The Hershey Company
) announced the opening of its most technologically advanced
manufacturing unit in Hershey, Pennsylvania. Hershey has made an
investment of $300 million for setting up the facility, one of its
biggest investments to date. Construction of this manufacturing
unit began in September 2010 and was completed, as per schedule, in
HERSHEY CO/THE (HSY): Free Stock Analysis
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The 340,000 square-foot West Hershey unit is one of the company's
eight manufacturing plants in the U.S. The new facility will
produce chocolate brands like Hershey's Bars, Hershey's Kisses
Chocolates, Rolo Candies and Hershey's Syrup. This investment
positions Hershey well for global growth over the next century.
In order to ensure future profit, Hershey intends to increase its
global presence. This implies that it needs to increase its
production scale in order to cater to the increase in demand that
would eventually come with the expansion in global market share.
Also, product innovation has always been an important growth
strategy for the company. The new facility offers a strong
infrastructural base to support future product lines.
The new manufacturing facility will cater to the growing demand for
Hershey's chocolates. The company expects to speed up production
and carry on product innovation without compromising on quality.
The manufacturing plant features an advanced Information Technology
system, which includes highly automated real-time diagnostics
systems, thus making it more efficient and capable of continuing
operations 24 hours a day.
The facility also comprises the most technologically advanced,
automated chocolate syrup manufacturing line in the world. In
addition, the plant can produce more than 70 million Hershey's
Kisses Chocolates per day.
The original Hershey plant was located on East Chocolate Ave and
operated from 1905 to April 2012. The setting up of the West
Hershey facility is a part of the company's Project Next Century
program. The program intends to optimize the cost structure by
upgrading the company's global supply chain. The company has
already invested $50 to $75 million to upgrade distribution and
administrative facilities in Hershey.
We are impressed by the company's strong brand positioning,
strategic marketing investments in core brands and disciplined
innovation. However, higher ingredient costs and lack of
significant presence outside the U.S. (more than 80% of the
company's business is generated in the U.S.) keep us on the
sidelines. We currently have a Neutral recommendation on The
Hershey Company. The stock carries a Zacks #3 Rank (a short-term