Part IThe Story
The Apron at the Bank
In Lancaster, Pennsylvania, in the late 1880s, a candy maker in his thirties received payment for the biggest order of his life and ran down the street to the bank with his apron still on. The bank's cashier had lent him the money to buy the sugar and milk for that order and had backed the loan with his own signature, because the candy maker's credit was worthless. He had already gone broke twice, in Philadelphia and in New York. Most of his relatives regarded him as a drifter who had inherited his father's weakness for schemes.
The candy maker was Milton Snavely Hershey. Within fifteen years of that sprint to the bank he would sell his caramel business for $1 million, stake the proceeds on the untested idea that milk chocolate could be mass-produced and sold for a nickel, and build a factory in the middle of Pennsylvania dairy country. Around it he built a town with his name on it. Then, having no children, he quietly gave his controlling stake in the company to a school for orphan boys, an arrangement that still controls The Hershey Company more than a century later.
Hershey's life has been told many times as a fable of generosity. The record is more interesting than the fable. He was a gifted operator who learned from repeated failure, a paternalist who could be autocratic, a sugar speculator who nearly lost his company, and an employer whose workers staged a sit-down strike in the middle of his model town. He was also, by any measure, one of the most consequential philanthropists in American history.
By the Numbers
Hershey's Chocolate Empire
2Candy businesses that failed before his caramel company succeeded
$1MPrice American Caramel paid for the Lancaster Caramel Company in 1900
5¢Price of the standard Hershey bar from 1900 until November 1969
~$60MEstimated value of the company stock Hershey gave to his school's trust in 1918
600+Men employed in Hershey's Depression-era building campaign
3 billion+Ration and Tropical bars Hershey produced for the military, 1940–1945
~2,000Students at the Milton Hershey School today
A Mennonite Boy With a Restless Father
Hershey was born on September 13, 1857, on a farm in Derry Township, Dauphin County, in central Pennsylvania. His parents, Henry and Veronica "Fanny" Snavely Hershey, came from families of Swiss and German descent who had settled in Pennsylvania in the 1700s, and he grew up speaking the Pennsylvania Dutch dialect. Both families were originally Mennonite. His mother remained a strict member of the Reformed Mennonite Church and wore plain dress throughout her life.
His father was the problem, or at least the complication. Henry Hershey read widely, loved ideas, and failed at almost everything he tried. He sold equipment during the western Pennsylvania oil boom, ran a trout pond, tried a fruit farm and nursery, and moved the family repeatedly in pursuit of each new venture. Fanny, frugal and strong-minded, grew frustrated with her husband's failures, and the couple drifted apart. Henry spent long stretches away from home trying his luck in Philadelphia, New York, Chicago, and Colorado. Milton's younger sister, Sarena, died in 1867 at the age of four.
All the moving wrecked Milton's education. He attended at least seven schools and did not go beyond the fourth grade, a gap he remained self-conscious about as an adult. When he was about fourteen, his father apprenticed him to the editor of a small German-language newspaper in Gap, Pennsylvania. He hated the work and was clumsy at it, and he was soon fired. His mother then arranged a second apprenticeship, with Joseph Royer, a confectioner and ice-cream maker on King Street in Lancaster. There, over four years, Hershey learned the trade that would make him. Candy making in the 1870s depended on feel and memory more than written recipes; an apprentice had to learn how heat and time changed sugar, and when a batch was ready to come out of the kettle.
Philadelphia, Denver, New York
In 1876, at eighteen, Hershey moved to Philadelphia to open his own confectionery business, hoping to profit from the crowds at the Centennial Exposition, the country's first world's fair. His mother's family, the Snavelys, subsidized the venture, and his mother and his Aunt Martha, known as Mattie, came to the city to work alongside him. He sold penny candy, caramels, ice cream, and nuts, and for a while the business grew. He moved to larger premises on Spring Garden Street and ran a wholesale operation around the corner.
By 1880 the business was faltering. Hershey could never generate enough cash to cover his costs, and his letters to his uncle from those years are a run of requests for loans and for patience. His father arrived in late 1880 to help, bringing with him a design for a candy display cabinet he was sure would transform the business. Milton's mother and aunt saw Henry as a disruption and urged Milton to pay him for the cabinet so that he would leave. Milton did, and the payment helped finish off the shop. After six years he closed it in the spring of 1882.
He followed his father west to Denver, which had just entered a depression after a slump in ore production. Without capital to start his own business, Hershey took a job with a local confectioner. It was the most important job of his early life. The Denver candy maker taught him to make caramels with fresh milk, which produced a richer candy that kept longer than the paraffin-based caramels common at the time. Hershey carried the technique to Chicago and New Orleans, found nothing, and in 1883 settled in New York City, where he opened a second business. It too ran into cash-flow trouble and failed by 1886.
He came back to Lancaster so broke that he could not pay to have his belongings shipped after him. When he walked out to his uncle's farm, most of his relatives shunned him.
The Caramel Fortune
What changed in 1886 was partly luck and partly loyalty. William Henry Lebkicher, who had worked for Hershey in Philadelphia, stored his possessions, helped pay the shipping charges, and became the first of many men who devoted their careers to Hershey. His mother and Aunt Mattie again helped with production. Hershey started the Lancaster Caramel Company in a warehouse on South Duke Street that had no boiler for cooking caramels, then moved to an old factory building on Church Street that had once housed the Edison Electric plant.
The early months were a struggle. With a bad credit rating from New York and nothing to offer as collateral but some kettles in a rented building, Hershey could not get bank credit to buy raw ingredients. Then a British candy importer, known to history only by the cable address "DECIES," placed a large order for his milk caramels. The cashier at the Lancaster County National Bank was impressed enough by Hershey to lend him the money, guaranteeing it personally. When the payment came in, Hershey made his dash to the bank in his apron.
From then on, the Lancaster Caramel Company grew fast. Its best-known line, "Crystal A" caramels, sold well beyond Pennsylvania, and orders came in from overseas. By the early 1890s the company employed more than 1,300 workers in two factories, and by 1894 Hershey was counted among Lancaster's most substantial citizens. In 1891 he bought a large house at 222 South Queen Street, filled it with exotic birds, plants, and souvenirs of his travels, and supervised the landscaping himself. He began travelling to Mexico, Europe, and Egypt, visiting museums and shops wherever he went.
On May 25, 1898, at forty, he surprised almost everyone by marrying Catherine "Kitty" Sweeney, an Irish-American Catholic from Jamestown, New York, who had worked as a shop clerk. They married privately in the rectory of St. Patrick's Cathedral in New York. By all accounts the marriage was happy. Kitty's influence is credited with prompting Hershey's first documented charitable gift, $5,000 to equip a chemistry laboratory at Franklin & Marshall College in 1902.
Chicago, 1893
The turn toward chocolate began at the World's Columbian Exposition in Chicago in 1893, where Hershey became fascinated by an exhibit of German chocolate-making machinery. According to Frank Snavely, a relative who worked with him at the caramel company, he made up his mind on the spot.
— Milton Hershey, as recalled by Frank Snavely, 1893 (Hershey Community Archives)Caramels are a fad; chocolate is permanent. I am going to make chocolate.
At the end of the exposition Hershey bought the German equipment and installed it in a wing of the Lancaster caramel factory. In February 1894 he set up the Hershey Chocolate Company as a subsidiary of the caramel business. Within a year he was producing cocoa, baking chocolate, and a confectionery line that soon ran to more than a hundred varieties of "vanilla sweet chocolate" novelties, the semi-sweet chocolate of the day, many of them used as coatings for caramels.
His real ambition was milk chocolate. The Swiss had pioneered it using powdered or condensed milk, and it remained an expensive treat. Hershey wanted to make it from fresh milk, as he had learned to do with caramels, and to make it cheaply enough for ordinary Americans. In 1897 he bought the Homestead, the farm in Derry Township where he had been born, and from 1898 he and a few chosen employees worked there late into the night on milk-condensing experiments. Fresh milk proved far harder to work with than he expected. One of the men recalled later that nobody told Hershey how to make milk chocolate; he found out the hard way.
By late 1900 he had a formula good enough to sell, and Hershey's milk chocolate went on the market. That August he had already made his most important business decision. On August 10, 1900, he sold the Lancaster Caramel Company to the American Caramel Company for $1 million, keeping the rights to the chocolate business. His caramel company was highly profitable; his chocolate company was an experiment. He chose the experiment.
A Factory in the Cornfields
Milk chocolate sold immediately, and by 1902 Hershey needed a much bigger factory. He inspected possible sites in New York, New Jersey, and Maryland before settling on the countryside of his birth, which offered a plentiful water supply, rail access, a steady supply of fresh milk from surrounding dairy farms, and a workforce he regarded as industrious. When Kitty heard he intended to build in Derry Township, she told him he ought to have his head examined. Most of his associates agreed that the site was too remote. Hershey began quietly buying land through an agent in late 1902, broke ground on March 2, 1903, and had the factory running by the summer of 1905.
The plant was designed from the start for mass production, and much of its specialized machinery was built or adapted by Hershey's own employees. The decisive commercial move was one of subtraction. Hershey had been making dozens of sweet-chocolate varieties; he chose to concentrate on milk chocolate and a handful of basic products such as cocoa and coatings. With a narrow line and a factory built to produce it at scale, his name became a national byword for milk chocolate in a remarkably short time.
The standard Hershey bar sold for a nickel from 1900, and the nickel price became the company's defining commitment. For decades, when the price of cocoa beans rose, Hershey kept the price and cut the weight of the bar; when bean prices fell, the bar grew again. The five-cent bar was not discontinued until November 24, 1969. In 1907 Hershey introduced Hershey's Kisses, small flat-bottomed drops of milk chocolate that were first wrapped by hand in foil. A milk chocolate bar with almonds followed in 1908.
Hershey also became famous in the advertising business for not advertising. For its first several decades the company bought no newspaper, radio, or television advertising, and it did not launch a national media campaign until 1970. The legend overstates the case: Hershey spent heavily on trade advertising, point-of-sale displays, and promotions aimed at retailers, and in its early years it had few competitors in solid milk chocolate. But the company's reliance on product, price, and distribution rather than consumer advertising was real. Early on, Hershey had painted "Hershey's Cocoa" on the sides of what is thought to have been Lancaster's first automobile and used it for deliveries around the state.
Planning the Model Town
Because Hershey had built his factory in farmland rather than in an existing town, he had to provide somewhere for at least some of his managers and workers to live. With a Lancaster engineer, Henry Herr, he laid out a tree-lined community whose main streets were named Chocolate and Cocoa Avenues. A bank, a hotel, a public school, churches, parks, a zoo, and golf courses followed in quick succession, along with a park for employees and their families that grew into Hersheypark. From the start Hershey built a trolley system so that employees could live in nearby towns and commute, rather than being forced to live in Hershey.
The town was an experiment in what historians call industrial paternalism, and it drew suspicion from the beginning. Americans had seen company towns in which employers owned the housing and the stores and squeezed their workers through both. Hershey's workers vetoed his idea of a cooperative store because they thought they would somehow be cheated. The Hershey Community Archives, the company's own historical record, acknowledges that he could be autocratic and was criticized for deciding what residents needed without consulting them. It also concludes that his concern for his workers' welfare was genuine.
Hershey rarely wrote down his beliefs and seldom talked about them. Asked once what his religion was, he is said to have replied, "The Golden Rule." He believed wealth should be used for the benefit of others, and he also understood that doing good was good for business. The model town served both purposes: it helped him recruit and keep a stable workforce in a remote location, and it made the company's name synonymous with a certain idea of wholesome American prosperity.
The Orphan Boys
Milton and Kitty Hershey had no children, and it was a source of sadness to them both. On November 15, 1909, they signed a deed of trust founding the Hershey Industrial School, a home and school for orphaned boys, and transferred about 486 acres of land to it. The deed set out the purpose plainly.
— Milton and Catherine Hershey, Hershey Industrial School Deed of Trust, 1909The main object in view is to train young men to useful trades and occupations, so that they can earn their own livelihood.
The first four boys arrived in September 1910. Admission was limited to poor, healthy, white male orphans who entered young and could stay until eighteen. Kitty worked closely with the wife of the school's first superintendent on the boys' home life, from menus to clothing and manners.
Kitty's health had begun to fail in the early 1900s. Her illness was never clearly identified; it attacked her nervous system and gradually left her limbs numb. In 1912 the Hersheys cancelled a booking on the maiden voyage of the Titanic because of business that needed Milton's attention, and sailed instead on a German liner. Kitty died in Philadelphia on March 25, 1915, at forty-three. On the day of her funeral Hershey gave his employees the day off and a free train ticket to Philadelphia so they could attend. He never remarried and is said to have carried her photograph with him for the rest of his life.
Three years later he made the decision for which he is best remembered. Early in 1918 he consolidated his various businesses and some 7,700 acres of land under the Hershey Chocolate Company. Then, on November 13, 1918, he transferred his shares in the company to the Hershey Trust Company as trustee for the school. The school became the majority shareholder in all of Hershey's enterprises and the largest landowner in Derry Township. The Hershey Community Archives records his explanation.
— Milton Hershey, as quoted by the Hershey Community ArchivesI have no heirs—that is, no children. So I decided to make the orphan boys of the United States my heirs.
He did not announce the gift. Five years passed before The New York Times reported on November 9, 1923, that Hershey had placed his entire fortune in trust for the school, estimating it conservatively at $60 million.
Sugar, Cuba, and the Bankers
The First World War disrupted Europe's beet-sugar production and made sugar scarce, and Hershey, whose product was largely sugar and milk, decided to secure his own supply. He was also drawn to Cuba itself. On a visit in early 1916 he toured the sugar country east of Havana, bought a small mill, chose a site for a larger one, and began building a railroad to serve it, all within weeks. The new mill and company town, Central Hershey, stood on a plateau near Santa Cruz del Norte and was finished in 1918. Hershey added other mills through the 1920s, an electric railroad between Havana and Matanzas completed in 1922, and a school for Cuban orphan boys modeled on the one in Pennsylvania.
Securing sugar was sensible. Speculating in it was not. Hershey bought heavily in sugar futures during the postwar boom, and when prices collapsed from about 22 cents a pound in May 1920 to less than 2 cents by early 1921, he was caught. Estimates of his losses range from $2.5 million to $7 million. The crisis forced him to mortgage his Pennsylvania and Cuban properties to the National City Bank of New York, which sent a representative to watch over the business. Hershey, who liked to think of himself as a farm boy who could outwit city bankers, found the arrangement humiliating. The company cut costs, found new retail outlets for its chocolate, and paid off its obligations to the bank by June 1922.
The episode taught him a lasting lesson about the separation between the business and his ambitions for the town. In 1927 he reorganized and refinanced the company, creating the Hershey Chocolate Corporation, whose shares were sold to the public, alongside separate entities for the town's properties and for the Cuban operations. At their height the Cuban holdings covered some 60,000 acres, with five sugar mills and 251 miles of railroad. They were sold in 1946 to the Cuban Atlantic Sugar Company, and the proceeds went to the school trust.
The Depression and the Strike
When the Depression arrived, Hershey's response was to build. Through the 1930s he undertook a construction program that became known as the Great Building Campaign, employing more than 600 men at a time when jobs were desperately scarce. The Hotel Hershey, the Hershey Community Theatre, the Community Building, a new junior-senior high school for the orphans, the Hershey Sports Arena, and a stadium all came out of those years. Together they turned the town into a destination for tourists as well as a place to make chocolate.
The popular version of this story holds that no Hershey worker lost his job in the Depression. The company's own archives are more careful. Everyone was affected. After 1933, federal rules under the National Recovery Administration limited working hours, which let the factory spread work across more employees but shrank individual paychecks to a critical point. That hardship helped set up the most painful episode of Hershey's later life.
In early 1937 the Congress of Industrial Organizations began organizing Hershey's factory workers, and in March the company reached an agreement recognizing the United Chocolate Workers of America. Not all the workers' concerns were addressed. On April 2, 1937, at 11 in the morning, union leaders called a sit-down strike, and several hundred workers occupied the factory. The numbers are disputed; organizers claimed far more participants than the company acknowledged.
The strike hit more than the company. Dairy farmers across the surrounding counties depended on selling their milk to the factory every day, and with the plant shut, their milk was spoiling. Many non-striking workers, organized in a company-sponsored loyal workers' group, were equally hostile to the union, which some regarded as communist. On April 7, after the strikers refused to leave, a crowd of farmers and loyal workers, estimated at several thousand, stormed the plant. Strikers were forced through a gauntlet, and by one historical account some twenty-five of them were badly beaten.
Weeks later a federal labor board election at the plant went decisively against the CIO union. Historians still disagree about how spontaneous the attack on the strikers was; some strike participants later said the company had helped orchestrate it. What is not in dispute is that the violence took place in the town built as a showcase of harmony between employer and employee, while Hershey, then nearly eighty, watched from his mansion above the factory. By 1940 an affiliate of the American Federation of Labor had successfully organized the factory's workers, and a union local represents them to this day.
The Logan Bar
In April 1937, the same month as the strike, an Army quartermaster officer, Colonel Paul Logan, came to Hershey with an unusual request. The Army wanted an emergency ration bar that weighed a few ounces, packed plenty of food energy, would not melt in hot climates, and tasted, in the Army's own specification, "a little better than a boiled potato," so that soldiers would not eat it except in an emergency. Hershey's company president, William Murrie, and its chief chemist, Sam Hinkle, took on the project, with Milton Hershey's enthusiastic support.
The mixture of chocolate, sugar, oat flour, cocoa fat, and skim milk powder was so thick that it would not flow into molds, and in the early production runs each four-ounce bar had to be kneaded, weighed, and pressed by hand. The result could withstand temperatures of about 120 degrees Fahrenheit. In June 1937 the Army ordered 90,000 bars for field tests. After Pearl Harbor the orders became enormous. Hershey later added a better-tasting Tropical Bar for the Pacific. Between 1940 and 1945 the company produced more than three billion ration and Tropical bars, and by the end of the war the whole plant was turning them out at a rate of 24 million a week. It received five Army-Navy "E" awards for production.
Hershey himself was stepping back. On October 5, 1944, he resigned as chairman of the chocolate company's board and chose as his successor Percy Alexander Staples, who had run the Cuban operations since 1921. Milton Hershey died of pneumonia at Hershey Hospital on October 13, 1945, at eighty-eight, and was buried beside Kitty in the Hershey Cemetery he had built. A bronze statue at the school shows him with an orphan boy in his arms, above the words "His deeds are his monument. His life is our inspiration."
The Trust That Owns a Company
The structure Hershey created in 1918 turned out to be his most durable invention. The school he founded for a handful of orphans was renamed the Milton Hershey School in the early 1950s. It admitted its first non-white student in 1968 and its first girls in 1977, broadened its definition of orphanhood to include children of poor single-parent families, and now serves about 2,000 low-income students free of charge. Its trust, valued at roughly $15 billion, is among the richest educational endowments in the United States, and its controlling voting stake in The Hershey Company has kept the business independent. In 1963 the trust also provided $50 million to found the Penn State Milton S. Hershey Medical Center.
That control has been tested. In July 2002 the Hershey Trust announced that it was exploring a sale of its controlling interest, and in September its board voted to accept a $12.5 billion offer from the Wrigley company, now part of Mars. Hershey's stock jumped 25 percent in a day, but the backlash from residents, alumni, employees, and Pennsylvania's attorney general was fierce. A county orphans' court judge moved to block the sale, the trust abandoned it, and many of the trustees who had supported it were forced off the board. A later attempt by Mondelez to buy the company in 2016 was also abandoned after objections from the trust. The school's spending relative to its endowment has drawn criticism as too low, and the trust's governance has been a recurring subject of controversy.
The arrangement does what Hershey intended in its simplest sense. The school's finances depend on the company's success, and the company's ownership is anchored by a charity that cannot easily be bought out. Few founders have tied the fate of a business and a cause together so tightly, or so permanently.
Part IIThe Playbook
Hershey's career combines two very different lessons. The first is how a twice-bankrupt candy maker with a fourth-grade education turned an insight about milk into a national brand and a fortune. The second is how he used that fortune, sometimes wisely and sometimes rashly, to build a town, a school, and an ownership structure that outlived him. The principles below draw on both.
The principles
- 1.Learn the craft before you own the shop.
- 2.Treat each failure as paid tuition.
- 3.Find the ingredient everyone else overlooks.
- 4.Sell the business that works to fund the one that could.
- 5.Narrow the product line to widen the market.
- 6.Hold the price and let the size move.
- 7.Build where your inputs are.
- 8.Secure supply, but never speculate with the operating company.
- 9.Build in the downturn.
- 10.Listen to employees before they stop talking.
- 11.Lock the mission into the ownership.
Principle 1
Learn the craft before you own the shop.
Hershey spent four years as Joseph Royer's apprentice before opening his first business, and he kept learning as an employee after his first failure, notably in Denver. Candy making in his era depended on hands-on judgment about heat, timing, and texture, and there was no substitute for doing it under someone who already knew how.
The knowledge he gained as an employee proved more valuable than anything he learned as an owner in those years. The Denver confectioner's fresh-milk caramel technique became the foundation of his first fortune and, indirectly, of his chocolate.
Tactic: Before starting a business in an unfamiliar field, work inside an established operator long enough to learn the production details that never appear in public descriptions of the industry.
Principle 2
Treat each failure as paid tuition.
Hershey's Philadelphia shop failed after six years, and his New York business failed after three. The Hershey Community Archives notes that the Philadelphia failure taught him about supply and demand, credit, cash flow, and the importance of limiting a product line. Each of those lessons showed up later in how he ran the caramel and chocolate businesses.
What distinguished him was not that he failed but that he kept extracting specific lessons and carrying them into the next attempt. He also learned what to avoid in his own father's pattern of chasing ideas without the discipline to sustain them.
Tactic: After a venture ends, write down the three operational causes of failure in concrete terms, and design the next venture so that each one is addressed from the start.
Principle 3
Find the ingredient everyone else overlooks.
Fresh milk was Hershey's edge twice. In caramels, it produced a richer candy with a longer shelf life than competitors' paraffin-based products. In chocolate, it let him make milk chocolate in a way the Swiss were not doing, from a raw material he could get in abundance in Pennsylvania dairy country. The resulting flavor was distinctive enough to become the American standard.
The insight was not glamorous. It was a production detail that others had not pursued because it was difficult, and Hershey spent years in the Homestead laboratory making it work.
Tactic: Look for an input or process step that competitors avoid because it is hard or unfashionable, and test whether mastering it would give your product a quality or cost advantage they cannot easily copy.
Principle 4
Sell the business that works to fund the one that could.
In 1900 Hershey sold a highly profitable caramel company for $1 million and kept an experimental chocolate subsidiary. He had concluded that caramels were a fad and chocolate was permanent, and he acted on that conviction while the caramel business was at its peak and worth the most.
Selling at the top gave him the capital to build a factory and a town without outside investors. It also removed the temptation to hedge by running both businesses half-heartedly.
Tactic: When you believe a new line will outgrow your current one, consider selling the mature business while its value is high, and use the proceeds to fund the new one fully rather than splitting attention between them.
Principle 5
Narrow the product line to widen the market.
After starting with more than a hundred varieties of sweet-chocolate novelties, Hershey made the decision to concentrate on milk chocolate and a handful of basic products. A narrow line let him design a factory around mass production of a few items, drive down unit costs, and make his name synonymous with one thing.
He had learned the cost of a sprawling product line in Philadelphia. In Hershey, focus let him reach a mass market that a sprawling line could not have served profitably. The underlying mechanics are described in economies of scale.
Tactic: Rank your products by contribution to volume and margin, and test whether cutting the long tail would let you lower costs or improve quality on the few that matter most.
Principle 6
Hold the price and let the size move.
For nearly seventy years the standard Hershey bar cost a nickel. When cocoa prices rose, the bar got smaller; when they fell, it got bigger. Customers could always buy a Hershey bar with a single coin, which made it an easy impulse purchase and a fixed reference point in American retail.
The approach traded margin volatility for price stability, and it had limits: by the late 1960s the bar had shrunk so much that the company finally doubled the price. But for decades, a fixed price point was part of the product's identity.
Tactic: If your product depends on impulse purchases at a round price point, consider absorbing cost swings through pack size or specification rather than repeated price changes, and communicate any change in size honestly.
Principle 7
Build where your inputs are.
Hershey chose a remote site in Derry Township over locations near big cities because it offered what his product needed most: fresh milk from surrounding dairy farms, a reliable water supply, rail links, and a steady workforce. His wife and associates thought he was making a mistake. The location became a lasting cost and quality advantage.
The choice also created obligations. Building in farmland meant building housing, transport, and services, which drew Hershey into running a town. A decision about inputs became a decision about community.
Tactic: When choosing a production site, weight proximity to your most perishable or costly input heavily, and budget explicitly for the infrastructure and community investment a remote site will require.
Principle 8
Secure supply, but never speculate with the operating company.
Hershey's move into Cuban sugar made strategic sense: the war had shown how vulnerable a chocolate maker was to sugar shortages, and owning mills and plantations gave him control of a key input. That was vertical integration in its classic form.
Buying sugar futures during the postwar boom was a different thing, and it nearly cost him the company. When prices collapsed in 1920, he had to mortgage his properties and accept a bank's representative inside his business. He spent two years freeing himself and then reorganized the company to separate its pieces.
Tactic: Draw a written line between hedging that protects your input costs and positions that bet on price moves, and forbid the second kind inside the operating company.
Principle 9
Build in the downturn.
During the Depression, Hershey launched a building campaign that employed hundreds of men and produced a hotel, a theatre, an arena, a stadium, and a new school building. The projects kept local incomes flowing, bought construction at depressed prices, and turned the town into a tourist destination that supported the brand for decades.
The campaign did not insulate everyone. Paychecks in the factory still shrank under hour limits, and the resulting strain fed the 1937 strike. Spending into a slump helps most when it is paired with attention to the people already on the payroll.
Tactic: Keep a list of long-term capital projects ready to start when demand and prices fall, and review how the downturn is affecting existing employees' pay before committing to new ones.
Principle 10
Listen to employees before they stop talking.
Hershey's model town, benefits, and personal generosity did not prevent a sit-down strike in 1937. Workers' paychecks had shrunk, not all their concerns had been addressed in the union agreement, and the paternalism that looked benevolent from above felt controlling to some of those living inside it. The confrontation ended in violence that damaged the town's image of harmony.
Hershey had faced the warning signs for decades, from workers vetoing his cooperative store to criticism that he decided what residents needed without asking them. The strike showed that generosity is no substitute for a channel through which employees can disagree.
Tactic: Create a regular, credible forum in which employees can raise grievances about pay and conditions without fear, and treat a drop in candid feedback as a warning sign rather than a sign of contentment.
Principle 11
Lock the mission into the ownership.
By giving his controlling stake to a trust for his school, Hershey tied the company's fate to a charitable mission and made the business very hard to sell. The structure has funded the education of generations of low-income children and has kept The Hershey Company independent through repeated takeover interest, including the blocked 2002 sale.
It has also brought governance problems, criticism of low spending, and fights over trustees. A mission embedded in ownership is powerful, but it needs strong oversight to stay faithful to its purpose.
Tactic: If you want a mission to outlast you, embed it in the ownership structure rather than in bylaws or slogans, and build in independent oversight so the stewards remain accountable.
Free playbook
Get The Business Model Playbook
58 business models, one visual page each: how the money flows, the metrics that matter, and who runs it. Free when you join the Faster Than Normal email.
Free. No spam. Unsubscribe anytime.
Part IIIMaxims
-
Loyal people are worth more than good credit. Lebkicher stored Hershey's belongings and a bank cashier guaranteed his loan when he had nothing. Most of his later success rested on people who trusted him before the numbers justified it.
-
A father's pattern is a map of what to avoid. Hershey inherited his father's appetite for bold ventures and spent his career adding the cash discipline Henry never had.
-
Remote places look foolish until the factory is running. Everyone told Hershey that Derry Township was too far from anywhere. The distance that worried his associates became the town's identity.
-
Advertising can be replaced, but not skipped. Hershey avoided consumer media for decades, yet spent steadily on retailers, displays, and distribution. The brand was built through a different channel, not through no channel.
-
Quiet gifts compound. Hershey gave away his fortune without announcing it. The absence of publicity did nothing to reduce the gift's effect, and when the story came out five years later it spoke for itself.
-
Generosity from above can still feel like control from below. Housing, parks, and schools did not stop workers from wanting a say. People value being consulted as much as being provided for.
-
Grief can clarify. Hershey's decision to give his company to the school came three years after Kitty's death, when he no longer had anyone to build a family fortune for.
-
The best-known version of a story is usually the kindest. Legends about Hershey's Depression-era employment and his no-advertising policy both simplify a more complicated record. Look for the archive, not the anecdote.
-
A structure can remember what people forget. The trust has kept Hershey's intentions in view long after everyone who knew him died, including when trustees themselves wanted to sell.
In Their Own Words
We must never be satisfied with good enough. There's always a way to make it better.— Milton Hershey
Caramels are just a fad, but chocolate is a permanent thing.— Milton Hershey
The orphan boy has the same right as any other boy to be given a chance in the world.— Milton Hershey
Give them quality. That's the best kind of advertising in the world.— Milton Hershey
Business is a matter of human service.— Milton Hershey
I have always believed that success comes from hard work, determination, and treating people fairly.— Milton Hershey
What we get from this business is the ability to provide good jobs for people and to help build a community where families can thrive.— Milton Hershey
A man's worth to a community is measured by his contribution to it, not by what he takes from it.— Milton Hershey
The secret to success is to make something so good that people will pay for it gladly, and then make it so efficiently that you can sell it at a price they can afford.— Milton Hershey
Failure is only failure if you don't learn from it. Every mistake teaches you something valuable about what doesn't work.— Milton Hershey
I learned more from my failures than I ever did from my successes. Failure forces you to think differently.— Milton Hershey
Money is not the most important thing in life. What matters is what you do with it to help others.— Milton Hershey
The man who dies rich dies disgraced. Wealth should be used to create opportunities for others.— Milton Hershey
I never wanted to be remembered as the richest man in the cemetery. I wanted to be remembered as someone who made a difference.— Milton Hershey
