Hershey Discovers Sweet Taste of Losing

Hershey Discovers Sweet Taste of Losing

As you pencil in your NCAA tournament brackets, it's a good time to think about just what it means to win and lose in business. Sometimes being a loser—a humiliated, left-for-dead loser—is better than winning the big prize. It's now 13 months since chocolate-maker Hershey Co. tried to break up Kraft Foods Inc.'s, $19.5 billion takeover of British icon Cadbury Plc golf business cards shirts. It was a lame effort, bogged down by infighting between Hershey's board and the charitable trust that controls it. The lost deal seemed to consign Hershey to history's fondue pot, weakened by the newly giant Kraft as well as Mars Inc. which had just bought Wm. Wrigley Jr. Co. in a $22 billion deal of its own. Analysts whined that Hershey, now third among global confectionary companies, was dysfunctional and had poor growth prospects abroad. In less polite terms: a loser. Hershey has a "major problem," hectored shareholder Mario Gabelli right after Kraft clinched Cadbury. "At some point, who wants to own a stock of a company where they can't get their act together with regards to the voting interest?" True to form, there were even rumblings that the trust wanted to replace Hershey chief David West. Of course, it is the natural bias of analysts, investors and journalists to favor action over inaction. The trope of success is a CEO who takes "bold steps" and shows a "vision." A funny thing happened on the road to also-ran Will Tiger Woods Become Mediocrity. Free from distraction, Hershey got back to the tired, old business of running a business. Mr. West had already begun consolidating manufacturing plants from 17 to 11 between 2007 and today, saving $185 million annually. He is targeting another $100 million in cost cuts by 2012. And he has tripled the annual ad budget to nearly $400 million, even dispatching dancing Reese's Peanut Butter Cups mascots to this year's Big East basketball tournament.