46th Edition
In the early 1980’s when I was an equity analyst, I used to enjoy visiting manufacturing operations to learn more about the products companies made. One memorable trip was to Hershey’s chocolate plant in, you guessed it, Hershey, PA., during which I discovered three amazing things. First, the plant was totally automated and run by technicians in a small control room. I had envisioned workers stirring massive cauldrons filled with chocolate. I even dreamed off sticking my finger in to taste the latest batch. From the time the cocoa, sugar, and milk arrived at the plant, computers and machinery handled the entire process. It was very impressive. The second amazing aspect of this operation was that all the sophisticated machinery was manufactured in Switzerland, which at that time was the home country of Hershey’s primary competitor, Nestle. I thought that was strange, but it never seemed to be an issue with Hershey’s management. Perhaps I read too many spy novels…
Finally, the third amazing thing I discovered on this visit was a beautiful, long hill of well-manicured grass in front of the Milton Hershey School. It was about 250 meters from the bottom of the hill to a parking area at the top, which was in front of the entrance to the school. The slope of the gradual incline was around 20%, steep enough to get my attention. About twenty-five years old at the time, and always looking for a new athletic challenge, I decided to run the hill. I set a goal of running it three times, each time faster than the previous one. It was a strenuous experience, but exhilarating, too. The silly things young people do…
On my third and final rep I envisioned Mr. Hershey running the same hill, to relieve stress or clear his mind during a difficult time in his early career. Exercise can be very therapeutic in that regard.
25 years later, my wife and I were invited to attend a wedding in Hershey. I decided to run the hill again, with the same rules – three times, each rep faster than the previous. It was definitely more challenging this time, but I did it. Each time I reached the top a few heads would turn as onlookers had to be wondering why a middle-aged guy would do such a thing. I hope to repeat this one more time at the next 25-year interval, sometime around my 75th birthday. The silly things old people do…
On a more serious note, Hershey was one of the best performing stocks I owned during my 40-year investment career. The company has always been very good at what they do, and they have done an admirable job of sticking to their core strength, unlike other packaged food companies who have wandered into areas that proved much less fruitful. Companies diversify for various reasons, and sometimes it adds value, but many times it doesn’t. I’ve always felt a diversified portfolio of focused, industry leaders was much better than owning a portfolio of diversified companies. It is just too hard to be excellent at multiple things. Unless you are Jim Brown or Bo Jackson…
On an even more serious note, there is much to learn from the Hershey story. The company was started by Milton S. Hershey who, like many famous entrepreneurs, experienced multiple business failures before achieving success. The importance of perseverance in any endeavor cannot be overstated. Mr. Hershey also understood how important it was to give back to the community. He and his wife opened the Hershey Industrial School in 1909 as a home for orphaned boys. He gave his fortune to the school in 1918, valued at $60 million. His gift was not publicized at the time, an indication of Mr. Hershey’s uncommon humility. Through his philanthropy and support of the school he changed thousands of lives. The serious things some people do that secures a lasting legacy…
I learned recently that The Hershey Company is facing a class action lawsuit because some of its seasonal treats did not look exactly like the image on the wrapping. According to a Wall Street Journal article – “Class Actions and the Candy Bar,” the attorney in the case is seeking $5 million in damages for “untold hardships.” The silly things trial lawyers do…
I should probably invite the lead attorney to run the Hershey hill with me. Perhaps it will clear his mind.
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Michael Kayes
*These views are my personal opinions and are not the viewpoints of any company or organization.