Lindt, Callebuat And Hershey Harvard Case Solution & Analysis

INTRODUCTION

The Hershey Company was founded by Milton Hershey, born and raised in an underdeveloped area of central Pennsylvania. A person of great perseverance, endurance and courage which lead to the formation of this company, he is still recognized for his generosity and open-hearted nature which is also seen in the company culture, his name lives on as a delicious milk chocolate bar which is loved by all.

The story of Hershey’s goes back to more than a century, it was the year 1894 when first time a person ever decided to cover caramel with chocolate coating, this was the initiative taken by Milton Hershey which led to the enterprise Hershey Chocolate Company, he had established it in the area he was born in with the focus to develop his town.

With the combined effort of local peoples hard work and the milk extracted from the nearby dairy farms, Milton’s new enterprise started making delicious milk chocolates.

It was not just the company, but the legacy that made it recognized all over the world, the boy who did not have the opportunity to receive proper education did not let that happen to other kids in his area, in 1909 he developed the Hershey Industrial School and in 1918 transferred the majority of his wealth and holding of the coming to the school.

In 1900 the company first time reached America and today its products are enjoyed all over the world in about 80 countries.

AUDITORS & AUDIT REPORT

The year ended financial statement of the year 2011, 2012 and 2013 are audited by the KPMG LLP, this is an independent accounting firm registered as public.

In the opinion of the of the independent auditors of the KPMG LLP the financial statements of the Hershey’s company present fairly, in all the respects of materiality and are in accordance with the US generally accepted accounting principles, the company has received a positive unqualified opinion.

FINANCIAL ANALYSIS

The sales of the company have a 5 years compound growth rate of 6.8%, the sales of the company have increased from $5,132,768 in 2008 to $ 7,146,079 in 2013 showing that the company in on a growing trend. Whereas the cost of sales has only increased by 2.7% in the last 5 years, which means the company has efficient, cost control and is on a high profit generating trend.

The increase in sales is a result of the increased advertisement expenditures, which have shown a 29% compound growth in the last 5 years, which is completely relevant, whereas the selling marketing and administrative expenses have shown a 12.4% compound growth rate.

The company has reduced its interest expense to $88,356 from $95,569 in the year 2013 meaning the company has paid off some liability, a company only pays off its liability when it feels that it is in a strong financial position and the financial statements do dictate that position.

The company’s income has had a 21.4% compound growth rate in the last 5 years, even though the sales have shown 6% growth, meaning the company has had strong cost control this is also seen on the EPS of the company which was $1.4 in 2008 and has increased to $3.7 in 2013 showing a growth rate of 21.7% this shows the company will continue to increase profits.

SUSTAINABILITY

Sustainability has been a core aspect of the business since its formation, the founder himself laid the stepping stones to Milton Hershey School and donated a big part of his holding to the school, this school acts as a provider and nourishes the youth to create a better tomorrow providing for almost 2000 children annually.

The company published a corporate social responsibility score card in 2013 which shows the efforts the company has put in during the year on the project initiated previously, the report shows how the company has performed and what progress has been made. It also shows the performance of the company against the 4 pillars of CSR that is the environment, marketplace, workplace and community.

Health and Safety of the employees is a core aspect of daily routine, the company not only focuses on the health and safety of the employees, but also focuses on suppliers and customer by maintaining high standards on all of its products.

Workplace safety is matched with continuous improvement since 2006 when the program was initiated in which the company continues to invest, along with high focus of quality management systems, making top priority the safety of the food and quality of the product.

Superior quality, absolute food safety and consistency of taste are the standards the company enforces and carefully monitors.

BUSINESS ACQUISITION

The company had entered into an agreement to acquire Shanghai Golden Monkey Food Joint Stock Co., Ltd. (“SGM”) in December 2013. This...............

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