Hershey Will Give About 1500 Workers the Big Kiss-Off

Hershey Co. unveiled Thursday a three-year Global Supply Chain Transformation. In plain English that will mean new manufacturing in Mexico, streamlining of production lines and approximately 1500 employees losing their jobs.

The overhaul will cost upwards of $575 million. A new cost-efficient manufacturing plant will be built in Monterrey, Mexico. There has been a growing demand in that country, and it will also allow the company to outsource production of low value-added items.

The plan is for Hershey to make its products at fewer facilities, thereby lowering its overall cost structure. The majority of manufacturing, about 80%, will continue to take place in the U.S. and Canada.

The candy bar wars have seen Mars Inc. inching past Hershey's market share. Hershey had a 10 percent drop in fourth-quarter earnings last month. The company claims that weak merchandising is partly to blame, as well as a product recall last year in Canada due to the discovery of salmonella bacteria.

While the loss of 1500 jobs seems excessive, Hershey Co. currently employs more than 13,000 workers. The loss would equal less than 11.5% of its current employees.

The chocolate maker has been working to increase sales by focusing on its tried and true brands. It has also developed some new lines, one being a premium dark chocolate.

Hershey says it will still see sales to increase in 2007 by 3-4 percent. However, that estimate is well below the company's long-term goal of 9-11 percent.

"The long-term benefits will include a significant, sustainable increase in investment behind Hershey's iconic brands and new product innovation, as well as targeted, profitable international expansion," said Chief Operating Officer David J. West, in a statement.