Mars also has pivoted its PR messages to chide its rival: Its premium brand Dove is "Made in the USA" and Mars can be trusted "to provide pure, rich chocolate," it says.And just to drive the point home, Mars recently opened the "Dove Chocolate Center of Excellence" right on the outskirts of Hershey, Pennsylvania.
What you would see around trade spend is if you were to go back several years, you would have seen trade spend be more important than where we were in terms of our advertising and consumer spend. What we think is the right thing to do is not let the pendulum go back the other way but necessarily bring them into balance.It's also good to see that they credit trade promotion (and trade promotion management) as a major driver in past success:
So we would see trade spend as a percent of net sale continuing to be relatively constant going forward because we think we’ve got that about right, and then the thing that we’ve remodeled is how do you get the consumer spend with the working media back to the right levels. That’s what we think is the right thing to do there.
Let me now take a quick look back at our historical performance. From 2001 to 2005, the company enjoyed a period of strong, top-line growth, behind closed-in news on new chocolate items as well as unlimited editions.In another note, the head of the Hershey Trust says, "Simply put: We will not sell the Hershey Co." There has been much M&A talk around Hershey ever says the Mars/Wrigley merger was announced.
This closed-in pipeline was executed by a redesigned selling organization. Hershey led the category in innovative customer marketing programs and a redesigned trade promotion architecture. This was complemented by enhanced retail capability.
In addition to strong revenue, gross margin improved during this time ...
Combined, Wrigley and Mars controlled 14.4 percent of the global confectionery market in 2006, compared with 10.1 percent for Cadbury, according to the most recent market share data from Euromonitor International.Cadbury (which is in the midst of spinning off its soft drinks as a separate entity) may now be looking at trying to buy Hershey, although the linked article says that state law in Pennsylvania may prevent Hershey being sold (which seems a bit strange).
Giant Eagle filed a federal lawsuit last week that accuses major chocolate makers of conspiring to fix prices to limit competition, according to published reports. The Hershey Co., Mars Inc., Nestlé and Cadbury Schweppes are defendants in the suit that alleges that the companies fraudulently claimed higher material costs and raised prices by more than 15% around the same time period. The suit cites the Canadian Competition Bureau’s ongoing investigation of the companies. The bureau allegedly uncovered communications between executives at the chocolate makers as they made plans to jointly raise prices, according to reports.In addition to the Canadian investigation and Giant Eagle's suit, I've seen reports of suits by other major retailers (CVS, Meijer, Kroger, etc) and also consumer groups.
The company is apparently giving into pressure from one of its new investors, Nelson Peltz. The Dallas Morning News speculates that the beverage division, if sold off, could bring in as much as $14 billion.The company intends to spin off its Plano-based U.S. beverages arm, which makes products including Snapple and Dr Pepper, from the rest of Cadbury. That would leave its confectionery business, which has products such as Dairy Milk chocolate and Trident Gum.
Cadbury said it was still evaluating the options for the split and would provide further information in a trading update due in mid-June.
Wall Street be damned, Hershey Co. is sticking by its theory that in-store marketing and promotion works better than advertising.The analysts are concerned about a quarter in which Hershey grew less than expected. However, their results have been consistently good over the past several years, as even the critics concede, saying that it's "hard to overly criticize Hershey given they've had such a good 3- to 4-year record."
Despite a slew of questions from analysts suggesting a link between the chocolate giant's recent decrease in ad spending and its lower-than-expected third-quarter sales, Hershey President-CEO Rick Lenny was adamant that Hershey's increase in consumer marketing next year will happen "closest to the point of consumption." Translation: in store.
"Marketing-mix modeling still reinforces that trade [spending] has the highest level of return on investment and then within consumer support ... those [efforts] closer to the point of consumption and point-of-sale tend to have the higher return," Mr. Lenny said in a conference call with analysts. In general, he said, Hershey uses advertising to create awareness for new brands and new platforms, but views in-store support -- whether through sampling or through activities tied in with retailers' own strategies -- as the best way to capitalize on those high-return investments.Music to my ears.
The name change is the final nail in the coffin of "the cockamamie bringing together of three disparate businesses that have nothing to do with one another," according to an executive close to Mars.I don't feel so bad now. I recently came across a reference to Masterfoods and asked myself, "Who dat?" Apparently I was not alone.
But it isn't only consumers that barely noticed the move to Masterfoods.
"I continued to think of them as Mars," said an East Coast grocery executive, one of the many retailers the Masterfoods plan was supposed to benefit. "In meetings, our top executives would always say, 'Who the hell is Masterfoods?' They still call them M&M's."
Mr. Gamgort said by cutting trade spending and what he called "the dogs in our portfolio" Masterfoods can afford a 20% increase in advertising for its brands as well as fund acquisitions. The first acquisition is expected to be announced in the next two weeks, he said. "If we were public, analysts would be applauding us."Retailers are predictably unhappy:
Retailers, however, warn a cutback in promotional spending could hasten Masterfoods' rising share losses to rivals Hershey Co. and Nestle.Masterfoods replies that the cuts are selective:
"Our Masterfoods candy business is down at least 20% from the $1.6 million we did with them last year because of their cutbacks in promotional spending," said one Northeast wholesale buyer, who noted that Hershey and Nestle are reaping the benefits.
Another East Coast retail buyer predicted a big sales tumble due to the cutbacks, which a Masterfoods executive told him were undertaken to drive profits. "You've got to spend money to make money," said the retail executive.
Mr. Gamgort responded that the company isn't cutting off its promotional spending for its more profit-driving customers. "We're being more selective about where we spend our money," he said.I've long been an advocate of directing trade spending toward your most profitable accounts. My concern is whether Masterfoods will have the courage to stay with the plan when some big, but less-profitable, accounts begin cutting back their share of shelf space.
Bazooka bubble gum is coming back! The Topps Co. is bringing back the famous pink gum, since gum is a hot market -- gum sales were up 3.4% last year.The Bazooka relaunch is Topps’ No. 1 priority over the next two years, Mr. Cherrie said, because it is the “strongest and most under-leveraged brand franchise we have,” and because gum is currently outperforming many of the other segments Topps plays in within the non-chocolate confectionary category.Actually, it seems it never totally went away, but it disappeared from advertising and seems to have dropped to the bottom shelf at retailers. I wonder if they still have the incredibly stupid Bazooka Joe comics in the package?
