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The Candy Industry

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

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  1. 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 • 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

  7. Market Segmentation

  8. Cost Structure

  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

  12. 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.

  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)= 2941.81 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 Substitutes?

  17. Total Sales for Confectionery Industry

  18. 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

  19. 2010 US Confectionery Market Retail Sales $22.5B Imports $4.7B Exports $1.895B

  20. 2008 Per Capita Retail Sales

  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

  25. Advertising Analysis (2010)

  26. Pivot Table Data

  27. Adverting Based on Location

  28. Advertising Expenditures based on Population

  29. Advertising Based on Day of Week

  30. Total TV Advertising

  31. Mars

  32. 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

  33. AnnualAdvertising

  34. Advertising to Sales Ratio for 2010

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

  36. 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

  37. 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

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

  39. 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:

  40. 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%

  41. 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

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

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

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

  45. 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”

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

  47. 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

  48. Financial Performance

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