Hershey’s sales lead takes a bite in competition
Chocolate wars between candy companies intensifies

By The Associated Press

Published: October 11, 2008

ELIZABETHTOWN, Pa. — This stretch of rolling dairy country has long been Milton Hershey’s turf, where he first found success making chocolate more than a century ago and earned a name synonymous with chocolate in America.

But M&M-making rival Mars has crept up on Hershey’s dominance of U.S. chocolate buyers.

And now, Mars has delivered a chocolate-coated slap in the face, setting up shop in south-central Pennsylvania, just 10 miles from Hershey’s flagship factory on Chocolate Avenue.

The $70 million "Dove Chocolate Center of Excellence” is the latest sign that the spotlight-shy Mars is breaking out of its shell as it tries to pound cracks into the long-held notion that Hershey is the real American chocolate company.

While Mars makes its surprisingly sharp-tongued attack, Hershey has struggled to cut costs by closing U.S. plants and blending cocoa butter substitutes into some of its chocolate candy — a step that has riled candy enthusiasts who say it dulls the flavor and feel of pure chocolate.

Mars has pivoted its PR messages to chide its rival: Its premium brand Dove is "Made in the USA” and Mars can be trusted "to provide pure, rich chocolate,” it says. And Mars is making its case just as it’s leapfrogging Hershey as America’s largest candymaker, with its $23 billion purchase of mint and chewing-gum giant Wm. Wrigley Jr. Co.

Meanwhile, Hershey is closing six plants — three in Canada and one each in California, Connecticut and Pennsylvania — in a move to cut costs and compete in faster-growing and cheaper regions. All told, Hershey is cutting about 3,000 U.S. jobs and expanding its operations in Mexico, India, China and Brazil.

Together, Hershey and Mars control more than two-thirds of the U.S. chocolate market, the world’s largest. But Hershey’s edge — currently about 42.5 percent to Mars’ 30 percent, according to IRI/Neilsen data provided to Hershey — has slipped as Mars has outmarketed and outmaneuvered Hershey, analysts say.

"I think that Mars sees a weakness and anyone who can get ahead in this economy is going to get ahead, even the secretive Mars,” said Marcia Mogelonsky, a senior analyst with Chicago-based market research firm Mintel International Group Ltd.

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