Transcript Title slide
Jenna Boyle, Kerry McDermott and Rob Whitehead
Name the Brand??
Taste the rainbow
Melts in your mouth, not in your hand
Gimme a break, gimme a break…
Nobody better lay a finger on my…
There’s no wrong way to eat a…
• Industry Overview • Advertising Analysis • Pivot Table Analysis • Target Market • Perceptual Map • Advertising Strategies • Mars Inc.
• The Hershey Company • “The Elegants” • Where the Industry is Going • Recommendations
Why is it relevant to us?
65% percent of all American branded candy bars have been on the market more than 60 years.
Americans eat approximately 25lbs of candy each a year (7.7 billion lbs total), about 60% of which is chocolate Engrained in American culture.
Candy is EVERYWHERE!!!
Industry Definition
The Candy Production industry acquires raw materials such as cocoa, sugar, cornstarch, fruit, preservatives and flavorings to process them into a range of sugar and non-sugar based confectionery products.
Major Products: Chocolate candies Sugar candies Sugarless candies Gum
Product Segmentation
PRODUCTS AND SERVICES SEGMENTATION Product/Services Candy or chocolate bars Soft candy Block chocolates Industrial chocolate Hard candy Gum Chocolate spreads and drinking powders Box chocolates Share 32.70
% 23.40
% 12.20
% 9.40% 8.90% 4.70% 4.70% 4.00%
Market Segmentation
MAJOR MARKET SEGMENTS Market Segment Confectionery wholesalers Supermarkets and grocery stores Food manufacturers Hospitality trade Discount stores Direct to public Share 61.30% 16.70% 8.10% 5.70% 4.30% 3.90%
Cost Structure
COST STRUCTURE Item Purchases Wages SG&A Depreciation Rent Utilities Other Profit Cost % 58.30% 10.10% 6.80% 3.50% 1.20% 1.10% 6.70% 12.30%
The Production of Confectionery
Government Regulation
The level of regulation is heavy - All cocoa, chocolate and sugar manufacturers must meet the standards of the FDA. - Manufacturers also must comply with the hygienic regulation - Environmental regulation - Stricter labeling
Industry Structure
2,50% 1,00% 1,00% 2,00% 2,00% 3,00% 4,00% 21,60% Life Cycle Stage Revenue Volatility Capital Intensity Concentration Level 13,40% 49,50%
Mature Low Medium High
Regulation Level Technology Change Barriers to Entry Competition Level
Mars Incorporated The Hershey Company Tootsie Roll Industries Ferrara Pan Candy Company Jelly Belly Candy Company Russell Stover Candies Inc.
Kraft Foods Nestle Inc.
The Topps Company Other Heavy High Low High
CR₄ and HHI
The HHI for just the top 4 companies in the industry is 2941.81.
The CR ₄ for the industry is 78.1%.
Therefore, the industry is highly concentrated with only a few major firms holding a majority of the market share.
HHI = 49.5²+21.6²+4²+3²=2941.81
CR ₄ = 49.5 + 21.6 + 4 + 3= 78.1% *Hershey and Mars Inc. alone hold 71.1% of the market share.
-Many mergers occur.
Concentration
Concentration in this industry is high This concentration of ownership is primarily a result of an increase in acquisitions, along with natural growth for a majority of major players encouraged by continued product innovation, strong brand loyalty and aggressive marketing.
Ways for companies to survive: - adaptability to new trends - economies of scale - product differentiation - successful supply chain management - powerful marketing strategies******
Competition
Quality Price Distribution Innovation and differentiation Substitute Products Imports
CANDY 1,00% 1,00% 2,00% 2,00% 2,50% 3,00% 13,40% 21,60% 49,50% 4,00% HHI (for top 4)= 2941.81
Cr ₄ = 78.1% High level of concentration 518 Businesses overall!!
Mars Incorporated
Candy v. Chocolate
The Hershey Company Tootsie Roll Industries Ferrara Pan Candy Company Jelly Belly Candy Company Russell Stover Candies Inc.
Kraft Foods HHI (for top 4) = 1141 CR ₄ = 59% Medium level concentration ->Concentration is increasing!
1,039 businesses overall !!
CHOCOLATE Nestle Inc.
The Hershey Company Mars Incorporated The Topps Company Nestle 25,00% Other 39,00% Russel Stover 20,00% 0,50% 0,50% 1,00% 4,00% 10,00% Lindt & Sprungli Guittard Chocolate Company See's Candies Other
20 15 10
Revenue for
5
candy v. revenue
-5 0
for chocolate
Chocolate -10 -15 Confectionary Production in US REVENUE GROWTH Candy Production in US REVENUE GROWTH 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 Revenue $ million Growth % 16,613.30N/A 16,563.30
15,700.10
16,074.00
2004 2005 2006 2007 2008 2009 2010 16,150.20
16,366.50
16,185.50
15,200.10
13,801.20
13,180.10
14,861.60
-0.3
-5.2
2.4
0.5
1.3
-1.1
-6.1
-9.2
-4.5
12.8
2000 2001 2002 2003 2004 Revenue $ million 7,079.60
7,201.60
7,240.50
6,504.50
6,621.70
Growth % 3.1
1.7
0.5
-10.2
1.8
2005 2006 2007 2008 2009 2010 7,610.90
6,763.10
6,919.40
7,082.60
7,298.10
7,621.20
14.9
-11.1
2.3
2.4
3 4.4
Candy Revenue Growth % Chocolate Revenue Growth %
Total Sales for Confectionery Industry
$22.6
$22.8
$24.0 $22.9
$22.1
$28.2
$20.5
$22.5
7.1
7.3
7.6
7.7
7.4
7.2
7.1
Dollars Sold at Retail, Billions Pounds Sold at Retail, Billions 2003 2004 2005 2006 2007 2008 2009 2010
Confectionery Seasonal Sales
(** in millions of dollars) 2006 2007 2008 Valentine’s Day - $971 Easter $1,884 Halloween $2,146 $1,036 $1,987 $2,202 $1,024 $1,846 $2,209 2009 $928 $1,990 $2,207 2010 projections * $935* $1,970* $2,225* Christmas $1,389 $1,420 $1,376 $1,401 $1,420* * – projections for 2010 2010 2009 2008 2007 2006 2005 VALENTINE’S +0.7%* -9.4% -0.2% +6.7% +0.1% -4.0% EASTER -1.0%* +7.9% -7.1% +5.4% +7.0% -7.6% HALLOWEEN CHRISTMAS +0.8%* +1.4%* Even +0.1% +2.6% +1.8% -3.1% +2.2% +2.8% +2.3% +1.0% +2.4% NCA projects a 0.4% increase in 2010 for total seasonal sales
2010 US Confectionery Market
Retail Sales Imports Exports $22.5B $4.7B $1.895B
Category Retail Sales $ Billions Imports $ billions Exports $ billions Total Confections Chocolate $22.5
$14.862
Non-Chocolate $7.621
$4.7
$3.0
$1.7
$1.895
$1.3
$.595
2008 Per Capita Retail Sales
$92.91
$100 $80 $60 $40 $20 $0
$52.46
$28.34
$9.54
Total Chocolate Non Chocolate Gum
Overview of Industry
The recent desire for healthy alternatives has required companies become more innovative.
Strong brands and customer loyalty.
Economies of scale and value addition during production.
Despite recession, consumers still continuously consume the same amount of candy because it is and inexpensive and feel good luxury.
Growth segments such as sugar-free confectionery and organic and fair-trade chocolate have shown considerable promise and are expected to continue in the next five years.
Demand Determinants
Changing Consumer Lifestyles
Pricing and Distribution
Presence of Substitutes
Product Innovation
Culture and Tradition
How to Reach Consumers: Advertising
2010 Total Advertising Expenditures for Top Players
Hershey $404,092,700 Mars Lindt Nestle Tootsie Roll Tootsie Pop Jelly Belly $422,510,500 $51,094,100 $743,163,800 $784,500 $3,939,900
0,00945%
The Hershey Company Advertising
9,19851% 0,00000% Magazines Sunday Magazines 30,52552% Newspaper 33,14173% National Newspaper0.8
23,99148% Outdoor Network TV 1,56180% Spot TV Syndication 34.46% 18.04%
Lindt's Advertising
0,00 18.71% 0,00 0,00 0.24% 0,00 0.12% 0.56% 27.86% Magazines Sunday Magazines Newspaper National Newspaper Outdoor Network TV Spot TV Syndication Cable TV 4,237% 0,754% 0,478% 35,279%
Mars Inc. Advertising
0,251% 30,119% 25,168% 2,786% 0,145% 0,583% 0,199% Magazines Sunday Magazines Newspaper National Newspaper0.8
Outdoor Network TV Spot TV Syndication Cable TV
Pivot Table Data
Adverting Based on Location
Total Spending on Advertising in Location
8000 7000 6000 5000 4000 3000 2000 1000 0 Total Spending on Advertising in Location
City
Advertising Expenditures based on Population
Price Paid Per 1000 Residents
25 20 15 10 Price Paid Per 1000 People 5 0
Advertising Based on Day of Week
Candy Ad. Spent on Days of Week
102000 100000 98000 96000 94000 92000 90000 88000 86000 84000 82000 Total SUN MON TUE WED THU FRI SAT
Total TV Advertising
0,25% 0,57% 1,99%
% of Total Ad. Expenditures
0,20% 2,95% 37,33% 14,46% 2,04% 4,23% 15,06% 3,95% 4,79% 0,16% 3,84% 7,10% 0,09% 0,42% 0,60% Animation Award Pageants/Parades Children's Entertainment College Sports Documentary Drama/Adventure Entertainment and Film Game Show Informercial Intruction/Advice Mini Series Music Videos News- All Types Sports Science Fiction Police/ Crim Show Situational Comedy Other
35000 30000 25000 20000 15000 10000 5000 0 Mars Inc DOCUMENTARY/SALUTE/TRIBUTE DRAMA/ADVENTURE FEATURE FILM INSTRUCTION/ADVICE SITUATION COMEDY SLICE-OF-LIFE SPORTSCAST TALK UNCLASSIFIED VARIETY - GENERAL VARIETY - MUSICAL
6000
Lindt Main TV Advertising Program Types
5000 4000 3000 2000 1000 DRAMA/ADVENTURE ENTERTAINMENT MAGAZINE FEATURE FILM INSTRUCTION/ADVICE NEWSCAST (LOCAL ONLY) SITUATION COMEDY SLICE-OF-LIFE 0 Chocoladefabriken Lindt & Sprngl Ag
Company
Target market (based on Pivot Table)
Majority of the Market Children Age 5-24 is main target Health Conscious Parents- also a major target Increased advertising to parents about healthier candy choices, may be why parents are still so heavily targeted Premium Producers Target educated consumers Sell luxury Target all adults
Annual Advertising
Mars' Annual Advertising
450 000 400 000 350 000 300 000 250 000 200 000 150 000 100 000 50 000 0 600 000,00 500 000,00 400 000,00 300 000,00 200 000,00 100 000,00 0,00 2006 2007 2008 2009 2010 2006
Hershey's Annual Advertising
2007 2008 2009 2010
Advertising to Sales Ratio for 2010
Sales Advertising Expenditure Advertising to Sales Ratio
422,510,500 1.51%
Mars Inc.
The Hershey Company
28,000,000,000 5,670,000,000
Lindt
2,740,000,000 404,092,700 51,094,100 7.13% 1.86%
How we’re going to break it down:
Adventurous Mars Inc.
Free Spirited Lindt&Sprungli + Ghirardelli Classy The Hershey Company Family-Oriented
Brands
Skittles Free Spirited Kit Kat Twix Reeses Adventurous M&M Dove Hershey Kisses Hershey Bar Family-Oriented Classy Mars Inc.
Hershey Lindt Ghirardelli
Experience Attribute
Don’t use informative Don’t advertise place Don’t advertise price Don’t use combative/comparative Don’t do comparisons to others MEMORY JAMMING HUGE
Types of Advertising Used in Industry
Humor appeal Holiday Sweepstakes Point of Sale Pricing Strategy Negative to Positive Heritage Advertising Product Differentiation Brand Identity
Mars Overview
Mars was founded in 1911 by the Frank C Mars, and the Mars Family remains privately owned to this day.
Mars Inc. is one of the world's biggest private companies, with annual sales approaching $30bn.
Candies included: Snickers, Twix, M&Ms, Skittles, Starburst, Milky Way, 3 Musketeers etc… Seen as Adventurous and Free-Spirited #18 Advertiser according to Advertising Age Memory Jamming Target Market:
Mars Incorporated Advertising
Mars now owns Wrigley as of April 2008
Similar strategies throughout
Heritage Advertising
Product Differentiation
Brand identity
Sweepstakes Advertising
Pricing Strategy
Holiday Advertising
Negative to Positive Advertising
Humor Appeal
Brand Identity
Stick to Roots
Spokescandy
Huge in Differentitation
Melts in your mouth not in your hand
http://www.youtube.com/watch?v=4gtM_mmvDww http://www.youtube.com/watch?v=SMrLz9tUrew
What is real?
“Unreal” situations
Taste the Rainbow
America’s favorite candy bar!
Satisfies hunger
Celebrity
“You’re not you when you’re hungry”
Need a moment… … Chew it over with a Twix
General Conclusions about Mars Inc.
Stick to roots
Differentiation is key
Even among own products
Starburst: “It’s a juicy contradiction”
3 Musketeers: “A lighter way to enjoy chocolate”
Milky Way: “Life’s better the milky way”
The Hershey Company Overview
• •
Founded in 1894 Hershey Manufactures chocolate and confectionery products
•
Largest chocolate manufacturer Major brands include:
Why Hershey has been so successful?
Strong financial performance Leader in confectionery products in the US due to it’s well-known brands Brand Equity Marketing Strategies (Obtaining Sales) Ability to determine consumer trends
Financial Performance
2010 Sales 1-Year Sales Growth 2010 Net Income $5.67B
7.03% $509.80M
2010 Sales US Other countries Total % of total 85 15 100
Hershey Products
Hershey’s Bliss Cookies ‘N’ Crème Hershey’s Milk Chocolate Hugs Kisses Nuggets Sticks Reese’s Fast Break Nutrageous Peanut Butter Cups Pieces Reesesticks Whipps Other 5th Avenue Almond Joy Cacao Reserve Caramello Eat More Good & Heath Jolly Rancher Kit Kat Milk Duds Mounds Mr. Goodbar Payday Pot Of Gold Rolo Special Dark Symphony Take5 Twizzlers Whatchamacallit Whoppers York Zagnut Zero Refreshment products Breath Savers Bubble Yum Ice Breakers York
Hershey’s Brand Equity
Harris Interactive Poll
RANK 25 Highest Ranked Brands
1 Hershey's Kisses Chocolate Candy 2 M&M Plain Chocolate Candy 3 Hershey's Milk Chocolate Candy Bars 4 Google.com
5 Duracell Batteries 6 Reese's Peanut Butter Cups Chocolate Candy 7 Heinz Ketchup 8 Kleenex Facial Tissues 9 Oreo Cookies 10 Neosporin Ointment 11 Cheerios Cereal 12 Ritz Crackers 13 Kraft Foods Inc.
14 Arm & Hammer Baking Soda 15 Campbell's Soups 16 Snickers Chocolate Candy 17 Coca-Cola 18 Sharpie 19 Dawn Dish Detergent 20 Johnson & Johnson 21 Energizer Batteries 22 UPS 23 Hershey's Chocolate Chips 24 M&M Peanut Chocolate Candy 25 Hallmark Greeting Cards
Advertising Strategies
Brand Image/Identity Holidays Community Amusement Park
Brand Identity
Old-fashioned Warm Family-Oriented Happy Nostalgic Love http://www.youtube.com/watch?v=EV0u08 SnL0g Rascal Flatts http://www.youtube.com/watch?v=Plf9bzri 6Rw&NR=1 Kisses
Sticking to Roots
1930s present
Hershey’s Slogans
“There’s no wrong way to eat a Reese’s” "Sometimes you feel like a nut, sometimes you don't" (Almond Joy) "Makes mouths happy“ (Twizzlers) "It's more than a mouthful - it's Whatchamacallit” “There’s a smile in every Hershey Bar” “Have a break, have a Kit Kat.”
Hershey’s Jingles
“Hershey’s is the GREAT AMERICAN, GREAT AMERICAN chocolate bar!!!” http://www.youtube.com/watch?v=47-blY2vZMY “Gimme a break, Gimme a break, break me off a piece of that Kit Kat Bar.” http://www.youtube.com/watch?v=DLJgyr-g3Ck&NR=1
Holidays
Easter Valentine’s Day Halloween Christmas
Community
Milton Hershey School American Red Cross Habitat for Humanity of Central Pennsylvania Children's Literacy Initiative - Lancaster, PA Hershey partners with Children’s Miracle Network
Amusement Parks
Way for fans of Hershey to interact with the company.
Increases revenue for the company Annual Sales: $270.96M
Annual Net Income: $6.94M
Chocoladefabriken Lindt and Sprungli
Founded in 1845 in Switzerland Leading world producer of premium chocolate Brands carry the name Lindt, Ghirardelli, Caffarel etc.
Strengths of the Company
Strong brand name Easily able to penetrate new markets Strong Global Operation with diversified revenue base Effective Use of Advertising
Lindt’s Main Marketing Strategies
Product Differentiation Premium Luxury Affordable Public Relations Point of Sale Advertising and Free Samples Bundling
Product Differentiation
Premium quality = Premium Ingredients
Affordability
Public Relations
Upcoming Trends
Showcasing your value
Sugar-free
Who you can advertise too
Obesity
Healthy Lifestyle
Employee Morale
Darker Chocolate (higher cocoa content)
Exotic Flavorings (e.g. citrus, fruits, spices)
More upscale private label chocolate
Things Companies Need to Think About:
Age Group Cost of Advertising Health Consciousness Per Capita Disposable Income Price of Inputs
Keys to Success in Future:
Economies of Scale Ability to adapt to change Product Differentiation Brand Loyalty Customer Retention