Corporate-wide initiatives

Another aspect of the evolving Hershey Foods organization is the ongoing implementation of a new enterprise-wide initiative (E21) to significantly enhance our information systems and business processes. As we planned the organizational changes discussed above, we knew we had reached a strategic juncture in our processing of information. We believe we can gain a competitive advantage in this area and, to that end, we are investing approximately $80 million in a new enterprise-wide information system utilizing SAP R/3 software. We expect this process to become fully operational during 1999.

Another element of our internal drive for continuous improvement is the adoption of Economic Value Added (EVA¹) concepts to help measure our performance. During 1997, our employees learned these concepts and processes were implemented in order to capture the necessary information needed to utilize EVA. Beginning in 1998, EVA will be a formal part of our compensation program for management, along with two other key measurements—earnings per share and free cash flow.

¹ EVA is a registered trademark of Stern Stewart & Co.