A recent report in 2019 by Statista revealed that Hershey is unequivocally the king of the chocolate industry: compared to other chocolate companies, Hershey leads in market share at 43% (see Figure 1)– 13% more than its nearest competitor, Mars, Inc.
So how did this come to be? How did a small chocolate company founded in 1894 survive an unforgiving capitalist market and become the industry giant we know it to be today? This blog post analyzes how Hershey has exploited workers in different areas of its supply chain over time to maintain its profitability, allowing the company to overpower its competitors in the race for market share.
1937: Manufacturing Labor Exploitation Exposed
1929–1933 marked the period of the Great Depression. GDP fell over 25% over the course of 4 years. Since chocolate is a discretionary good, demand for Hershey’s chocolate decreased, causing Hershey’s price of chocolate per oz to fall by 15%. However, despite this decrease in price/oz, Hershey managed to maintain its profitability through effectively decreasing its labor cost/oz.
To do this, Hershey pulled two levers: 1) it increased the volume quota per worker, and 2) it cut the paid hours per week from 60 to 40. This meant that workers had fewer hours to produce a higher quantity of chocolate products than before. Annual bonuses were also cut to zero.
This was especially distressing given how labor-intensive the production of Hershey’s chocolate was. Hershey’s kisses, for example, were individually wrapped in foil by hand.
By late 1936, workers were ready to unionize. They began circulating a pamphlet called “The Chocolate Bar-B”. Some claims in this pamphlet include that employees faced “low wages, erratic work schedule, and recent orders to speed up production.” The newsletter insisted that “chocolate workers [performed] physically demanding labor, with deafening levels of noise and temperatures over 100 degrees” (D’Antonio 2008).
In response to these abusive employment practices, the factory workers went on strike. However, five days into the strike, Hershey “loyalists” and dairy farmers whose livelihoods were affected by the halted operations of the factory stormed the factory, outnumber the strikers four to one. Strikers were violently beat up and injured (D’Antonio 2008).
Whether or not Milton Hershey himself instructed the anti-strikers to attack does not absolve Hershey from the blame in this violence. As historian Catherine Koonar writes, “By the late 1930s, the Hershey brand was beloved by American consumers…Mr. Hershey was respected as great industrialist and philanthropist. This affection allowed the company and its supporters to portray unionists as greedy and ungrateful and labor organization as unnecessary and ultimately incompatible with Mr. Hershey’s vision” (Koonar 2018).
Thus, Hershey was able to exploit a conflated, idyllic perception of its company to suppress a union strike, allowing it to maintain profitability. By 1937, Hershey reported $37 million in pre-tax income (D’Antonio 2008).
Today: Exploitation of Cacao Farmers and Children
In 2000, a British organization called True Vision Entertainment released a documentary titled Slavery: A Global Investigation. This award-winning documentary reported on the chocolate industry’s alleged connection to cocoa harvested by child slaves. The filmmakers meet with 19 children who were recently freed from slavery by cacao farmers—they describe getting “broken in” during the first six months, which entailed routine beatings. Before these beatings, the boys are stripped naked and tied up. The documentary sparked national outrage as these boys bared scars covering their bodies. As one boy heartbreakingly says, “[People] enjoy something I suffered to make; I worked hard for them but saw no benefit. They are eating my flesh” (Haglage 2015).
In response to this documentary, Hershey denied ever knowing that child slavery was happening. They vowed to eradicate child slavery in cacao farming by 2005.
However this has yet to come true. This is why in 2018, American consumers filed a lawsuit against the Hershey Company, “alleging that the company is violating consumers’ protection laws by not disclosing that their cocoa suppliers in Cote d’Ivoire rely on the worst forms of child labour” (Haglage 2015).
What drove these cacao farmers to use child slaves? A cacao farmer in True Vision’s documentary says it’s because “he is paid a low price for the cacao, and thus needs to harvest as much of it as he possibly can” (Haglage 2015).
Due to its large amassed market share over time, Hershey has a large amount of bargaining power with these farmers. Thus, it’s no surprise that farmers are getting paid so little. Almost 80 years after the labor strike, Hershey continues to grow in size and profit, and yet its exploitation of laborers remains the same.
Where is Hershey now?
From $37 mn in pre-tax profit in 1937, Hershey’s 2019 pretax profit was $1.38 bn (Hershey 2020). This represents an aggressive CAGR of 4.5%. This growth was built off the backs of exploited workers in various parts of the supply chain. While Hershey has certainly changed in size, the verdict is still out on whether its labor practices will change for the better.
“Annual and Other Reports: The Hershey Company.” Annual and Other Reports | The Hershey Company, http://www.thehersheycompany.com/en_us/investors/events-reports-releases/annual-other-reports.html.
D’Antonio, Michael. Hershey Milton S. Hershey’s Extraordinary Life of Wealth, Empire, and Utopian Dreams. Paw Prints, 2008.
Haglage, Abby. “Lawsuit: Your Candy Bar Was Made By Child Slaves.” The Daily Beast, The Daily Beast Company, 30 Sept. 2015, http://www.thedailybeast.com/lawsuit-your-candy-bar-was-made-by-child-slaves.
Koonar, Catherine. “Making Chocolate American: Labor, Tourism, and American Empire in the Hershey Company, 1903–85.” The Pennsylvania Magazine of History and Biography, vol. 142, no. 3, 2018, pp. 339–364., doi:10.1353/pmh.2018.0032.