Hershey is modernising its production facilities in a $250 to $300m investment plan that will see the company move out of a century-old chocolate factory and cut 500 to 600 jobs.
The bulk of the investment budget - $200 to $225m – will go towards the expansion of its West Hershey site in Pennsylvania. The rest of the money - $50 to $75m – will be spent on distribution and administrative facilities in Hershey.
Meanwhile, production will be transferred away from the East Chocolate Avenue factory, which had been constructed by company founder Milton Hershey in 1903 and later became the largest chocolate factory in the world.
Explaining the reason for the departure, CEO David West said: “The 19 East Chocolate Avenue factory is a proud part of the company’s heritage, but the facility is over 100 years old, and simply cannot be modernized to meet the manufacturing needs of a 21st century business.”
Through the investment in technology and automation at West Hershey and the running down of the old East Chocolate Avenue factory, Hershey expects to increase efficiency to the point where it can cut some 500 to 600 jobs.
Union members overwhelmingly approved what Hershey calls the Next Century project despite the likelihood of significant job losses. Associated Press reported last week that workers had feared that Hershey would move production to another part of the US if they did not support the plans.
Hershey expects to save $60 to $80m annually on the back of its restructuring plans, leaving the company with more money to spend on brand development and global capabilities.
“Savings from project Next Century will enable us to continue making investments that will deliver core business growth and position us for long-term success in the global confectionery marketplace,” said West.
Realignment charges and start-up costs from the project are expected to add up to $140m to $170m over the next three years.
For the full year 2010, Hershey expects to achieve 6-7 per cent sales growth and obtain adjusted earnings per share-diluted in the $2.47 to $2.52 range.