That's why Nestle, a distant No. 3 in the chocolate wars, is following larger rivals with plans for two new entries under its $70 million-plus Nestle Crunch flagship. It's also seeking more clout by creating a new platform for "indulgent" products under the Nestle Signatures name.
The introduction this November of Nestle Crunch with Caramel and a line of Nestle Crunch Minis marks the first major innovation in the U.S. in years for the Switzerland-based company. The move follows the recent launches of other top candy-bar extensions, including Masterfoods USA's Snickers Cruncher and Hershey Foods Corp.'s Reese's FastBreak, both of which have so far seen middling success.
The three players have been cautious with new product entries of late, relying almost exclusively on line extensions.
"You're seeing a lot more line extensions because the cost of launching a new brand becomes so expensive," said a candy industry insider. "The failure rate of new items is pretty high, so coming up with something totally new is a risky proposition."
A Nestle sales executive said the company expects new Crunch with Caramel to gain more repeat users than either of its competitors' entries, which he said "haven't held up with consumers."
Snickers Cruncher, launched last year with a $32 million ad effort, has grown to $25 million in sales in supermarkets, drug stores and mass merchandisers (excluding Wal-Mart Stores) for the 52 weeks ended April 21, according to Information Resources, Inc. FastBreak, against which Hershey spent $7 million during the first two months of this year, has grown to $14.5 million for the same time period.
"Wal-Mart and convenience stores are a pretty sizeable piece of Cruncher's business that are not represented by the [IRI] data," said a Masterfoods spokesman, adding it's "very pleased" with the brand's performance.
A Hershey spokeswoman disputed Nestle's contention that FastBreak has not done well, saying it has met expectations. She cited data indicating it outsells well-established brands including Nestle Crunch.
Nestle will tout its new candy bar beginning in January with a $15 million TV and print campaign from Interpublic Group of Cos.' Dailey & Associates, West Hollywood, Calif., featuring Crunch spokesman Shaquille O'Neal and targeting the coveted 18-to-34 year old demographic. Nestle will also launch a Hispanic-focused ad campaign and event-marketing effort as well as sampling to college campuses, concerts and sporting events.
The Nestle Signatures is a new platform that Nestle will use to position its Nestle Treasures, Turtles and a host of new products as a more indulgent line than traditional bars.
Set to launch in August, Nestle Signatures will help Nestle gain promotional and advertising efficiencies for Treasures and Turtles, which have received little marketing. Nestle spent $7 million in media on Treasures last year, and has spent nothing against Turtles in 13 years, according to the sales executive. Turtles grew double digits recently, despite the lack of support. The brands will get at least $15 million in advertising next year from WPP Group's J. Walter Thompson, New York.
Nestle also will test its acumen in the fast-growing boxed premium chocolates segment. The limited-time line dubbed Nestle International Collection will launch in August and directly compete against Hershey's Hershey Pot of Gold, which grew 36% to $55 million for the 52 weeks ended April 21, according to IRI.
Nestle's chocolate sales during the same time period totaled $355 million, trailing Masterfoods' $1 billion, and Hershey's $1.7 billion, according to IRI.
Chocolate sales: $1.7 billion
Sales growth: 1.7%
Chocolate sales: $1 billion
Sales growth: 2.2%
Chocolate sales: $355 mil
Sales growth: 2.8%
Source: IRI , 52 weeks ending April 21.