Wrigley eyes expansion beyond gum, plays down acquisition speculation
business strategy will once again focus on expanding beyond its
core line of gum-based confectionery and has played down
speculation that it is on the acquisition trail, Tom Armitage
reports.
A burgeoning trend for functional confectionery and Wrigley's willingness to explore new market territory has, in previous years, helped it to outmanoeuvre a number of its European rivals - many of which are facing the backlash from governments and consumers alike for contributing to an increase in diet-related health problems.
Speaking at the company's annual shareholder meeting in Chicago, Ron Waters, Wrigley's chief operating officer said that in 2004 the company had "delivered record high volume, sales and earnings" amid what he called a "dynamic and competitive market".
New product developments (NPDs) accounted for an estimated 19 per cent share of its net sales in 2004 and such developments, when expressed as a percentage of sales, average close to 20 per cent over the last three years.
This has arisen largely thanks to Wrigley's research and development (R&D) spend, which has risen by more than 50 per cent in the last two years (in 2004 alone it increased spending by 22 per cent on the previous year).
R&D spending has enabled the company to move away from its core gum-based confectionery business to develop products including breath-freshening mints and thin films, dental drops and breathe-free menthol candies under the Extra, Excel and Eclipse brands.
Wrigley claims that although there is considerable scope in NPD for the future, its long-term ambitions will be achieved through a "simple, sustainable business model."
Meanwhile, Waters quelled speculation that the company is on the verge of securing an agreement to buy fellow Chicago-based confectionery group Tootsie Roll. Bill Wrigley, Wrigley's chairman and chief executive, said that, "we look for opportunities that are out there but we are very cautious".
The company is indeed no stranger to acquisitions, having recently bought Kraft's confectionery division and also Spanish confectioner Joyco - both of which have given the company a number of profitable brands, particularly across the bubble gum, candy and lollipop categories.
"Wrigley's strengths and talents are just as relevant in confections as they are in gum," commented Waters.
Wrigley-branded chewing gum, however, continues to provide the company with the bulk of its total revenue (which stands at a reported US$3.6 billion) and volume sales on the previous year have tripled - culminating in 2004 net profits of around US$720 million and a 5 per cent increase in earnings per share to US$2.19.
The Chicago-based company also claims that capital investment projects in Latin America and Goose Island, Chicago will be "open for business" later this year and it will be interesting to see how Wrigley's first ever Asian gum base in Shanghai, China will fare.
According to industry analysts Euromonitor, China is expected to be one of the most important gum markets in the world, with projected sales figures in the region of US$909 million by 2008.
