Sticking to the strategy

- Last updated on GMT

Related tags: Gum, Wrigley

The world's largest chewing gum manufacturer Wrigley has reported
strong six-month and second-quarter sales growth and a 12.5 per
cent increase in profits.

The world's largest chewing gum manufacturer Wrigley has reported strong six-month and second-quarter sales growth and a 12.5 per cent increase in profits. This underlines both the company's financial position and the strength of the chewing gum market as a whole.

Consolidated second quarter net earnings of $126 million (€110.4m) million were up $16 million on three months ago. On a per share basis, earnings for the quarter were $0.56, up 14 per cent.

However the impressive jump in profits - 10.5 per cent over the past six months - should be seen in the context of a weak dollar and favourable currency comparisons. On a currency neutral basis, global sales grew by a more modest 5 per cent.

Nonetheless, the continuing upward trend suggests that the chewing gum market has plenty of scope for innovation and growth. Certainly, the introduction of breath strips to the European market maintained economic buoyancy and helped Wrigley​ to overcome a significant drop-off in the important Asian market because of the SARS virus.

Indeed, Wrigley sales have fallen by 9 per cent in Asia, in sharp contrast to dramatic growth experienced in Europe. Unsurprisingly the company plans to continue its strategy of product expansion in the second half of the year. Fresh breath strips such as Eclipse Flash, Extra, Thin Ice and Winterfresh will be distributed across Europe along with sugar-free dental candy under the Orbit and Extra brands.

In the US, new Juicy Fruit, Strappleberry and Juicy Fruit Grapermelon products in a coated pellet format are being introduced to supermarket shelves. At the same time, Wrigley is introducing new flavours to traditional brands such as Extra and Orbit.

Such innovation marks a significant departure for the Chicago-based giant, which until recently was known almost solely for its established brands such as Doublemint, Juicy Fruit and Wrigley's Spearmint.

The gum industry as a whole looks set to achieve impressive growth over the next few years. Market analysts Euromonitor describe gum as a low volume, high value product which still has significant potential due to low per capita consumption.

In addition it is associated with wellness trends through the dental accreditation of sugar-free varieties, and by the explosive development of functional variants.

Such is the perceived potential of gum, and functional gum in particular, that Wrigley's rival Cadbury has made it a key part of its strategy, acquiring key Kraft and Huhtamäki brands in 2000, Danish gum manufacturer Dandy and a controlling stake in Kent Gida in 2002, and the acquisition of Adams cleared in March 2003.

The innovative strategy followed by Wrigley is therefore just one example of how the gum industry is diversifying. The company's six-month and second-quarter results would also suggest that this is a strategy worth pursuing.

Related topics: Markets

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