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The Candy Industry. Jenna Boyle, Kerry McDermott and Rob Whitehead. 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…. Agenda. Industry Overview Advertising Analysis
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The Candy Industry Jenna Boyle, Kerry McDermott and Rob Whitehead
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…
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
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!!!
Industry Definition • 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
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
CR₄ and HHI • The HHI for just the top 4 companies in the industry is 2941.81. • 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=2941.81 CR ₄ = 49.5 + 21.6 + 4 + 3= 78.1% *Hershey and Mars Inc. alone hold 71.1% of the market share. -Many mergers occur.
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******
Competition • Quality • Price • Distribution • Innovation and differentiation • Substitute Products • Imports
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)= 2941.81 Cr ₄ = 78.1% High level of concentration 518 Businesses overall!!
Revenue for candy v. revenue for chocolate Chocolate Confectionary Production in US Candy Production in US Substitutes?
Confectionery Seasonal Sales(** in millions of dollars) 2006 2007 2008 2009 2010 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 201020092008 2007 2006 2005 VALENTINE’S +0.7%* -9.4% -0.2% +6.7% +0.1% -4.0% EASTER -1.0%* +7.9% -7.1% +5.4% +7.0% -7.6% HALLOWEEN +0.8%* Even +0.1% +2.6% +2.8% +2.3% CHRISTMAS +1.4%* +1.8% -3.1% +2.2% +1.0% +2.4% NCA projects a 0.4% increase in 2010 for total seasonal sales
2010 US Confectionery Market Retail Sales $22.5B Imports $4.7B Exports $1.895B
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.
Demand Determinants • Changing Consumer Lifestyles • Pricing and Distribution • Presence of Substitutes • Product Innovation • Culture and Tradition
How to Reach Consumers: Advertising Television Magazines Sweepstakes Radio Theme Parks Newspapers Point of Sale Displays Online
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
How we’re going to break it down: Adventurous Mars Inc. Lindt&Sprungli + Ghirardelli Free Spirited Classy The Hershey Company Family-Oriented
Brands Adventurous Skittles Mars Inc. Twix Hershey Lindt M&Ms Reeses Ghirardelli Free Spirited Snickers Classy Dove Hershey Kisses Kit Kat Hershey Bar Family-Oriented
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
Types of Advertising Used in Industry • Humor appeal • Holiday • Sweepstakes • Point of Sale • Pricing Strategy • Negative to Positive • Heritage Advertising • Product Differentiation • Brand Identity
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:
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%
Brand Identity • Stick to Roots • Spokescandy • Huge in Differentitation • Melts in your mouth not in your hand http://www.youtube.com/watch?v=4gtM_mmvDww http://www.youtube.com/watch?v=SMrLz9tUrew
What is real? • “Unreal” situations • Taste the Rainbow
America’s favorite candy bar! • Satisfies hunger • Celebrity “You’re not you when you’re hungry”
Need a moment… … Chew it over with a Twix
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”
The Hershey Company Overview • Founded in 1894 • Hershey Manufactures chocolate and confectionery products • Largest chocolate manufacturer • Major brands include:
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