China was previously cited as the likeliest location for the new Asia plant as its Chinese factory held in a joint venture with Lotte reached capacity. But Hershey has opted for Malaysia and will open a $250 million USD (RM816 million) factory in Johor by 2015.
'Strategic choice'
Hershey said in a statement: "The plant’s location in Johor is a strategic geographical choice that provides Hershey with easy distribution access to more than 25 markets across Asia. Malaysia also offers a well-educated potential workforce, a stable political environment, a strong supply chain infrastructure and globally recognized Halal food manufacturing certification that is an advantage for products sold in the region."
The 700,000 sq ft facility will be one of the largest in Hershey's manufacturing network. The firm currently has nine plants in the United States as well as facilities in Canada, Mexico, India, Brazil and China.
The Johor plant will produce Hershey’s Kisses, Ice Breakers, Reese’s and Hershey’s Milk Chocolate bars.
Low market share in Malaysia
Last year Hershey entered into a marketing partnership with expansion services group DKSH to sell and market Hershey’s Kisses, chocolate bars, nuggets, and pearls, as well as Bubble Yum gum in Malaysia.
According to Euromonitor data, Hershey is the fifth largest chocolate player worldwide, but only the seventh biggest in Malaysia with just a 3.4% market share.
The Malaysian chocolate market is dominated by Mondelez and Nestlé, who together command almost half of the market with Mars just behind.
Euromonitor forecasts that chocolate confectionery in Malaysia will grow around 3.7% year-on-year up until 2014. Chocolate is the highest selling confectionery category in the market, some way ahead of sugar confectionery, while gum accounts for only a small portion.
Growth is not expected to be as strong in the Malaysian chocolate sector compared to BRIC markets, but chocolate retail value sales would reach €138.4m ($188m) if Euromonitor growth forecasts are realized.
China: The priority
China is Hershey’s number one international priority.
Hershey currently holds a plant in China through a joint venture with Korean confectioner Lotte, but the factory has reached capacity.
Earlier this year Hershey launched milk candy brand Lancaster in the growing Chinese market.
Hershey has forecast that its overall international sales will reach approximately $1bn by the end of 2014.