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JUL O8 1988

JI l<iss

How Sweet It Is!
Some people crave pricey European chocolates. But true candy lovers prefer the old favorites - Milky
Ways, Hershey Bars, Snickers, Reese's
Peanut Butter Cups, Three Musketeers,
Hershey Kisses, Twizzlers - good, oldfashioned, mass-produced American candy made from high-quality
ingredients and sold at prices that
most people can afford.

Chances are that at least one of
your favorite candies is made by
either Hershey or Mars, the two
giants of the American confectionery industry. Between them, they
make all ten of America's top-selling
Hershey and Mars have at least
two things in common. They both
advertise heavily, and they both

strive to produce high-quality products. (Mars was one of the first companies to introduce "freshness
dating" and take back unsold candy
after a specified period of time. And
Hershey was a leader in providing
nutritional information on product
labels.) In most other respects, however, the two companies are as different as milk chocolate and dark

Federal Reserve Bank of Boston Vol. 14, No. 2
Federal Reserve Bank of St. Louis

June 1988

Hershey has traditionally maintained a high public profile. From
1927 to 1973, the company welcomed more than 10 million visitors
to its manufacturing plant on Chocolate Avenue in Hershey, Pennsylvania. Then it opened Chocolate
World, a huge visitor facility that
offers a step-by-step introduction to
the chocolate-making process from cocoa tree to chocolate bar.
Hershey Entertainment & Resort
Company owns and operates the
Hersheypark amusement center,
Hotel Hershey, and the Hershey
Lodge & Convention Center, all of
which are within a short distance of
the company's chocolate factory in
Hershey, Pennsylvania.
Moreover, Hershey has long been
regarded as a "good corporate citizen." In 1905, when Milton Hershey
decided to build his new chocolate
factory in a cornfield outside the tiny
village of Derry Church, Pennsylvania, he also made plans to build a
new community for the factory
workers. Derry Church changed its
name to Hershey in 1906, and ever
since then the company has been
the major influence on civic life. In
1909, Milton and Catherine Hershey
founded the Hershey Industrial
School for orphaned boys. (It is now
called the Milton Hershey School,
and it provides a home for boys and
girls who are unable to be cared for
by one of their natural parents.)
During the Depression years of the
1930s, Milton Hershey's concern
over unemployment prompted the
Hershey Corporation to launch a
building program that led to the
construction of a community center
building (1933), Hotel Hershey
(1933), a new building for the Milton
Hershey School (1934), a corporate
office building (1935), a sports arena
(1936), and Hershey Stadium (1939).
Even today, the company helps to
fund many of Hershey, Pennsylvania's cultural and recreational
Compared to Hershey, Mars has
always been more reticent. Indeed,
journalists and other observers of
the confectionery industry often
describe the company as "secretive," and some delight in pointing
out that Mars World Headquarters
is located in McLean, Virginia - not
far from CIA headquarters. All of
which does not mean that Mars is a
"bad" corporate citizen or a
Federal Reserve Bank of St. Louis

"worse" company than Hershey.
On the contrary, Mars tries to offer
consumers high-quality products at
a reasonable price, and nearly
everyone would agree that it has
succeeded in doing so. Mars simply
does not seem to involve itself in
civic and community affairs to the
same degree as Hershey does.
Another difference between the
two companies is that Hershey is a
"public company" and Mars is a
"closely-held private corporation."
(Please see box, "Types of Ownership.") Milton S. Hershey founded
Hershey's Cocoa in the early 1900s
and remained its owner and proprietor until 1918, when he donated the
business to a trust for the Milton
Hershey School. Then, in 1927, the
company's name was changed to
the Hershey Chocolate Corporation,
20 percent of its stock was sold to the
public, and its stock was listed on
the New York Stock Exchange. In
short, Hershey became a publiclyheld corporation, which was (and
is) required to issue an annual
report and disclose certain information to its stockholders and the general public.
In contrast, Mars has remained a
private entity ever since Franklin C.
Mars founded the Mar-O-Bar Company in 1922. Today M&M/Mars is a
privately-held corporation - often
referred to as a "closely-held" private corporation - which is run by
two of Frank Mars' grandsons, Forrest Mars, Jr. and his brother John.
As a private company that has not
issued shares of its stock to the public, Mars need not publish an
annual report nor disclose certain
financial information to the general
When it comes to advertising,
however, Mars is anything but
"quiet." Each year the company

Courtesy of M&M/Mars

spends millions on TV, radio, and
print ads to promote such brands as
Snickers and M&Ms, and the results
have been impressive. Advertising
(and Mars' long-standing commitment to producing quality products) has helped to make Snickers the
top-selling candy for more than ten
years, and nearly everyone knows
that M&Ms "melt in your mouth,
not in your hands."
Rival Hershey, on the other hand,
waited nearly 66 years before running its first advertisements in the
mass media. The company's
founder, Milton S. Hershey,
believed in a philosophy of, "Give
them quality. That's the best kind of
advertising in the world." Even after
Milton Hershey died in 1945, his
philosophy continued to guide the
company he founded, and the
Hershey Chocolate Corporation
enjoyed a long reign as the number
one U.S. candy corporation.
By the late 1960s, however, advertising had helped Mars to win the
top spot, and Hershey finally realized that making a quality product
was no longer the sole key to success. The marketplace had changed,
and even a company that made a
quality product could not afford to
ignore television and changing
demographics. Hershey ran its first
TV commercial in 1970 and eventually managed to regain the lead
from Mars through mass-media and
effective marketing.
In other ways, too, Hershey and
Mars have evolved over the years so
that they no longer resemble the
companies that Milton Hershey and
Frank Mars founded. Although neither company has become a true
conglomerate, both have diversified. By and large, each has chosen
to establish or acquire businesses
that are food-related. Hershey
Chocolate Corporation has become
Hershey Foods Corporation, which
owns several pasta companies, Cory
Food Services, and Friendly Ice
Cream Corporation. Mars, Inc.
owns and operates M&M/Mars,
Uncle Ben's, Inc., and Kal Kan
Foods, Inc. (Mars, Inc. also owns
Mars Electronics International and
Information Services International.)
Yet two things have not changed:
1) Mars and Hershey are still very
different companies, and 2) both
still make very good candy.

Types of Ownership

Businesses fall into one of the following categories of ownership:
1) a corporation, which is owned by its shareholders. Under the corporate
form of ownership, shareholders enjoy limited liability. In other words, if
the company incurs debts or obligations that it cannot meet, the corporation's shareholders would not be personally responsible for the debt. A
corporation is either "closely held," in which case a very small number of
principals owns all of the stock, or a corporation may be a "public
company," in which case shares of the corporation's stock are sold to the
general public;
2) a partnership, which is an unincorporated company with two or more
owners, each of whom is personally liable for claims against the company; and
3) a sole proprietorship, which is an unincorporated company with a single
owner who is personally responsible or liable for claims against the


1) What is the function of a modem corporation?
a) To produce and sell goods and services at prices most people can
b) To provide jobs?
c) To earn as much money as possible for its owners or shareholders?
d) All of the above?
e) None of the above?
2) To what extent is a corporation obligated to be a "good neighbor" - to
involve itself in civic activities or charitable endeavors?
3) Can advertising alone sell a product or service?
4) To what extent should a corporation be required to publicly disclose
information about its activities and its financial condition?

Educator's Economic Exchange,
newsletter, published by the Federal
Reserve Bank of St. Louis.
The candy counters of neighborhood stores have served to initiate
an untold number of kids into the
world of commerce. It is there that
many first learned the art of comparison shopping or discovered that
the attributes of a particular product
did not necessarily match the promises of a television commercial.
A recent issue of Educator's Economic Exchange (newsletter, Federal
Reserve Bank of St. Louis, Spring
1988) uses candy to teach yet
another lesson in economics - the
benefits of international trade. The
newsletter's lead article illustrates
the principle of comparative advantage and defines such terms as
opportunity cost.
Federal Reserve Bank of St. Louis

In addition, the newsletter features a teacher's lesson plan called
"Schoolroom becomes a chocolate
concern." The lesson plan is geared
to the junior high and high school
level, and is designed to underscore
the concept of global economic
interdependence. Teachers and students use maps and chocolate bars
to focus on the international linkages needed to produce a candy bar.
The lesson plan also concentrates
on how various contingencies (war,
natural disaster, civil unrest) might
affect the production and distribution of candy.
For a free copy of the Spring issue
of Educator's Economic Exchange or for
a free subscription, please write to:
Nancy A. Melsheimer, editor,
Research and Public Information,
Federal Reserve Bank of St. Louis,
P.O. Box 442, St. Louis, MO 63166;

A Primer on the Fed, booklet, published by the Federal Reserve Bank
of Richmond, 74 pages.
Most Americans have probably
heard of the Federal Reserve System, but many would be hardpressed to explain what the "Fed" is
and what it does. The workings of
America's central bank remain a
mystery to many.
There is a new booklet from the
Federal Reserve Bank of Richmond
that outlines the System's structure
and functions and then discusses
the conduct of monetary policy,
with particular attention to events in
the late 1970s and early 1980s. The
booklet is called A Primer on the Fed,
written by Alfred Broaddus, senior
vice president and director of
research at the Federal Reserve
Bank of Richmond.
A Primer on the Fed is intended for
the person who is looking for a nontechnical but substantive description of the Federal Reserve and its
role in the formulation and implementation of U.S. economic policy.
In short, the booklet is written for
people who would like to know
more about the Fed, but who do not
have time to study the institution in
For a free copy of A Primer on the
Fed, please write to: Publications,
Public Services Department, Federal Reserve Bank of Richmond,
P. 0. Box 27622, Richmond, VA


Photo by Ralph Ragsdale

New England
Boston Fed Hosts Meeting of
New England Economic Educators

Economic education professionals from four New England states
and staff members from the New
York headquarters of the Joint Council on Economic Education, recently
met at the Federal Reserve Bank of
Boston to share experiences and
ideas related to the delivery of effective economic education programs
to New England's students. The
meeting also offered participants an
opportunity to learn more about the
Boston Fed's economic education
program and to receive an update
on the New England economy.
Among those attending the meeting were: Ed Hamblin, director of
the Connecticut Joint Council on
Economic Education; Ron Daigle,
director of the Central Connecticut
State College Center for Economic
Education; Bob Mitchell, director of
the Maine Council on Economic
Education; Jeff Blais, director of the

page 4
Federal Reserve Bank of St. Louis

Rhode Island Council on Economic
Education; Peter Moore, director of
the Rhode Island College Center for
Economic Eduction; Norm Benson
and Carol McDonough, co-directors
of the Economic Education Council
of Massachusetts; Joanne Davidson,
trustee of the Economic Education
Council of Massachusetts; as well as
Jack Middleton and Tony Suglia of
the Joint Council on Economic Education. Representatives of the Boston Fed staff included Sue Rodburg,
Bob Jabaily, and economist Lynn
Browne, who gave an overview of
the New England economy. Also
attending was Al Peckham, who
retired from the Boston Fed and has
continued to pursue his longstanding commitment to economic
The meeting culminated in agreements to encourage regional cooperation in carrying out specific
economic education programs and
projects throughout New England
and to encourage private sector
financial support for these regional
efforts. In addition, participants formally agreed to meet on a regular



Editor: Robert Jabaily
Graphic Arts Designer: Ernie Norville
Photography: Ralph Ragsdale
This newsletter is published periodically as a
public seruice by the Federal Reserve Bank of
Boston. The reporting of news about economic education programs and events should
not be construed as a specific endorsement by
the Bank. Further, the material contained
herein does not necesarily reflect the views of
the Federal Reserve Bank of Boston or the
Board of Gauemors. Copies of this newsletter
may be obtained free of charge by writing:
Ledger Editor, Public Services Department,
Federal Reserve Bank of Boston, Boston, MA
02106; or by calling (617) 973-3452.