Hershey in Midst of a Digital Transformation
HERSHEY, Pa. — As physical and digital shopping experiences converge, The Hershey Co. sees itself at the helm of success as it embarks on a companywide digital transformation.
"While the retail environment continues to change how our products are purchased, consumer desire for our brands remains," CEO Michele Buck said during a recent analyst event at the company’s Global Customer Innovation Center in Hershey. "We have the right vision, strategies, organization and talent to drive commercial advantage, and our far-reaching digital transformation efforts are an important element to win in the fast-changing retail landscape."
A little more than a year ago, Hershey delivered innovation snacking leadership goals to increase shareholder value. Today, Buck said Hershey can report "solid progress" against the key priorities it set last year, and has experienced core CMG [convenience/mass/grocery] growth, reduced foundational cost structure and digital transformation.
"If we look at what’s possible today with technology, it’s very different than what was possible many years ago, and there’s a huge opportunity to take our data technology to the next level," Buck noted, adding that Hershey is currently engaged in a companywide digital transformation by putting IT at the forefront of its vision going forward to use the right data and right technology to create the right culture.
"As a category, we didn’t go first in digital, unlike some products like paper, among others. And we’ve been able to learn — frankly — from some players who went into that space and got into some issues where they weren’t maximizing margins," she explained. "I’m happy to take that learning as the food business is now expanding broadly in this space.
"Retail is changing, but consumers’ need and desire for Hershey brands remains the same. It’s just about how we look at meeting them is different," she continued.
The chief executive used dollar stores as an analogy. Twelve years ago or so, the dollar channel wasn’t considered a big factor or contender in the marketplace. But then, it started fighting its way in, first focusing on clothes, then on general merchandise, and now food by examining three factors: its business model, its channel and its consumers.
"Hershey looks at digital in a similar manner and approaches it in a similar way," Buck said.
To continue to build capabilities that make for a unique digital commerce experience, Hershey's Chief Digital Commerce Officer Doug Straton said it is important to understand the retail ecosystem. Hershey expects to see mid-single-digit FMCG (fast-moving consumer goods) digital commerce penetration in the next five years in the United States. Currently, penetration is at about 1.2 percent.
"The 'what' hasn't changed; the 'who' and 'where' have," Straton explained.
Consumer wants, shops and buys are part of the constants, while shopper behaviors, trips and pay points comprise the changes.
This retail evolution has unlocked new consumer access. With fewer physical trips and declines in impulse purchases, the opportunities that exist are: "store in a pocket," more digital trips, price basket dynamics, more engagement points, and data and algorithms.
Under Hershey’s strategy to win search with thumb-stopping, mobile-first content, the company is focused on capturing the opportunity for planned and unplanned purchases by leveraging capabilities from the physical to digital transformation. It calls this the "5 Cs":
- Consumers: At the core of its strategy; know them by understanding their journey and missions;
- Content: Be brilliant in package design and digital content;
- Covert: Be on the list; customer partnerships, sales reps, merchandising, portfolio for different needs and models;
- Community: Be loved; have one-to-one relationships with shoppers and consumers; and
- Connections: Be found; media, planograms and search.
"There is no more online or offline. If you think about these businesses as binary choices, you’re completely missing the point in digital," Straton expressed.
To keep the digital momentum going into 2019, Hershey will focus on five key accelerators:
- Holistic captaincy and media optimization;
- Dynamic and modular content ecosystem;
- Robust data acquisitions, application and analytics;
- Full digital measurement and performance tracking; and
- "Fit to Win" organization.
Pennsylvania-based Hershey has more than 80 brands around the world that drive more than $7.5 billion in annual revenues. Its brands include such iconic names as Hershey's, Reese's, Kit Kat, Jolly Rancher, Ice Breakers and SkinnyPop.