Presentation on theme: "Jenna Boyle, Kerry McDermott and Rob Whitehead"— Presentation transcript:
1 Jenna Boyle, Kerry McDermott and Rob Whitehead The Candy IndustryJenna Boyle, Kerry McDermott and Rob Whitehead
2 Name the Brand?? Taste the rainbow Melts in your mouth, not in your handGimme 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 MarketPerceptual MapAdvertising StrategiesMars Inc.The Hershey Company“The Elegants”Where the Industry is GoingRecommendations
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 chocolateEngrained 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 candiesSugar candiesSugarless candiesGum
6 Product Segmentation PRODUCTS AND SERVICES SEGMENTATION Product/ServicesShareCandy or chocolate bars32.70%Soft candy23.40%Block chocolates12.20%Industrial chocolate9.40%Hard candy8.90%Gum4.70%Chocolate spreads and drinking powdersBox chocolates4.00%
7 Market Segmentation MAJOR MARKET SEGMENTS Market Segment Share Confectionery wholesalers61.30%Supermarkets and grocery stores16.70%Food manufacturers8.10%Hospitality trade5.70%Discount stores4.30%Direct to public3.90%
8 Cost Structure COST STRUCTURE Item Cost % Purchases 58.30% Wages 10.10%SG&A6.80%Depreciation3.50%Rent1.20%Utilities1.10%Other6.70%Profit12.30%Cost structures can vary widely among industry players, depending on their size and scale of production, ease of access to production inputs, level of
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 VolatilityLowTechnology ChangeHighCapital IntensityMediumBarriers to EntryConcentration LevelCompetition Level
12 CR₄ and HHIThe HHI for just the top 4 companies in the industry isThe 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 ProductsImports
15 Candy v. Chocolate CANDY HHI (for top 4) = 1141 CR ₄ = 59% Medium level concentration->Concentration is increasing!1,039 businesses overall!!CHOCOLATEHHI (for top 4)=Cr ₄ = 78.1%High level of concentration518 Businesses overall!!
16 Revenue for candy v. revenue for chocolate Chocolate Confectionary Production in USCandy Production in USREVENUE GROWTHRevenue $ millionGrowth %200016,613.30N/A200116,563.30-0.3200215,700.10-5.2200316,074.002.4200416,150.200.5200516,366.501.3200616,185.50-1.1200715,200.10-6.1200813,801.20-9.2200913,180.10-4.5201014,861.6012.8Substitutes?REVENUE GROWTHRevenue $ millionGrowth %20007,079.603.120017,201.601.720027,240.500.520036,504.50-10.220046,621.701.820057,610.9014.920066,763.10-11.120076,919.402.320087,082.602.420097,298.10320107,621.204.4
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 2010VALENTINE’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 $1.895BCategoryRetail Sales$ BillionsImports$ billionsExportsTotalConfections$22.5$4.7$1.895Chocolate$14.862$3.0$1.3Non-Chocolate$7.621$1.7$.595In 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 IndustryThe 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 DistributionPresence of SubstitutesProduct InnovationCulture and Tradition
23 How to Reach Consumers: Advertising TelevisionMagazinesSweepstakesRadioTheme ParksNewspapersPoint of Sale DisplaysOnline
24 2010 Total Advertising Expenditures for Top Players Hershey$404,092,700Mars$422,510,500Lindt$51,094,100Nestle$743,163,800Tootsie Roll Tootsie Pop$784,500Jelly Belly$3,939,900
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.
34 Target market (based on Pivot Table) Majority of the MarketChildrenAge 5-24 is main targetHealth Conscious Parents- also a major targetIncreased advertising to parents about healthier candy choices, may be why parents are still so heavily targetedPremium Producers-Target educated consumersSell luxuryTarget all adults
36 Advertising to Sales Ratio for 2010 Advertising ExpenditureAdvertising to Sales RatioMars Inc.28,000,000,000422,510,5001.51%The Hershey Company5,670,000,000404,092,7007.13%Lindt2,740,000,00051,094,1001.86%
37 How we’re going to break it down: AdventurousClassyFamily-OrientedFree SpiritedMars Inc.Lindt&Sprungli + GhirardelliThe Hershey Company
38 Brands Adventurous Classy Family-Oriented Free Spirited Skittles Mars Inc.TwixHersheyLindtM&MsReesesGhirardelliSnickersDoveHershey KissesKit KatHershey Bar
39 Experience Attribute Don’t use informative Don’t advertise placeDon’t advertise priceDon’t use combative/comparativeDon’t do comparisons to othersMEMORY JAMMING HUGE
40 Types of Advertising Used in Industry Humor appealHolidaySweepstakesPoint of SalePricing StrategyNegative to PositiveHeritage AdvertisingProduct DifferentiationBrand Identity
41 Mars OverviewMars 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 AgeMemory JammingTarget Market:
42 Mars Incorporated Advertising Similar strategies throughoutHeritage AdvertisingProduct DifferentiationBrand identitySweepstakes AdvertisingPricing StrategyHoliday AdvertisingNegative to Positive AdvertisingHumor AppealMars now owns Wrigleyas of April 200849.5%
43 Brand Identity Stick to Roots Spokescandy Huge in Differentitation Melts in your mouth not in your hand
44 What is real?“Unreal” situationsTaste the Rainbow
45 “You’re not you when you’re hungry” America’s favorite candy bar!Satisfies hungerCelebrity“You’re not you when you’re hungry”
47 General Conclusions about Mars Inc. Stick to rootsDifferentiation is keyEven among own productsStarburst: “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 1894Hershey Manufactures chocolate and confectionery productsLargest chocolate manufacturerMajor brands include:
49 Why Hershey has been so successful? Strong financial performanceLeader in confectionery products in the US due to it’s well-known brandsBrand EquityMarketing Strategies (Obtaining Sales)Ability to determine consumer trends
50 Financial Performance 2010 Sales$5.67B1-Year Sales Growth7.03%2010 Net Income$509.80M2010 Sales% of totalUS85Other countries15Total100
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.”