot of big options."
A source familiar with the company pointed to two potential larger confectionary targets: Nutella maker Ferrero International SA and Swiss chocolate companyChocoladefabriken Lindt & Sprüngli AG, or Lindt.
Ferrero generated revenue of €9.5 billion ($10.7 billion) in the year ending Aug. 31, 2015. CEO Giovanni Ferrero succeeded his late father last year as CEO of the perennial takeover target.
Ferrero is interesting large, high-growth buisness as well as a strong position in Europe and China where Mondelez is investing make the Nutella maker an attractive target, the person said, acknowledging that the company has remained family-owned for three generations and rejected prior buyout offers.
As for Lindt, the company has attractive positioning in the premium end of the market, attractive margins, the person said.
Lindt trades on the SIX Swiss Exchange, where it has a market capitalization of 14.5 billion Swiss francs ($15.5 billion). The company generated sales of 3.6 billion Swiss francs in fiscal 2015.
Mondelez, Ferrero and Lindt did not respond to requests for contact.
While international expansion, especially in China, is important to Mondelez, the company may also target more health-focused brands to keep pace with other large food companies.
According to Garfield, two companies that have followed a similar acquisition strategy are General Mills Inc. (GIS) and Danone SA. On Sept. 8, 2014, food giant General Mills announced that it would pay $821 million for organic food company Annie's Inc., famed for its bunny-shaped macaroni and cheese.
"Annie's has a great brand of better-for-you options in core categories, and very parent- and kid-friendly," Garfield said. "What General Mills has done to leverage the brand without stretching it to its breaking point is very smart," including expanding its offerings to soups.
General Mills has made a number of such smaller acquisitions in the health food space. In January, for example, the Minneapolis-based company acquired meat bar maker Epic Provisions LLC. A source told The Deal, a sister publication of TheStreet, that the company likely fetched about $100 million, or five times its 2015 revenue of $20 million.
On a much larger scale, France's Danone agreed to pay $12.5 billion forWhiteWave Foods Co. (WWAV) , the maker of dairy alternatives such as Silk soymilk. The deal is currently under antitrust review.
WhiteWave, Garfield said, is "plant-based protein and dairy alternatives, super trend-right, great for a company that's in other dairy categories that have slowed or where competitive pressures have intensified."
Traditionally, Mondelez has not used financial advisers. Steve Cohen of Wachtell, Lipton, Rosen & Katz was outside counsel to Mondelez on the Hershey bid.
Still, Mondelez calls a number of big tim corporate raiders among the ranks of its shareholders and will have to be diligent in its approach to acquisitions. Bill Ackman's Pershing Square Capital Management LP (5.6% stake), Nelson Peltz'sTrian Fund Management LP (3%) and Paul Singer's Elliott Management Corp.(Less than 1%) all hold stakes in Mondelez.
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