FOR almost a century, Wrigley has had its own way in Britain. Since the
company’s Spearmint chewing gum was launched in 1911, it has scarcely faced
any competition and now has a virtual monopoly.
Yes, one or two large retailers sell own-brand chewing gum. But ask any
British consumer to name the leading brand and they will inevitably say
Wrigley. The company has more than 95% of the market.
And it shows. The most recent accounts for the Plymouth-based company reveal
the huge profits it makes.
Sales in 2005 were £214m — of which £175m were in Britain, with most of the
rest elsewhere in Europe. Operating profits were £62.8m. Few manufacturers
would complain about a profit margin of almost 30%.
But from this week, Wrigley faces a challenge. Cadbury Schweppes, which paid
£2.7 billion in 2003 for the American chewing-gum company Adams, will
tomorrow begin a £10m marketing push with a high-profile television
advertising campaign to herald the launch in Britain of its Trident brand.
The Adams deal made Cadbury a big player in the global gum market. Wrigley
remains the leader with almost 36% of sales, but Cadbury is undisputed No 2
with more than 25%.
Britain is one of the few big gum markets where Cadbury has little or no
presence. Others include China, Italy and Germany. This week’s launch aims
to plug the gap in the UK.
Last year, people in Britain spent an estimated £300m on gum. And since the
turn of the millennium, global sales of gum have been growing by about 8% a
year — far faster than demand for chocolate or sweets.
But that growth hasn’t been reflected in Britain: over the past couple of
years chewing-gum sales have actually fallen.
Cadbury is convinced that the British market can be nudged back into growth,
and that it can take a hefty chunk out of Wrigley’s dominant share.
Compared with people in other countries, we aren’t big chewers, buying less
gum per head than the Americans, Canadians, French or Greeks.
But Jim Cali, who rejoices in the title of Cadbury Schweppes’s director of
global gum, insists that about 60% of the British population over the age of
10 has chewed at least one piece of gum over the past six months. With all
the passion of an evangelist, he declares: “We are really excited about gum.”
He maintains that the recent decline in the British market is only because
there has been little innovation to tempt consumers. For Cali and his
colleagues at Cadbury’s North American confectionery head office in New
Jersey, nobody should dare to suggest that gum is just gum.
There are different flavours, certainly. And there are variations in
packaging. But then there are different types, such as those with a hard
coating and those without. Some gums claim to help whiten teeth. And,
perhaps the source of greatest pride for Cali, is that Adams — or Cadbury
Adams as it is now known — has developed Trident Splash, gum where each
piece has a dot of coloured liquid at its centre.
Trident is being launched in Britain with two flavours of uncoated gum and two
flavours of the more sophisticated Splash. The Trident sold here will come
from a Cadbury plant in Turkey.
Cadbury reckons that in Britain most people chew gum as a distraction or to
help clean their teeth and freshen their breath. This last category includes
what Cali describes as “crime cleaners” — people who use gum to get rid of
the smell of cigarette smoke or strong food.
With the launch of Trident, Cadbury hopes to attract a different type of
consumer — people who chew for pleasure.
For Cadbury, gum has unquestionably been a global success story. And the
company is eager to repeat that success in the UK — particularly after its
British chocolate business stumbled so badly last year. The company had to
withdraw millions of chocolate products last June after a leaking pipe at
one of its plants infected seven product lines with salmonella. Later in the
summer, sales were also depressed by the hot weather.
It wasn’t until the late 1990s that Cadbury began to look seriously at chewing
gum as an area to complement its existing strong positions in chocolate and
sweets. It bought Hollywood of France in 1999.
Three years later came Kent in Turkey and Denmark’s Dandy, which is strong in
northern and eastern Europe and best known for Stimorol.
The Adams deal, which transformed Cadbury into a heavy-weight player in the
gum market, was in 2003. The takeover was the brainchild of Todd Stitzer,
the company’s head of strategy who became chief executive just as the Adams
deal was being completed.
Last year Cadbury also bought a Botswana business that produces chewing gum
for the South African market.
Together, these deals have transformed the shape of Cadbury. A decade ago, gum
made up just 2% of the company’s global confectionery sales; now it accounts
for about 33%.
Since the takeover by Cadbury, Adams has prospered. Before the deal, the
business had been a somewhat unloved child of Warner Lambert, which merged
with Pfizer. It was an awkward fit — a confectionery business that was part
of a pharmaceuticals giant.
In the month immediately before the takeover, Adams’s share of gum sales in
America was less than 22%. Within little more than two years of being
brought under the Cadbury umbrella, that market share had risen to more than
27%, and has now topped 31%.
That has been helped by a raft of innovations. Splash arrived on the scene
only in late 2005. And in markets where it has already been launched, Splash
has done extraordinarily well. In France it took 15% of the market within
three months.
Cadbury Adams continues to seek new ways to tweak and improve what are
essentially long-established products. At its science and technology centre
in New Jersey, teams of testers solemnly sit around tables in a windowless
room and put their taste buds to work on prototype sweets and gums.
Only one in ten of those who apply for a tasting job is chosen. And those who
are selected are given strict instructions on how to sample any new gum
dreamt up by the technicians.
They are told how long to chew — and even which teeth to use. Shifts are
limited to two-and-a-half hours, as it is reckoned that anything longer
would be too exhausting given the amount of sniffing, tasting, chewing and
sucking involved.
Cadbury’s move into the British chewing-gum market — disclosed in The Sunday
Times last October — is one example of Stitzer’s approach, summed up by the
term “smart variety”.
In essence, it boils down to taking expertise gained from one range of
products in one country and applying it to a market elsewhere in the world.
For British consumers, the next manifestation of the smart-variety strategy
will be a relaunch of Bournville plain chocolate using ideas gleaned from a
successful campaign in Australia, where sales of dark chocolate have
increased by 50% in three years.
Of course, Wrigley won’t take the launch of Trident lying down. Analysts
expect it will step up its marketing effort in an attempt to hold on to as
much of its sales as possible. This weekend it announced itself “official
gum provider” for the FA Premiership.
But Wrigley’s recent record worldwide has not been entirely happy.
It announced last autumn that it had hired William Perez, former head of
sportswear company Nike, as the company’s first chief executive to come from
outside Wrigley’s founding family. He replaced Bill Wrigley Jr, who had
shouldered the blame for several mishaps during his seven years in charge.
Wrigley tried and failed to take over the iconic American chocolate company
Hershey in 2002. Then in 2005, it succeeded in buying a number of
confectionery brands, including Life Savers and Altoids from Kraft Foods. At
the time of the deal with Kraft, it was predicted that the purchase would
increase earnings per share. In fact, they fell — and Bill Wrigley later
admitted mistakes had been made in trying to integrate the acquisition.
Although Wrigley remains the world’s largest gum company, its first
product, Spearmint, was launched in America only in 1893 — more than two
decades after Thomas Adams had created the gum industry by transforming a
substance originally intended for tyres on carriage wheels into something
that people might enjoy chewing.
In Britain at least, Wrigley is going to face a fearsome challenge from
Cadbury, a company whose distribution network for chocolate and sweets is
unrivalled.
For Wrigley, its easy ride in Britain is at an end.
