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Hershey (HSY) Closing First Chocolate Factory

Move from original plant eliminates 500 jobs


The Hershey Co. (NYSE: HSY) said it will close the doors of its original chocolate factory in Hershey, Pa.  After nearly 107 years of operation, Hershey  is trading in its iconic factory for a brand-new confectionary plant.

The Hershey Co. was revolutionary for its time, providing citizens of the town with a theme park, inexpensive housing, public transportation and even a movie theatre.  The original factory, located between Chocolate and Cocoa Avenues, began construction in 1903, and was the center of the iconic town. 

The new factory will cost Hershey approximately $300 million, and will add new food-processing equipment to ensure it can compete in the global candy market.  The new plant will be located just outside the historic town.

Hershey’s main competitor is Kraft Foods (NYSE: KFT).  In January, Kraft acquired famous confectionary company Cadbury for $19 billion.  Since then, KFT stock has climbed 14.8%.  Now Hershey is feeling the heat from the competition.

"We’re creating a cost-effective, efficient facility that will enable us to compete with global players and meet the needs of customers and our consumers," said Kirk Saville, a Hershey spokesman.

The new factory’s efficient equipment renders 500 jobs unnecessary. Only 600 Hershey workers will be making the move across town.

HSY stock has performed quite well in 2010.  Since January, the stock has jumped 34.3% and currently trades at $48.10. Hershey stock has outperformed earnings estimates for four consecutive quarters. The company is expected to report third-quarter earnings Oct. 21.

If all goes according to plan and the new plant increases Hershey’s productivity, HSY stock may continue to climb into 2011. However, a gaining stock provides little solace to those in the growing unemployment line on Chocolate Avenue.

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Article printed from InvestorPlace Media, http://investorplace.com/2010/10/hershey-hsy-closing-first-chocolate-factory/.

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