1. Jenna Boyle, Kerry McDermott and Rob Whitehead
The Candy Industry
Jenna Boyle, Kerry McDermott and Rob Whitehead

2. Name the Brand?? Taste the rainbow
Melts in your mouth, not in your hand
Gimme a break, gimme a break…
Nobody better lay a finger on my…
There’s no wrong way to eat a…

3. Agenda Industry Overview Advertising Analysis Pivot Table Analysis
Target Market
Perceptual Map
Advertising Strategies
Mars Inc.
The Hershey Company
“The Elegants”
Where the Industry is Going
Recommendations

4. Why is it relevant to us?
65% percent of all American branded candy bars have been on the market more than 60 years.
Americans eat approximately 25lbs of candy each a year (7.7 billion lbs total), about 60% of which is chocolate
Engrained in American culture.
Candy is EVERYWHERE!!!

5. Industry Definition Major Products:
The Candy Production industry acquires raw materials such as cocoa, sugar, cornstarch, fruit, preservatives and flavorings to process them into a range of sugar and non-sugar based confectionery products.
Major Products:
Chocolate candies
Sugar candies
Sugarless candies
Gum

6. Product Segmentation PRODUCTS AND SERVICES SEGMENTATION
Product/Services
Share
Candy or chocolate bars
32.70%
Soft candy
23.40%
Block chocolates
12.20%
Industrial chocolate
9.40%
Hard candy
8.90%
Gum
4.70%
Chocolate spreads and drinking powders
Box chocolates
4.00%

7. Market Segmentation MAJOR MARKET SEGMENTS Market Segment Share
Confectionery wholesalers
61.30%
Supermarkets and grocery stores
16.70%
Food manufacturers
8.10%
Hospitality trade
5.70%
Discount stores
4.30%
Direct to public
3.90%

8. Cost Structure COST STRUCTURE Item Cost % Purchases 58.30% Wages
10.10%
SG&A
6.80%
Depreciation
3.50%
Rent
1.20%
Utilities
1.10%
Other
6.70%
Profit
12.30%
Cost structures can vary widely among industry players, depending on their size and scale of production, ease of access to production inputs, level of

9. The Production of Confectionery

10. Government Regulation
The level of regulation is heavy
- All cocoa, chocolate and sugar manufacturers must meet the standards of the FDA.
- Manufacturers also must comply with the hygienic regulation
- Environmental regulation
- Stricter labeling

11. Industry Structure Life Cycle Stage Mature Regulation Level Heavy
Revenue Volatility
Low
Technology Change
High
Capital Intensity
Medium
Barriers to Entry
Concentration Level
Competition Level

12. CR₄ and HHI
The HHI for just the top 4 companies in the industry is
The CR ₄ for the industry is 78.1%.
Therefore, the industry is highly concentrated with only a few major firms holding a majority of the market share.
HHI = 49.5²+21.6²+4²+3²=
CR ₄ = = 78.1%
*Hershey and Mars Inc. alone hold 71.1% of the market share.
-Many mergers occur.

13. Concentration Concentration in this industry is high
This concentration of ownership is primarily a result of an increase in acquisitions, along with natural growth for a majority of major players encouraged by continued product innovation, strong brand loyalty and aggressive marketing.
Ways for companies to survive:
- adaptability to new trends
- economies of scale
- product differentiation
- successful supply chain management
- powerful marketing strategies******

14. Competition Quality Price Distribution Innovation and differentiation
Substitute Products
Imports

15. Candy v. Chocolate CANDY HHI (for top 4) = 1141 CR ₄ = 59%
Medium level concentration
->Concentration is increasing!
1,039 businesses overall!!
CHOCOLATE
HHI (for top 4)=
Cr ₄ = 78.1%
High level of concentration
518 Businesses overall!!

16. Revenue for candy v. revenue for chocolate
Chocolate Confectionary Production in US
Candy Production in US
REVENUE GROWTH
Revenue $ million
Growth %
2000
16,613.30
N/A
2001
16,563.30
-0.3
2002
15,700.10
-5.2
2003
16,074.00
2.4
2004
16,150.20
0.5
2005
16,366.50
1.3
2006
16,185.50
-1.1
2007
15,200.10
-6.1
2008
13,801.20
-9.2
2009
13,180.10
-4.5
2010
14,861.60
12.8
Substitutes?
REVENUE GROWTH
Revenue $ million
Growth %
2000
7,079.60
3.1
2001
7,201.60
1.7
2002
7,240.50
0.5
2003
6,504.50
-10.2
2004
6,621.70
1.8
2005
7,610.90
14.9
2006
6,763.10
-11.1
2007
6,919.40
2.3
2008
7,082.60
2.4
2009
7,298.10 3
2010
7,621.20
4.4

17. Total Sales for Confectionery Industry

18. Confectionery Seasonal Sales (** in millions of dollars)
projections * Valentine’s Day - $971 $1,036 $1,024 $928 $935* Easter - $1,884 $1,987 $1,846 $1,990 $1,970* Halloween - $2,146 $2,202 $2,209 $2,207 $2,225* Christmas - $1,389 $1,420 $1,376 $1,401 $1,420* * – projections for 2010
VALENTINE’S %* -9.4% -0.2% +6.7% +0.1% %
EASTER %* +7.9% -7.1% +5.4% +7.0% %
HALLOWEEN %* Even +0.1% +2.6% +2.8% % CHRISTMAS +1.4%* +1.8% -3.1% +2.2% +1.0% %
NCA projects a 0.4% increase in 2010 for total seasonal sales

19. 2010 US Confectionery Market
Retail Sales $22.5B Imports $4.7B Exports $1.895B
Category
Retail Sales
$ Billions
Imports
$ billions
Exports
Total
Confections
$22.5
$4.7
$1.895
Chocolate
$14.862
$3.0
$1.3
Non-Chocolate
$7.621
$1.7
$.595
In the past five years, imports have increased. Confectionary and chocolate production has become increasingly globalized over the past decade, and the domestic industry is not immune to these structural changes. Until the recent downturn in the domestic economy, consumers of confectionary products made with purchased chocolate inputs were looking abroad for alternative options. The major sources of imports are from Canada and Mexico, due to favorable trading conditions under NAFTA.

20. 2008 Per Capita Retail Sales
According to the US Department of Commerce, the average US consumers spent $93 on confectionery in You can see that chocolate is a bigger sector of the company than non chocolate. But overall, $100 annually is pretty large average consumption. With 300 million Americans that is pretty close to 30B in sales for the industry as a hole.

21. Overview of Industry
The recent desire for healthy alternatives has required companies become more innovative.
Strong brands and customer loyalty.
Economies of scale and value addition during production.
Despite recession, consumers still continuously consume the same amount of candy because it is and inexpensive and feel good luxury.
Growth segments such as sugar-free confectionery and organic and fair-trade chocolate have shown considerable promise and are expected to continue in the next five years.

22. Demand Determinants Changing Consumer Lifestyles
Pricing and Distribution
Presence of Substitutes
Product Innovation
Culture and Tradition

23. How to Reach Consumers: Advertising
Television
Magazines
Sweepstakes
Radio
Theme Parks
Newspapers
Point of Sale Displays
Online

24. 2010 Total Advertising Expenditures for Top Players
Hershey
$404,092,700
Mars
$422,510,500
Lindt
$51,094,100
Nestle
$743,163,800
Tootsie Roll Tootsie Pop
$784,500
Jelly Belly
$3,939,900

25. Advertising Analysis (2010)

26. Pivot Table Data

27. Adverting Based on Location

28. Advertising Expenditures based on Population
When we control for the population of the cities that were advertised in we see that the most money per capita is spent on Salt Lake City and Honolulu. The cost patterns for the other cities do go up and down but for the most part they are constant. Thus this suggests that the candy industry is further targeting these two cities above others and they are willing to pay much more to do it.
It could be possible that these cities just cost more to reach or that they do not watch as much television so in order to get the same level of exposure you may advertise more. However, the more likely option is that these two markets currently do not consume large amounts of candy. Thus the industry may be trying to use a persuasive advertising strategy to try to change consumer tastes and increase demand in the market for candy.
On the otherside of the coin, the largest city there which is Los Angeles has the cheapest cost per 1000 people living in the city.

29. Advertising Based on Day of Week
We can see from the following graph that the most money are spent on Tuesday ads and then Monday night ads. Ads are run with fairly consistent expenditure during Monday through Saturday except there is a large decrease in spending on Sunday. This is most likely due to the fact that the programming during the days of the week is better and therefore, they get more exposure by advertising on those days.

30. Total TV Advertising

32. Mars

34. Target market (based on Pivot Table)
Majority of the Market
Children
Age 5-24 is main target
Health Conscious Parents- also a major target
Increased advertising to parents about healthier candy choices, may be why parents are still so heavily targeted
Premium Producers-
Target educated consumers
Sell luxury
Target all adults

35. Annual Advertising

36. Advertising to Sales Ratio for 2010
Advertising Expenditure
Advertising to Sales Ratio
Mars Inc.
28,000,000,000
422,510,500
1.51%
The Hershey Company
5,670,000,000
404,092,700
7.13%
Lindt
2,740,000,000
51,094,100
1.86%

37. How we’re going to break it down:
Adventurous
Classy
Family-Oriented
Free Spirited
Mars Inc.
Lindt&Sprungli + Ghirardelli
The Hershey Company

38. Brands Adventurous Classy Family-Oriented Free Spirited Skittles
Mars Inc.
Twix
Hershey
Lindt
M&Ms
Reeses
Ghirardelli
Snickers
Dove
Hershey Kisses
Kit Kat
Hershey Bar

39. Experience Attribute Don’t use informative
Don’t advertise place
Don’t advertise price
Don’t use combative/comparative
Don’t do comparisons to others
MEMORY JAMMING HUGE

40. Types of Advertising Used in Industry
Humor appeal
Holiday
Sweepstakes
Point of Sale
Pricing Strategy
Negative to Positive
Heritage Advertising
Product Differentiation
Brand Identity

41. Mars Overview
Mars was founded in 1911 by the Frank C Mars, and the Mars Family remains privately owned to this day.
Mars Inc. is one of the world's biggest private companies, with annual sales approaching $30bn.
Candies included: Snickers, Twix, M&Ms, Skittles, Starburst, Milky Way, 3 Musketeers etc…
Seen as Adventurous and Free-Spirited
#18 Advertiser according to Advertising Age
Memory Jamming
Target Market:

42. Mars Incorporated Advertising
Similar strategies throughout
Heritage Advertising
Product Differentiation
Brand identity
Sweepstakes Advertising
Pricing Strategy
Holiday Advertising
Negative to Positive Advertising
Humor Appeal
Mars now owns Wrigley
as of April 2008
49.5%

43. Brand Identity Stick to Roots Spokescandy Huge in Differentitation
Melts in your mouth not in your hand

44. What is real?
“Unreal” situations
Taste the Rainbow

45. “You’re not you when you’re hungry”
America’s favorite candy bar!
Satisfies hunger
Celebrity
“You’re not you when you’re hungry”

46. Need a moment…
… Chew it over with a Twix

47. General Conclusions about Mars Inc.
Stick to roots
Differentiation is key
Even among own products
Starburst: “It’s a juicy contradiction”
3 Musketeers: “A lighter way to enjoy chocolate”
Milky Way: “Life’s better the milky way”

48. The Hershey Company Overview
Founded in 1894
Hershey Manufactures chocolate and confectionery products
Largest chocolate manufacturer
Major brands include:

49. Why Hershey has been so successful?
Strong financial performance
Leader in confectionery products in the US due to it’s well-known brands
Brand Equity
Marketing Strategies (Obtaining Sales)
Ability to determine consumer trends

50. Financial Performance
2010 Sales
$5.67B
1-Year Sales Growth
7.03%
2010 Net Income
$509.80M
2010 Sales
% of total US 85
Other countries 15
Total
100

51. Hershey Products Hershey’s Bliss Cookies ‘N’ Crème
Hershey’s Milk Chocolate
Hugs
Kisses
Nuggets
Sticks
Eat More
Good &
Heath
Jolly Rancher
Kit Kat
Milk Duds
Mounds
Mr. Goodbar
Payday
Pot Of Gold
Rolo
Special Dark
Symphony
Take5
Twizzlers
Whatchamacallit
Whoppers
York
Zagnut
Zero
Refreshment products
Breath Savers
Bubble Yum
Ice Breakers
York
Reese’s
Fast Break
Nutrageous
Peanut Butter Cups
Pieces
Reesesticks
Whipps
Other
5th Avenue
Almond Joy
Cacao Reserve
Caramello

52. Hershey’s Brand Equity

53. Harris Interactive Poll
RANK 25 Highest Ranked Brands 1 Hershey's Kisses Chocolate Candy 2 M&M Plain Chocolate Candy 3 Hershey's Milk Chocolate Candy Bars 4 Google.com 5 Duracell Batteries 6 Reese's Peanut Butter Cups Chocolate Candy 7 Heinz Ketchup 8 Kleenex Facial Tissues 9 Oreo Cookies 10 Neosporin Ointment 11 Cheerios Cereal 12 Ritz Crackers 13 Kraft Foods Inc. 14 Arm & Hammer Baking Soda
15 Campbell's Soups
16 Snickers Chocolate Candy
17 Coca-Cola
18 Sharpie
19 Dawn Dish Detergent
20 Johnson & Johnson
21 Energizer Batteries
22 UPS
23 Hershey's Chocolate Chips
24 M&M Peanut Chocolate Candy
25 Hallmark Greeting Cards

54. Advertising Strategies
Brand Image/Identity
Holidays
Community
Amusement Park

55. Brand Identity Old-fashioned Warm Family-Oriented Happy Nostalgic Love
Rascal Flatts
Kisses

56. Sticking to Roots
1930s
present

57. Hershey’s Slogans “There’s no wrong way to eat a Reese’s”
"Sometimes you feel like a nut, sometimes you don't" (Almond Joy)
"Makes mouths happy“ (Twizzlers)
"It's more than a mouthful - it's Whatchamacallit”
“There’s a smile in every Hershey Bar”
“Have a break, have a Kit Kat.”

58. Hershey’s Jingles
“Hershey’s is the GREAT AMERICAN, GREAT AMERICAN chocolate bar!!!”
“Gimme a break, Gimme a break, break me off a piece of that Kit Kat Bar.”

59. Holidays
Easter
Valentine’s Day
Halloween
Christmas

60. Community Milton Hershey School American Red Cross
Habitat for Humanity of Central Pennsylvania
Children's Literacy Initiative - Lancaster, PA
Hershey partners with Children’s Miracle Network

61. Amusement Parks
Way for fans of Hershey to interact with the company. Increases revenue for the company Annual Sales: $270.96M Annual Net Income: $6.94M

62. Chocoladefabriken Lindt and Sprungli
Founded in 1845 in Switzerland
Leading world producer of premium chocolate
Brands carry the name Lindt, Ghirardelli, Caffarel etc.

63. Strengths of the Company
Strong brand name
Easily able to penetrate new markets
Strong Global Operation with diversified revenue base
Effective Use of Advertising

64. Lindt’s Main Marketing Strategies
Product Differentiation
Premium
Luxury
Affordable
Public Relations
Point of Sale Advertising
and Free Samples
Bundling

65. Product Differentiation
Premium quality = Premium Ingredients
Affordability
Public Relations

66. Upcoming Trends Showcasing your value Sugar-free
Who you can advertise too
Obesity
Healthy Lifestyle
Employee Morale
Darker Chocolate (higher cocoa content)
Exotic Flavorings (e.g. citrus, fruits, spices)
More upscale private label chocolate

67. Things Companies Need to Think About:
Age Group
Cost of Advertising
Health Consciousness
Per Capita Disposable Income
Price of Inputs

68. Keys to Success in Future:
Our Recommendations
Economies of Scale
Ability to adapt to change
Product Differentiation
Brand Loyalty
Customer Retention

69. Questions?