Hershey eyes expansion with new restructuring scheme
restructuring plan to further increase the company's global
footprint and allow it to outsource production of low value-added
The strategy will cut 1,500 jobs and move 80 per cent of Hershey's production volume to Canada and the US. Hershey president and CEO Richard Lenny said: "When completed the transformation programme will deliver a flexible, advantaged supply chain designed to meet a diverse range of consumer and customer needs while generating significant resources available to invest behind our strategic growth initiatives." As part of the 'Global Supply Chain Transformation' Hershey will be outsourcing operations as well as reducing its number of production lines by over a third and focusing production at a small number of factories rather than scattering manufacturing. The company said: "Finished products will be sourced from fewer facilities, each one a centre of excellence specialising in Hershey's proprietary product technologies. "Increase access to borderless sourcing will further leverage the company's manufacturing scale within a lower overall cost structure." Hershey expects margins to swell significantly as a result of the restructuring with predicted savings of $170 million (€129.7m) to $190 million (€144.9m) by 2010. With the excess revenue generated from the programme Hershey plan to invest in core brand growth, new product development, selling and go-to-market capabilities and global expansion. Moving further into worldwide markets has been high on the agenda for the owners of the Hershey Kisses brand after disappointing results last month showed a €13m fall in net income through its US operations. In order to target the lucrative potential of the burgeoning Chinese market, Hershey formed a partnership with Korean confectioners Lotte in January this year with production expected to be underway by the summer.