Packaging line at the West Hershey facility.

In a move designed “to create an advantaged supply chain and competitive cost structure,” The Hershey Company has unveiled a “Next Century” capital investment program that includes a $200-$225 million plant expansion of the existing West Hershey facility and approximately $50-$75 million in upgrades to distribution and administrative facilities located in Hershey, Pa.

As part of the project, production will transition from the company’s century-old facility at 19 East Chocolate Ave. in downtown Hershey to a planned expansion of the West Hershey facility, which was built in 1992. Production from the 19 East Chocolate Avenue plant as well as a portion of the workforce will relocate to the West Hershey facility. The move will eliminate 500-600 jobs as investments in technology and automation result in enhanced efficiency in the new building.

“Next Century will ensure that we continue to make the world’s best chocolate and are well-positioned in the marketplace,” says David West, Hershey’s president and CEO. “Our investment will create a highly flexible, cost-effective manufacturing facility that will enable us to remain competitive with global players while satisfying the needs of retail customers and consumers.

“The 19 East Chocolate Ave. factory is a proud part of the company’s heritage, but the facility is over 100 years old and simply cannot be modernized to meet the manufacturing needs of a 21st century business,” he continued. “Our employees at the facility have worked hard, and we are pleased that many of them will transition to the new facility, continuing to make Hershey’s syrup, Hershey’s milk chocolate and milk chocolate with almond bars, and Hershey’s Kisses brand milk chocolates, as they have for many years.

“We operate in an ever-changing global marketplace and will continue to make the difficult decisions necessary for our business to succeed over the long term,” West says. “Additionally, we are committed to assisting all of the impacted the company employees during the transition.”

To preserve the distinctive heritage of downtown Hershey, the company will continue to occupy a significant portion of office space within the historic 19 East Chocolate Ave. facility, including consolidating several local headquarters offices into the vacated space. Hershey indicates that it will work to ensure that the remainder of the facility is developed in a way that complements downtown Hershey.

Total capital expenditures related to the program are expected to range from $250 million to $300 million. At the conclusion of the program in 2014, ongoing annual savings are expected to be approximately $60-$80 million.

“Our recent marketplace performance has been driven by the investments we have made in our brands and our global capabilities, fueled by our strategic focus on supply chain efficiency and effectiveness,” West says. “Savings from project Next Century will enable us to continue making investments that will deliver core business growth and position us for long-term success in the global confectionery marketplace. We must continue to look at all options that provide us the flexibility to make the investments necessary to ensure that Hershey is as successful in this century as it was in the past century.”

In early June, the company announced it had reached a tentative labor agreement with the union representing employees at its 19 East Chocolate Ave. and West Hershey facilities. Upon approval of the labor pact, Hershey’s Board of Directors was asked to review and approve the Next Century modernization project, which it did unanimously.