Using the proceeds from the 1900 sale of the Lancaster Caramel Company, Hershey initially acquired farm land roughly 30 miles northwest of Lancaster, near his birthplace of Derry Church. There, he could obtain the large supplies of fresh milk needed to perfect and produce fine milk chocolate. Excited by the potential of milk chocolate, which at that time was a luxury product, Hershey was determined to develop a formula for milk chocolate and market and sell it to the American public. Through trial and error, he created his own formula for milk chocolate. The firstHershey bar was produced in 1900. Hershey's Kisses were developed in 1907, and the Hershey's Bar with almonds was introduced in 1908.
On March 2, 1903, he began construction on what was to become the world’s largest chocolate manufacturing company, only he didn't know that it would become a large company. The facility, completed in 1905, was designed to manufacture chocolate using the latest mass production techniques. Hershey’s milk chocolate quickly became the first nationally marketed product of its kind.
The factory was in the center of a dairy farmland, but with Hershey’s support, houses, businesses, churches, and a transportation infrastructure accreted around the plant. Because the land was surrounded by dairy farms, Hershey was able to use fresh milk to mass-produce quality milk chocolate. Hershey continued to experiment and perfect the process of making milk chocolate using the techniques he had first learned for adding milk to make caramels when he had moved to Colorado.