Hershey Chocolate North America

Our corporation achieved excellent performance in 1997 led by our largest division, Hershey Chocolate North America. The confectionery category at retail was one of the fastest growing segments of the U.S. food market in 1997, with growth of approximately 5.4%. Once again, Hershey's sales at retail outpaced industry growth and we continued to enhance our leadership positions in both the chocolate and non-chocolate confectionery categories. During 1997, deliberate efforts to eliminate unprofitable items in the newly acquired Leaf business resulted in slower than industry growth for the Leaf brands.

As category leader, Hershey's creative selling, marketing and merchandising tactics continued to infuse the category with excitement. New products such as Reese's Crunchy Cookie Cups, Hershey's Classic Caramels, Hershey's Sweet Escapes reduced-fat and calorie candy bars (with two new flavors introduced in mid-1997), Hershey's TasteTations candy and Hershey's Pot of Gold boxed chocolates fueled category excitement and provided incremental sales during the year. Core brands were stimulated by our continued creation of unique, thematic merchandising programs such as those related to NASCAR, the NFL, the NCAA Final Four, and, last summer's tie-in with the movie, "The Lost World: Jurassic Park." ² This tie-in alone resulted in the largest, most complex promotion ever attempted in the confectionery industry, and the results were outstanding.

² NASCAR is a registered trademark of the National Association of Stock Car Autoracing, Inc. NFL is a registered trademark of the National Football League. NCAA and FINAL FOUR are registered trademarks of the National Collegiate Athletic Association. THE LOST WORLD: JURASSIC PARK is a trademark of Universal City Studios, Inc. and Amblin' Entertainment, Inc.