The Founders Series – The Story behind Hershey Chocolate

When you work in the Food and Drink Industry you need to find your reference points. They can be brands like: Nestlé, Heinz or Hershey, or the people behind their success – The founders.

For me, my reference points are the big brand builders like Henri Nestlé, Henry Heinz, or Milton Hershey but also the founder of the company I work in – António Jo?o Eusebio.

In this newsletter, I’m going to tell you Milton Hershey’s story and how he built the brand HERSHEY.

The Context

While milk chocolate was popular in Europe, it was unknown in the United States. Chocolate consumption dates all the way back to the Maya civilization, who would drink chocolate beverages spiced with chili. By the late 1600s, Dark chocolate was common in Europe and, in 1875, a Swiss baby formula manufacturer named Henri Nestle was the first to make milk chocolate.

We all know the Nestle name, but what he became famous for was taking the water out of the milk, thus creating condensed milk. From there he combined it with chocolate. Compared to the dark recipe, milk chocolate was sweeter in flavor.

Milton Hershey first tasted milk chocolate at the World's Columbian Exposition in Chicago and he recognized that it was something very special.

The Big Idea

European milk chocolates were made with condensed or powdered milk. Despite this, Hershey believed that he would be able to mass-produce his chocolate based on the nearly limitless supply of fresh milk from local farms.

The problem was that milk has a lot of water and chocolate has a lot of rich plant fat, cocoa butter, and as you know, it’s not easy to mix oil and water! Milton Hershey was still trying to find the recipe for milk chocolate when his new factory was nearly complete, and the workers were arriving to his company town.

He ultimately came up with the recipe in time! A milk chocolate with sour notes, which meant that his process of condensing, soured his milk. He didn't realize at the time that his chocolate didn't taste like European version.

The iconic brown wrapper that encases the Hershey bar was about to take over the US market. With his invention of mass-produced milk chocolate, Milton Hershey quickly transformed an obscure European luxury into a popular product.

For nearly 25 years, the Hershey Company was the most lucrative candy maker in the nation, with profits from the Hershey Bar, Hershey's Syrup, and the Hershey's Kiss growing every single year.

Hershey’s Utopia Town

In 1880s, the factories were often built on cheap land outside of cities, and the workers had to walk to work because there was no urban transport system in place. If the factory was located outside of the town, then companies had to build housing for the workers to live so they could walk to work each day.

Company towns were often dirty, poorly built, and expensive, but Milton Hershey decided to take a very different approach. He wanted to create a township that would support the factory and became the first chocolate-industry town in history.

Construction would take nearly every penny of his $1 million investment. Hershey had this utopian vision, this idea that everyone should have all the modern conveniences like plumbing or electricity, which the workers of that time couldn't even dream of. These were things that people just did not do for their employees.

Difficult moments bring about great achievements

On July 28th, 1914, the first World War began. The United States joins the conflict in 1917, and resources are quickly diverted to the war effort. As the war dragged on, the government imposes mandatory rationing on sugar.

To avoid sugar rationing Milton Hershey uses a brilliant strategy. Opening his own sugar refinery in Cuba. Complete with a mill town and railroad. So, despite World War I, Hershey profits continue to increase!

In October 1929, after a decade of unprecedented growth, the stock market plummets over 25% in just two days, triggering the Great Depression. The Hershey Company sales crash by a devastating 50%, and the easiest way to cut costs would have been to reduce his workforce which lived in Hershey, Pennsylvania. Bent on preserving his utopia, Milton Hershey didn’t lay off a single worker.

To answer this national disaster, he decided to promote his products in a different way. He started to advertise that the nutritional value of a bar of Hershey's Chocolate was the equivalent of that of a pound of meat. When people couldn’t afford food, they could still afford a chocolate bar.

During the second world war, Hershey played a critical role in supporting the military by supplying rations. As part of a partnership with the war department, they were trying to come up with a single ration that could keep the soldiers alert and active and well fed for as long as possible. Hershey wins the contract for the Ration D Bar. Driven by the war effort, Hershey as others American brands expand their reach across the globe.

The Founder’s background

Hershey left school in the fourth grade to help support his family. After an apprenticeship with a confectioner, he started his own caramel company, and in 1900, he sold it for $1 million to a competitor and began the production and sale of milk chocolate bars.

Business was so successful that in 1903 Hershey started work on a new factory in Derry Township, Pennsylvania today known as Hershey’s Town.

In 1927, the renamed the company as The Hershey Company and it became a publicly traded company. Milton Hershey remained in the company until shortly before his death in 1945.

Milton Hershey donated, nearly his entire fortune, to charity throughout his life. His dream was to create a legacy and an institution for children. Originally, it was just orphan boys who had lost their fathers, and then the girls were admitted and students of all races and from really every corner of the country. He viewed these children as his own because he and his wife were never able to have children of their own.

Take Aways

Milton Hershey was an entrepreneur. He wasn't afraid of taking risks he believed in himself enough to think that "Trial and error” could get you further ahead!

What can we learn about the personality of Milton Hershey?

• He was an experimentalist as he thought it would be possible to come up with his own version of milk chocolate.
• He was a dreamer, before having develop his recipe he was building his utopia Town!
• He was an optimistic person, as he found ways to overcome difficult times!
• He was a philanthropist, as he sought to promote the welfare of children throughout is life!

Don’t forget that the Global Brands of today, once they were small and local like your Brand!

Based on the “The Food That Built America” TV series, 2019