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Thursday, January 21, 1999

An Investment Opinion
by Dale Wettlaufer

My Bookshelf: "The Emperors of Chocolate"

I'm a sucker for business books. A total Blow Pop -- the retailers can see me coming a mile away, and I frequently hear the ledger closing with a satisfied slam and the lock turning as a I walk out bookstores loaded down with the latest. I've even heard that the lights dim in Seattle as my orders tax the servers at Following the normal bell curve that you find in almost any part of life, most of the books are so-so, a few are sub-par, and a few are really great. I've recently read one of the great ones and I wanted to pass it along.

The Emperors of Chocolate: Inside the Secret World of Hershey and Mars by Joel Glenn Brenner is one of those business books where you walk away satisfied that you've picked up some interesting and useful insights into an industry. That's the yardstick for me. I can't remember many books that tell you everything you need to know to about a particular industry in order to invest in that industry. If you can pick up one useful piece of information from a book like this, however, the purchase price becomes more than justified. For instance, I don't want to call myself provincial, but I had no idea about Hershey Foods' (NYSE: HSY) position in the global confectionery industry.

One vital point I picked up from this book is the fact that the Hershey bar and any confection with Hershey's milk chocolate in it stand little chance of picking up significant market share in Europe or any other country where European tastes have had a substantial influence on local palates. That's because Hershey's chocolate tastes sour to non-American palates. It's called "barnyard chocolate" by the rest of the industry because of its taste. (Who knew, huh? I love it, personally.) This definitely shapes my opinion on the company. When you think of Marlboro, you think "international brand." When you think of Coca-Cola, you think "international brand." If you think of a traditional American icon, the Hershey bar, and think "international brand," you'd miss a vital point of investing in the company. "Brand" is not always the magical answer.

Not that all markets will reject Hershey's milk chocolate. For instance, I would think Hershey's chocolate stock keeping units (SKUs) will have a better chance in inland China than in coastal provinces where British tastes would have a larger influence on things. You can pretty much forget huge chunks of the Indian subcontinent and the British Commonwealth countries, as Cadbury and more caramel and sweet chocolates have mindshare and "mouthshare." These issues are key in thinking about investing in Hershey Foods. Figuring out how it is doing in international markets with respect to individual brand SKUs would be pulling teeth, by the way, given the highly secretive nature of the confectionery industry.

The Emperors of Chocolate is particularly useful in its review of Mars, Inc., the maker of Mars bars, Three Musketeers, Snickers, Milky Way, M&Ms, Uncle Ben's rice, and Pedigree and Sheba pet foods, among other things. It's too bad the company isn't publicly traded. It sounds like a wonderful company, balancing out the good and the bad. The management (the company is still a family owned and run corporation and is one of the largest private corporations in the U.S.) of Mars probably didn't like the profiles in the book, because it is publicity shy and the author paints its admirable circumspection as being somewhat strange. Anyone who invests in Hershey or other packaged foods companies would do well to check out this book. Mars Inc. is also a tiger that deserves one's attention.

Overall, this is an excellent introduction to the U.S. confectionery industry and a fine historical work. The author could have used some help on the financial aspects of particular companies, though. That's pretty much the only criticism of the book that I have. Brenner follows in the footsteps of fellow Washington Post reporter Kara Swisher, who wrote the very well done, in turning a writing assignment for the paper into a great book. Overall rating: 8.5 out of 10 Fool hats.

Here's a link to the book at, but you can, of course, buy it elsewhere. If you do click the link above and buy the book, we get a commission on the sale, just to let you know what the relationship is there.

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