Wrigley lifted by Joyco takeover

Related tags Wrigley Cent United states dollar

The takeover of Spanish confectionery group Joyco earlier this year
continued to lift sales at gum giant Wrigley in the third quarter
of the year. Joyco's business in Asia, in particular, has helped
improve Wrigley's standing there.

Third quarter sales at the chewing gum maker were up 17 per cent to $917 million on the back of a 13 per cent increase in volumes, with 6 per cent of this coming from Joyco. But there was also solid volume growth from Wrigley​'s existing business, too, buoyed by new product rollouts such as extensions to the Eclipse gum brand.

The Joyco acquisitions gave an additional boost to Wrigley's figures in that the company benefited from additional overseas sales and, as a result, from the strength of foreign foreign currencies against the weaker US dollar, which contributed 4 per cent to third quarter sales increases.

Sales in North America were up 6 per cent driven by volume growth, in particular from the Orbit and Eclipse brands in the US. Sales from Wrigley's EMEAI region (principally Europe but also the Middle East, Africa and India) were up 22 per cent on strong volume growth - particularly in Russia, the UK and the Ukraine - again helped by favourable currency translations.

In Asia, sales were up 23 per cent, primarily on volume growth - especially from China, a particularly important market for Joyco. Indeed, Wrigley and Joyco combined have a market share in excess of 60 per cent in China. In India, another important market for Joyco, the combined share is now around 35 per cent, up from some around 6 per cent for Wrigley on its own, according to market analysts Euromonitor​.

The Joyco acquisition contributed just under half of the sales increase in the Asia and EMEAI regions, Wrigley confirmed.

But if volumes were boosted during the quarter, margins took a hit, with the cost of the Joyco deal biting into profits and increased costs associated with new products (mostly brand support) also taking their toll. Nonetheless, Wrigley's gross margin for the quarter was 55.5 per cent, some 30 basis points below the same period a year ago.

These costs, as well as increased expenditure on R&D and IT, also took a chunk out of the group's operating profits for the three month period, although they remained a healthy 10 per cent ahead of the previous year at $183.8 million. Net profits, meanwhile, were up 11 per cent at $126 million.

"We are very pleased with the solid performance of our business, particularly the positive product mix in the US and the volume gains across EMEAI and Asia,"​ said Ronald V. Waters, Wrigley's chief operating officer. He added that Joyco would continue to boost Wrigley sales in the final quarter of the year as the first of its brands began to be distributed through the Wrigley sales network.

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