1997 was an outstanding year...

1997 was another outstanding year for Hershey Foods Corporation. We worked extremely hard to achieve our goals in a very difficult, competitive climate for our businesses. Reese's Peanut Butter Cups and our new product, Reese's Crunchy Cookie Cups, are featured on the cover and the inside front cover of this annual report because the Reese's brand represents the corporation's largest and most successful brand. These two products, however, also are representative of the current state of your corporation — we may look the same on the outside, but we are significantly different within.

In early 1994, we set an aggressive goal to enhance the utilization of the corporation's assets, leading to an acceleration of profitable growth. We made excellent progress toward achieving this goal during 1997 as a result of our concentrated focus on what we do best:

  • producing and marketing quality products;
  • providing first-class service to our customers; and,
  • managing low-cost, effective operations.

Focus

An organizational structure which keeps employees focused on quality, service and cost effectiveness is essential. We must have employees with the appropriate skills in the proper positions to add value by enhancing the quality of the products and services which we provide. For over a year, we have been in the process of reorganizing the way your corporation does business. The resulting new organizational structure can be summarized as follows:

  • Business Units — primarily sales and marketing units — which are responsible for the equity of our brands and for growth, profits and financial returns;
  • Operations Shared Services, which essentially encompasses the supply chain and focuses on product quality, customer service and financial returns; and,
  • Staff Shared Services, which represents the traditional staff functions, again with a focus on customer service, cost control and financial returns.

When totally implemented, we expect this new organization to generate increased value from our existing businesses and maximize returns for our stockholders.

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