Kraft Foods has reported that the biggest challenge in its otherwise growing confectionery/global snacks category is gum.
The company reported strong growth in its chocolate category in its second quarter (Q2) results, but gum sales remained unchanged.
Speaking during the company’s Q2 results conference, Kraft chairman and CEO Irene Rosenfeld said: “The only challenge in our global snacks portfolio remains Gum & Candy, with revenues essentially flat in the first half.”
“Gum, in particular, continues to be weak. In fact, in developed markets, the rate of decline was similar to 2011 levels.”
She added that gum was growing in developing markets, but at a slower rate than other categories.
Rosenfeld gave the example of Brazil.In the second quarter, Kraft’s gum sales in Brazil declined due to “softening category trends”, however, the firm still made gum gains in Central and Eastern Europe.
The company was worst hit in Eurozone countries, such as France, Spain and Greece.
Gum outlook and launches.
The Kraft head indicated there would be no immediate let-up in the waning gum category.
“Given the high consumption among teenagers and the disproportionate impact of the economy on this group, we believe gum is unlikely to return to historical growth rates in the near term.
“We do, however, expect trends to improve in the back half of the year with the launch of a number of innovations. And we remain confident that gum will be an important contributor to our long-term growth.”
Kraft hopes to revamp the ailing gum category and put pressure on Mars-owned Wrigley with a new gum launch for its Stride brand: ID gum.
The product comes in 14-piece packs, retailing at $1.69, with three flavour options: spearmint, peppermint and berry melon.
Kraft is also looking for collaborators on a new degradable gum. (See HERE ).
In other confectionery categories, the company is performing strongly.
In the first half of the year Kraft’s Global Chocolate category, which includes the Cadbury business, grew 5%
The firm reported strong growth in Brazil through its Lacta brand and gains in India through Cadbury Dairy Milk.
Kraft also oversaw chocolate growth in Europe amid the troubled economy by introducing bite-sized chocolates, Crispello and Cadbury Bubbly bars
Rosenfeld said that Kraft/Cadbury’s share in the UK chocolate market was “higher than at any time in recent history”, driven by its London Olympics campaigns and launches such its Bubbly range.
Q2 results roundup
In its overall results, Kraft reported a 5.4% rise in second quarter net profit to $1.03bn.
However, sales were down 4.3% to $13.3bn. Profits were sustained by higher pricing that took effect in Q2.