Hershey: A Hybrid-dominant company

Kim Button

april 2016

It is with great care that companies must manage their greatest asset: their brands. As

Keller (2013) writes, “To the extent ‘you are what you sell’, brands help…create an image and

establish positioning” (p. 14). Products become a part of an overall brand portfolio, which is the

“firm’s current set of brands across countries, businesses, and product-markets (Kotabe &

Helsen, 2010, p. 367).

Just like a builder wouldn’t build a house without an architectural plan, a multinational

company wouldn’t build its global business without brand architecture. Simply put, brand

architecture “guides the dynamics of the firm’s brand portfolio” and “spells out how brand

names ought to be used at each level of the organization” (Kotabe & Helsen, 2010, p. 368).

Brand architecture establishes the “framework for decisions related to the firm’s brands in

international markets” (Douglas, Craig & Nijssen, 2001). Some would argue that brand

architecture is the stabilizing foundation of the entire company. Batey (2015) believes that

“brand architecture is inextricably linked to the theme of brand meaning” (p. 153).

In this sense, consumers are looking to how products on the shelves relate to them, their

country, and their culture. Much of this is tied to the products’ relationship to the corporate

brand. In some cases, consumers want to know there is a close relationship between a product

and a brand (i.e. luxury items). In other cases, consumers prefer the product to feel more like

home and separate from a multinational company operating (seemingly) from a foreign land (i.e.

food). Batey (2015) writes, “Brand architecture and the strategies that shape it are company-side

concerns, consumers will subconsciously and spontaneously filter and hierarchize when

confronted with a multi-brand offering” (p.153). For this reason, it is up to each company to

explore the best way to brand their products in a way that allows consumers to adopt them

seamlessly into their lives.

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There have been many attempts to categorize the approaches to brand architecture. Brand

consultant Waly Olins outlined three approaches: monolithic, endorsed and branded (as cited in

Balmer, 2015). Laforet and Saunders (1994) claimed that three categories exist: corporate

brands, mixed brands, and brand dominant, though they tweaked this a bit in 2005. For the

purpose of this paper, the three approaches to brand architecture are: corporate-dominant,

product-dominant and hybrid dominant.

A MNC using corporate-dominant brand architecture extends its own corporate name to

all products associated with its brand. Because it believes its strength lies in the associations that

consumers have with the corporate name, it takes every opportunity to associate the corporate

name and logo with its products. Nike is a good example of a company that does this. High

brand equity and a “narrow and coherent” product line makes this a good strategy for Nike

(Douglas, Craig & Nijssen, 1999).

The product-dominant approach is used by companies that prefer for their brands to be

measured against dedicated brand names. While the mother company does not hide the fact that

these brands are in the parent’s brand architecture, the corporate name and logo hang in the

shadows to allow the individual brand and brand names to develop meaning with consumers.

Procter & Gamble uses this strategy namely because many of their brands were acquired and

consumers had developed attachments to non-P&G (labeled) brands (Douglas, Craig & Nijssen,

1999).

Many companies prefer a hybrid-dominant approach where they combine corporate and

product brands in their brand architecture. In this case, some products are marketed with the

corporate name while others adopt a different brand name altogether. A thoughtful audit reveals

when a company should apply its name to a brand and when it should hold back. It evaluates

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what markets the corporate brand name and accompanying meaning would add value and what

markets would it detract or be a stumbling block to gaining market share. Coca-Cola is an

example of a company that uses the hybrid-dominant approach. In the U.S., they market a

number of products with the Coca-Cola name (Cherry Coke, Diet Coke, Coke Zero). The Coke

name has strong brand equity in the U.S. At the same time, if Coke was on the name of all their

beverages in the U.S. (Sprite, Dr. Pepper, Powerade, Fanta, Barq’s, Monster, Minute Maid) and

abroad (Lilt, Tab and Cappy), consumers may bolt, not wanting to support such a juggernaut. In

this case, using corporate and product/brand names creates balance for consumers.

Diving into the brand architecture of the Hershey company shows how the hybrid-

dominant approach is being used by a global consumer-packed goods company. Hershey, the

122-year-old global confectioner based in Hershey, Pennsylvania, has 80 brands around the

globe and $7.4 billion in

annual revenues

(“Company Profile”,

2015). Most familiar in the

U.S. are iconic brands like

Hershey Kisses, Reese’s, Milk

Duds, Twizzlers, Rolo and Kit

Kat. Hershey has five product categories: chocolate candy, sugar confectionery, gum & mint,

baking & pantry and snacks. While Hershey products are sold around the globe, some markets

(India, China, Mexico and Brazil) have specially-developed products operating under a different

name. Hershey’s customers are “mainly wholesale distributors, chain grocery stores, mass

Some Iconic Brands in Hershey’s Brand Portfolio.

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merchandisers, chain drug stores, vending companies, wholesale clubs, convenience stores,

dollar stores, concessionaires and department stores” (“Hershey’s Facts”, 2016).

Hershey is most known for its chocolate. Though founder Milton Hershey was originally

a caramel maker, he found success developing a recipe for milk chocolate similar to the Swiss

method (“Milton S. Hershey”, n.d.). He was the first to be able to mass-produce and distribute a

milk chocolate candy bar in the U.S. (“Milton S. Hershey”, n.d.). For this reason, with few

exceptions, Hershey’s chocolate products bear the Hershey name with corporate-dominant

branding. In addition to chocolate bars (milk, dark, aerated, cookies ‘n’ crème, candy cane, etc.),

the chocolate candy category includes Hershey’s Drops, Nuggets, Miniatures, Caramels in

Chocolate, and seasonal chocolate products. By including its name on all of its chocolate brands,

it strategically uses brand-name imprinting, linking a brand to a category in memory (Solomon,

2013, p. 578).

There are some products where the Hershey name is omitted (Reese’s, York, Symphony

bar, Mounds). This is because these products are different enough that they warrant their own

brand name. Reese’s is a predominately peanut butter confection, York is mint, Mounds is

coconut filled and Symphony is made from a different formula of chocolate. Hershey remains in

the shadows on these products’ packaging. Sometimes it is completely absent, like in the case of

Reese’s. Reese’s was an acquired company and already had a strong consumer base. Changing

the name “Reese’s” to “Hershey” could have been detrimental to already-earned brand equity.

Hershey likes to keep its name on chocolate-dominant products. In the baking & pantry

category, this includes baking bars, chips, toppings, cocoa and syrups.

Hershey leverages its corporate name on chocolate products abroad as well. Hershey’s

Bites and Leche Hershey’s (individual chocolate milk boxes) are strong product offerings in

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Mexico that carry the corporate

name. The company offers a

Hershey’s Signature milk chocolate

with almonds bar in China. In this

country, by offering products like

green tea Hershey Kisses and

covering the kisses in gold (a preference of the

Chinese), Hershey proves its commitment to

adapting its products to overseas markets (Watson, 2013).

Hershey uses the product-dominant approach when it comes to its confectionary line.

This line has a broader range of products and is manufactured and distributed to a greater global

market. Almost none of these brands carry the Hershey name. For instance, Jolly Rancher, the

brand of hard candy, gummies, fruit chews, jelly beans, etc., was acquired in 1996 by Hershey

and kept its original name (Barbaro, 2006). Similarly, Good & Plenty, licorice candy, was

originally a Quaker City Confectionery Company product and maintained its name from the

1950s (“Good & Plenty”, 2014).

Hershey traditionally acquires confectionary brands, but it introduced its own in 2014

(the first in 30 years), a confectionary product line called Lancaster. Hearkening back to its

Lancaster, Pennsylvania roots where Milton Hershey got his start in caramel making, this line

features soft caramels in a variety of flavors. Though Hershey doesn’t use its corporate name on

the caramels, it loosely associates itself with the brand by the city-of-origin name, Lancaster,

with a barn, cow and kitchen tools as its logo.

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By focusing on brand elements

that have a wholesome, creamy, from-

the-farm feel with the Lancaster name,

consumers are likely to be motivated to

purchase these caramels. It would

have been distracting from the brand

theme to slap the name Hershey on it. Again, the

flavors are adapted for its global market. While it

offers plain caramel, vanilla & caramel and vanilla & raspberry in the U.S., it comes in three

flavors in China: nai bei, nai bei filled with rich nai bei and nei bei wfilled with strawberry

(Hawkes, 2013).

Hershey Mexico acquired Grupo Lorena, a leading confectionery company in Mexico. It

maintains original product names. Its candy market is led by the Pelon Pelo Rico brand and has

never had the Hershey name on any of its products. It already had “strength in the youth market”

and the Pelon Pelo Rico brand was an entry point to the “popular spicy candy segment for

Hershey Mexico” (Moritz, 2004). It made sense to apply a

product-dominant approach here, as it does with most of its

products in this category.

In the snack category, Hershey uses a hybrid-dominant

approach. This makes sense because some of its products have

Hershey chocolate in them. For instance, the company

manufactures both Reese’s and Hershey’s Snack Mix.

Because Hershey’s Snack Mix contains mini milk chocolate

China’s Lancaster Caramels

Hershey’s & Reese’s Snack Mix

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Hershey bars and Hershey’s milk chocolate pretzel bites, it warrants applying the Hershey name

to the brand. Conversely, the Reese’s Snack Mix contains Reese’s peanut butter cup minis and

Reese’s Pieces candies. Keeping the Reese’s name on this brand provides mental congruency

for consumers with this brand line.

Hershey purchased Mauna Loa, manufacturer of macadamia nut treats in 2004 and

retained the forty-year-old brand name. Brookside Foods, a British Columbia-based company

specializing in chocolate and fruit snacks was acquired by Hershey in 2011. Its products include

fruit and nut bars, granola mixes and chocolate covered fruit. Despite thinking of it as a “$500

million brand” (Watson, 2014), Hershey does not include the line on its consumer website

(though it is offered via foodservice) and Brookside does not reference itself as a Hershey brand

whatsoever on its website, product packaging or marketing materials. Mauna Loa and Brookside

are clearly product-dominant brands for Hershey.

Hershey had enjoyed success with the Io-Io brand in Brazil. Io-Io was a South American

brand of hazelnut crème snack items targeted to Brazilian children. When Hershey acquired the

brand in 2001, its products, Io-Io Mix and Io-Io Cream retained the name Io-Io because it already

had a strong brand presence. Noting the success of this product line, Hershey developed a

chocolate snack product and, as you

might have guessed, assigned its

name to the Brazilian snack,

naming it Hershey’s chocotubs.

Proving once again that it will

leverage the Hershey name if it will

strengthen the product’s image and increase Hershey’s chocotubs, Brazil

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brand equity. According to Hershey’s R&D manager in Brazil, Ana Fontes, “The package had to

be an eye-catcher on Brazilian store shelves while creating real added value” (as cited in Maes,

2016). What better way to do that than to add the Hershey name to the chocolate snack package!

Here again, Hershey is using brand-name imprinting to link its name with its iconic chocolate.

Hershey is following the likes of many other companies by using a hybrid-dominant

approach in developing its brand architecture. Sanchez (2004) writes, “Both corporate- and

product- dominant structures are evolving towards hybrid structures.” Hershey has adopted a

glocalization strategy to expand its interests outside the continental U.S. Part of that strategy

includes applying the Hershey name to products that are closely associated with its heritage,

chocolate. For products that have other distinguishing features (peanuts, mint, coconut) or have

built-in brand equity (due to acquisition), Hershey develops a new name or keeps its existing

name. In this way, each product in its brand portfolio earns or maintains important brand

meaning to consumers. Because Hershey knows that a brand is merely a set of associations that

consumers have, it carefully contrives its brands to have just the right meaning for each of its

global markets.

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References

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Barbaro, M. (2006, September 7). Dorothy Harmsen, 91, a creator of the Jolly Rancher candy line, dies. The New York Times. Retrieved from: http://www.nytimes.com/2006/09/07/business/07harmsen.html?_r=0

Batey, M. (2015) Brand meaning: Meaning, myth and mystique in today’s brands. [E-book]. Retrieved from: https://books.google.com/books?id=Pbw0CwAAQBAJ&pg=PA153&lpg=PA153&dq=mars+brand+architecture&source=bl&ots=PU2yQlCTVH&sig=RvfYVpf_8u4L1i2eduhFzZVbio8&hl=en&sa=X&ved=0ahUKEwjq0fbQo_rLAhVBQSYKHUlTC284ChDoAQg3MAQ#v=onepage&q=mars%20brand%20architecture&f=false

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Hawkes, J. (2013, May 21). Hershey launching ‘Lancaster’ chocolate brand in China. Retrieved from: http://lancasteronline.com/news/hershey-launching-lancaster-chocolate-brand-in-china/article_5cc25a95-170a-5f91-8869-dba88ab27651.html

Hershey Bites, Hershey Mexico. (n.d.). [Screenshot]. Retrieved from: Hershey’s Facts. (2016, February). The Hershey Company. Retrieved from: https://www.thehersheycompany.com/pdfs/fact-book-2016.pdf

Hershey chocotubs. (n.d.). [Screenshot]. Retrieved from: https://www.linkedin.com/pulse/hersheys-chocotubs-win-brazil-over-iml-snack-packaging-dieter-maes

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Milton S. Hershey. (n.d.). The Hershey Company. Retrieved from: https://www.thehersheycompany.com/about-hershey/our-story/milton.aspx

Moritz, S. (2004, August 17). Hershey Mexico, a subsidiary of Hershey Foods Corporation, to acquire Grupo Lorena, a leading Mexican confectionery company. [Press release]. Retrieved from: https://www.thehersheycompany.com/newsroom/news-release.aspx?id=604537

Sanchez, R. (2004, February). Conceptual analysis of brand architecture and relationships within product categories. Brand Management. Retrieved from: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.459.8778&rep=rep1&type=pdf

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Watson, E. (2013, April 25). Hershey’s Kisses are smoother, and ‘significantly less sweet’ in China, says R&D boss. Retrieved from: http://www.foodnavigator-usa.com/Manufacturers/Hershey-s-Kisses-are-smoother-and-significantly-less-sweet-in-China-says-R-D-boss

Watson, E. (2014, January 31). Hershey ‘very excited’ about mystery new product, reckons Brookside could be $500m brand. Retrieved from: http://www.foodnavigator-usa.com/Manufacturers/Hershey-very-excited-about-mystery-new-product-reckons-Brookside-could-be-500m-brand

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