Leaf Integration

Another important aspect of Hershey Chocolate North America's 1997 performance was the successful integration of the Leaf North American confectionery business which was acquired at the end of 1996. Leaf's business systems were totally integrated with Hershey's by Memorial Day 1997. We closed the Leaf headquarters building and reduced administrative personnel from 250 to approximately 90 team members, most of whom are now located in Hershey, Pa. Plans to realign Leaf's mid-western manufacturing base with our bi-coastal manufacturing and distribution systems have been finalized and will be completed over the course of the next few years.

By October 1997, the sales effort for the major Leaf products was completely assumed by our existing sales force, thereby streamlining selling and marketing programs. The full impact of this important step will phase in during 1998. In accomplishing this, we integrated the selling efforts of these products, with our field and national accounts sales teams assuming responsibility for the power brands Jolly Rancher, Whoppers, Milk Duds and PayDay and a network of confectionery brokers taking on the rest of the line. These brokers, who also handle Luden's and Heide items, have proven to be very effective. Currently we are exploring the possibility of line extensions and new products for certain of the former Leaf brands. While the integration process is ongoing, we are well ahead of our integration schedule. The opportunities that initially led us to acquire this large and complex business have become more clearly evident as we continue the integration process.