Hershey confronting possibility of life without company

Wednesday, August 21, 2002

HERSHEY, Pa. -- For many here, the notion that Hershey Foods Corp. would remain in the town built by late chocolate magnate and philanthropist Milton S. Hershey was as entrenched as the candy company's 97-year-old factory on Chocolate Avenue.

That notion died when the nation's largest candy maker was put up for sale, leaving many residents wondering what the town will look like if a company with no ties to the Hershey legacy buys it.

"There won't be any town left if they move everything out," said Herman Good, 75, who, like many in this suburban central Pennsylvania town, retired after a career in one of the company's chocolate factories. "You might as well call it a ghost town."

Good and many others are troubled that Hershey Foods, a part of the community since 1894, could be gutted and relocated by a buyer, perhaps Swiss conglomerate Nestle SA or Chicago-based Kraft Foods Inc.

One former Hershey executive called the feeling a "bone-deep pain."

Workforce may remain

Many remain hopeful that efforts by state Attorney General Mike Fisher to involve a court review in any sale will prevent the Hershey Trust Co., the charitable trust that owns 77 percent of Hershey Foods' voting stock, from selling that control.

The trust's president, Robert C. Vowler, has said that selling the controlling stake would allow the trust, which has assets of $5.4 billion, to diversify its holdings in a volatile market.

Analysts say the maker of Hershey's Kisses, the Hershey Chocolate bar and various Reese's products is an attractive buy that would vault its new owner to the top of the confectionery and chocolate sectors.

Hershey's work force could remain intact even if the company is sold -- depending on the buyer. Analysts say M&M/ Mars Inc. and Nestle are the only companies with U.S. chocolate-making operations big enough to warrant closing down the city's three chocolate factories, which comprise about one-third of the company's manufacturing capacity.

Analysts add that the company's state-of-the-art distribution facility near Hershey could encourage a buyer to route even more goods through it, creating more jobs.

Sense of betrayal

The Hershey brands probably would survive, but former Hershey Trust director J. Bruce McKinney said some lines could end up being flipped for a profit to another buyer, or spun off.

If a buyer is "going to be paying the premium on the company that the trust wants, they're going to be looking to maximize their return by cutting costs," McKinney said.

The Hershey Trust's philanthropy in the Hershey area will continue whether the company is sold or not. The trust supports the Milton Hershey School, giving its nearly 1,300 disadvantaged students free education, room and board on a lush, 2,700-acre campus.

Still, the prospect of the Hershey name surviving on a chocolate wrapper without its hometown roots is cold comfort to some in a town where just about everybody either works for Hershey or is related to someone who does.

Kathryn Taylor, a lifelong area resident, expressed betrayal at the thought that the company could be sold by trustees whose only connection to Hershey is "eating chocolate at Christmas.

"We feel as though we're being sold out," she said.

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