Industry observers note that the major confection competitors to Wm. Wrigley Jr. Co. will very quickly allocate exponentially higher marketing resources to their gum and mint brands now that Wrigley can dominate retailers' front-end shelf space with the addition of Kraft Foods' Altoids and Life Savers. And that domination, which an executive close to Hershey Foods pegged at a roughly 60%-plus share of the combined "refreshment" category, will be brought by those quaking competitors to the attention of the Federal Trade Commission.
"Hershey and Cadbury are certainly pointing out to the FTC the clout that this deal would give Wrigley," the executive said, adding, "It's not over `til the fat lady sings."
Retail analysts note that it's natural for competitors to make deals hard to close, since such efforts often extend the process period, during which companies are distracted. Kraft has said it expects the deal to close in mid-2005.
Marla Sims, associate analyst at Sanford Bernstein, said that "When Wrigley is focused on integrating [the Kraft brands] they'll be less focused on growth, which will provide Cadbury the opportunity to put their foot on the accelerator in terms of marketing spend and take share from Wrigley."
Cadbury, Ms. Sims said, vowed to increase marketing spending for the Adams brands it acquired last April-including Trident and Dentyne gum-by at least 10% following Pfizer's longtime under-investment in the brands. TNS Media Intelligence/CMR shows Cadbury's 2003 measured media spending on gum actually trailed the 2002 outlay for the brands-$57.6 million vs. $66 million.
But the first half of '04 showed Cadbury spending $38 million for a slew of new initiatives including Trident White Cool Rush and Dentyne Fire. In September, Cadbury began advertising significantly for the new Dentyne Tango. Sales of Certs, which has not benefited from any increase in spending, dropped 40% to $11.6 million, according to IRI, in the food, drug and mass accounts it tracks for the 52 weeks ended Oct. 31.
Despite the investment, Cadbury still trails Wrigley significantly in gum, with IRI data showing Cadbury sales in the $635 million sugarless gum category totaling $189 million to Wrigley's $356 million and sales in regular gum a mere $21 million to Wrigley's $224 million for the 52 weeks ended Oct. 31. (IRI data excludes crucial convenience channels and Wal-Mart)
Hershey, meanwhile, has been "hemorrhaging" in gum and mints, Ms. Sims said, with double-digit sales losses in both areas. But the executive close to Hershey still maintained the company is "playing to win" in those categories, shifting resources from its chocolate brands to build momentum for its innovation there, including the recent launch of its Ice Breakers Liquid Ice mints. Last year's $20 million outlay of media toward Ice Breakers gum, however, certainly didn't seem to pay off, as the brand's sales fell 18% in the outlets IRI tracks to a mere $27 million. In mints-where Hershey spent a mere $1.2 million-sales for Ice Breakers and Breath Savers fell 12.4% to $49 million.
Smaller companies such as Ferrero USA, whose Tic Tac brand holds nearly as high a share as Altoids in the breath freshener segment, are expected to suffer as the larger companies push harder in the category.
Retailers are excited about the shift of Altoids and Breath Savers to Wrigley, which one West Coast retail executive referred to as "a great marketer who will re-energize the Kraft brands."
Life Savers, especially, is expected to grow substantially under the renewed focus of Wrigley, since Kraft's inattention has caused it to all but disappear from many front checkouts. Sales for the brand slipped 12% to $182 million for the 52 weeks ended Oct. 31.