Chapter 9: A Third Life

What does the title mean?

Answer P. 165

• 1915 Kitty dies and Milton feels a deep loss

• Milton is not needed on a daily basis at his company nor on the development of the town.

Sugar, Sugar

The flow of sugar in the US is controlled by two firms:

1. American Sugar Refining

2. National Sugar Refining

For all intents and purposes, it was like a monopoly.

Page 161

Sugar, Sugar

Inspired by Teddy Roosevelt, Milton turns his attention to a possible

“Second empire” in Cuba.By 1906….• US invests about $200 million into the

sugar industry in Cuba and railroads to transport it.

• 60% of the rural land is owned by Americans Page 160-161

Pages 161-End

CUBA

The Plaza in Havana Cuba: The Start of

Hershey’s New Adventure

http://www.hotelplazacuba.com/Page 161

Yumiri Valley, Cuba

• One of the most beautiful places in Cuba

• Large spring-fed river provided a good water supply to the land

• A new factory & town could free Hershey of from the sugar monopolies….. Page 162

Hershey, CubaProblems:• Battle with a British railroad firm already

there• Hershey constructed the first electric line:

the Hershey Cuban Railway, but it could not link up to the city of Havana. Could only go to Casa Blanca on the Havana Bay because the British firm controlled Havana

• http://www.tramz.com/tw/la.html#CUBA

Pages 163-165

Hershey, Cuba• Hershey is 59 years old; he is more relaxed in

Cuba…no watchful Mennonite eyes. • A new adventure could distract him from the loss

of Kitty• He could produce his own sugar; lower cost with

Cuban labor

Pages163-168

Hershey’s New Adventure in Cuba

• Milton’s presence in Hershey PA greatly diminished; no one knew when he would be coming or going

• Milton oversaw construction of town and company• Enjoyed cigars, champagne, and a large amount of

gambling in casinos and racetracks…living the life of a wealthy man.

Pages 167-168

A Visit Home to Pa

November 13,

1918

Created the Trust for the Industrial School and placed ALL of the Hershey stock in it.

Page 169

Chapter 10: A Betting Man

Hershey’s Bet on Sugar• Released Hershey from the

US monopolies• Very profitable during the war

when there were sugar shortages; he had his own supply

Big Events in Chapter 10

• Sept-Dec. 1919Travels to Europe, gambles with thousands of

dollars in casinos• Returned because his mother was very sick with

pneumonia. A couple weeks later, Fannie dies and is buried next to Catherine

Hershey’s Bet on Sugar• Needed more sugar and trying to cut out the

wholesaler, like he did with milk, Milton went back and forth to NYC “traders” buying sugar contracts for future crops of sugarcane/sugar.

• Wouldn’t switch to other sweeteners as other companies did; refused to risk affecting quality of his chocolate

• Thought he knew the

“market trend” like he did with

carmels and milk chocolate

Chapter 10: A Betting Man

Pages 172-173

Chapter 10: A Betting Man

Hershey’s Bet on Sugar• Sugar Bust in 1920……• Oversupply of sugar; value of contracts nosedives• Milton in jeopardy of losing his entire company in

Hershey, PA and Hershey, Cuba• National Bank saves the company with a $20

million bond issue, a $10 million dollar mortgage, and an overseer named RJ DeCamp.

Chapter 10: A Betting Man

MS, Snyder, and Murrie

• Announced the crisis at a meeting with 50 company executives and town leaders

• MS said he wasn’t worried about his wealth, but the future of the school for the orphans

Chapter 10: Betting Man

• With renewed loyalty and focus, sales increased by 30% from 1921-1923

• In 1924, bank granted them control of the company again; employees rewarded from a newly designed profit-sharing plan

Pages 176

Post World War I

• Further emergence of marketing strategies

• National Brand Success:– Hershey for chocolate– Kellogg for cereals– Ford for cars– Ivory for soap

– Expansion of Advertising Techniques:

Utopia or Not a Utopia?

Role of the Media: Newspapers, Magazines, etc.• Promoted Hershey as a utopia: the school for orphans,

the park, the resort facilities• The Hershey Press Newspaper: Real, propaganda, both?

Page176-178

Hershey’s CompetitionEline’s Chocolate • Tries to take on Hershey

Co; About 30 employees are persuaded to go to Wisconsin and work for Eline’s.

• Company only lasts about 10 years; Hershey will not rehire employees who left.

Hershey’s Competition

Strange Alliances

Hershey struggled to create new products that excited customers…only Mr. Goodbar

Hershey Company provided bulk chocolate to bakers and other competitors…they made the chocolate coating for Reese Cups, Oh! Henry, and The Milky Way

Lawsuits

• In Harrisburg, a family named Hershey started producing Hershey Brothers Chocolates.

• In 1926, Milton sued and won, but the brothers still stayed in business and continually misrepresented itself until it went bankrupt in 1936.

Continued Growth in PA

Hershey went on a building spree in Hershey PA…

• Junior-Senior High school given to town

• Hospital

• Hershey Park gets kiddie rides

• Convention Hall gets ability to turn into an Ice Palace for winter skating and hockey

Continued Growth in PA

Industrial School gets Fanny B. Hershey Memorial Building as an elementary center.

Continued Growth in Cuba

• Purchased 3 more mills and brought in labor from Haiti and Jamaica because they would work at a lower wage– Helped the company recover from the sugar

contract debacle– Got him in trouble with the Cuban authorities

Hershey always proud of what he had accomplished and welcomed visitors to his properties and promoted them as tourist attractions.

In the 1920 and beyond…

Pamphlets were distributed offering package tours-train fare, lunch, golf, and a factory tour…all for $4.00

Still Building & Experimenting…

• Spent hours and hours above the mill in Hershey conducting experiments on sugar

• Built a orphanage/school in Cuba

Generous, But Controlling

• Squeezed wages at times

• Resisted workers’ attempts to unionize in Cuba and in Pennsylvania

• “Hershey reserved every decision about how and where to invest his fortune and would not be pressured into anything.”

Page 189

Generous, But Controlling

Labor Issues in Cuba

• Employees of Cuba Railroad threatened to strike; Hershey threatened to end his business in Cuba

• Fired those employees who did go on strike

• In the end, he gave a 10% raise, but stopped the annual profit-sharing

Page 188-189

Reorganization

In 1927, Hershey created three distinct

Corporations:

• Hershey Chocolate Corporation

• Hershey Estates

• Hershey Corporation

Pages 190-191

Hershey Chocolate Corporation

The Hershey brand products“A cash cow for the industrial school trust”

Pages 190-191

Hershey Estates

The infrastructure: electricity, water, sewers, trolleys,retailers, real estate, Hershey Park, a mill, a quarry, etc.

Pages 190-191

Hershey CorporationThe Cuban Businesses

Pages 190-191

Stanley Russell’s Plan

US Economy was Expanding and Booming

• Vice President of National Bank

• Watches the General Foods Corporation form from the merger of more than a dozen companies…”a conglomerate”

• Wants to do the same with Hershey at its center; approached Campbell, Heinz, Swift

Pages 191-195

• Russell will make tens of millions of dollars if deal was successful

• Works on the deal for 2 years

• Grow overconfident, goes on vacation, and almost loses the deal to a competitor from Chicago

Stanley Russell’s Plan

Pages 191-195

Stanley Russell’s Plan

Russell meets with Milton (72 years old),

Murrie, and Snyder

• National City will pay half a million dollars for a 6-month option to buy half a million shares

• If National City lines up all the other companies, the option would be exercised and National City would control Hershey Chocolate

Pages 191-195

Stanley Russell’s Plan

• Hershey agrees and signs the paperwork for the option

• Collects $500,000

• Stanley goes to organize the other companies and create the conglomerate

Pages 191-195

Stanley Russell’s Plan

• Gathers agreements from Colgate-Palmolive and Kraft

• Forms “Quality Products Corporation”

• Works on lining up more companies

Pages 191-195

Stanley Russell’s Plan

Late September Dow Jones Industrial Average

drops 13% in one month

October 24Panic Beginning…crisis feared

October 29Stock Market crashes and the Dow plummets; $30 billion to $60 billion lost

Pages 191-195

Stanley Russell’s Plan

• The plan to incorporate Hershey into the “Quality Product Corporation” conglomerate crashes with the Stock Market

• Hershey Chocolate keeps the $500,000

• School Trust retains control of Hershey Chocolate

Pages 191-195

Years Later…..Hershey quotes

…it was “the best thing that ever happened”

…a merger would have put

the company under

“outsider control” and

“made a big difference to the town.”

Page 195

The Great Depression

“No money, no banks, no nothing…”

~Will Rogers

Except for MS Hershey and

Hershey PA….

Producer of milk and sugar

Producer of a 5¢ chocolate bar

Pages 196-197

The Great Depression

New Hershey Products in the 1030’s

• Mild and Mellow • Not-So-Sweet• Aero Bar, a British

chocolate bar, under a license granted by Rowntree of Great Britain

Page 198

The Great Depression

Milton gives his mansion to the Hershey County Club and moves into two rooms on the upper floor.

The Great Depression

Employs hundreds of workers full-time for

six years in an extensive building program:

• A luxury hotel

• A sports arena

• A modern office building

• A new school

The Great DepressionA six story high

Community Building

with

murals, bronze statues, marble fountains,

a gym, a library,

a swimming pool,

a hospital,

a 2,000 seat theater, and 130 dorm rooms

Pages 199-200

The Community Building:

“A social hub for the Town”

The Great DepressionThe Hershey Hotel:

•Other millionaires played with yachts

•His hobby had been the dream of building a luxury hotel

•Dreamed about it since he first bought land in Derry Church

•Planned various designs over the years with Catherine

The Hershey Hotel

~A Dream Come True~

The Great DepressionThe Sports Arena:

•Designed by Anton Tedesko

The Sport Arena in Hershey

~An Engineering Marvel~