Kraft Foods’ global snacks spin-off Mondelez International will focus on penetrating the Chinese market and will introduce lower price points for gum as it looks to reinvigorate the ailing gum and candy segment.
Jim Cali, senior vice president and leader of the gum and mint category, recently said at Barclays’ Back to School Conference in the US that growth in Mondelez’s $6bn gum and candy segment was flat year-to-date, while other categories such as chocolate had grown.
Mondelez claims to be the number one candy player worldwide through the Halls brand and the number two gum player behind Mars’ Wrigley through Trident.
Candy is the larger of the two categories for Mondelez in terms of sales, with growth around 4% in the past four years driven by developing markets.
“Growth in gum on the other hand has slowed to 3% with gains in developing markets somewhat offset by weaker performance in Europe and North America,” said Cali.
The economy: Cause of the gum downturn
Gum growth had averaged at 7% from 1998 to 2009, but Cali said unemployment and GDP figures had led to lower purchasing power for gum consumers and fewer chewing occasions.
Declines in the number of kiosks in Spain and Greece as well as falls in consumer visits to convenience stores in the US had also created fewer impulse purchase opportunities, said Cali.
He added that 26% of gum was consumed at work and 16% was consumed going to and from work.
“If you don’t have a job you’re probably chewing less gum,” said Cali.
He added that price increases from all the major players had made gum too expensive, making it less accessible to teens and young adults.
Turning the tide with gum
To turn the tide, Mondelez will step-up its marketing aimed at mid-teens and, lower its gum prices and introduce value offers with smaller packs to improve accessibility and frequency.
“We see on-going opportunities also to trade up consumers to larger packs,” added Cali.
He said that large packs were growing in the US and were up 10% so far this year.
Priority gum and candy markets were set as Brazil, US and China, while Mondelez also sees potential in ‘Next Wave’ markets such as Mexico, Turkey, Argentina and South Africa.
Mondelez will focus on protecting is market position in slower growing ‘Scale markets’ such as France, Japan and Canada.
China: the missing link
Cali showcased China as the big growth market for Mondelez in the category.
He said that the Chinese gum market was already the second largest worldwide and was growing at an annual rate of 16%.
Kraft Foods launched its first gum in China earlier this month with the Stride brand (see HERE ).
Cali said that the launch featured more conventional gums aimed at young adults and contrasted with competitors’ functional offerings for older consumers. Cali said that such an approach would avoid head-to-head clashes with Wrigley.