Candy has an eventful year.
Confection sales rose 3.6% last year, a performance called "good, but not spectacular" by one industry expert. Since inflation's increase was marginally lower, the gain was comparable to 1982, which also was a year of little real growth.
Sales were depressed by a heat wave and limited allocations of one of the category's most popular brands, M&Ms. (Demand for that $400 million brand outran supply.) But sales increased significantly toward the end of the year when buyers increased purchases in order to avoid higher prices planned for 1984.
Hershey's, which in mid-December raised its prices to 35 cents a bar from 30 cents, recorded an increase in sales of about 7%. Deb Ryerson, manager of media relations for Hershey's, says chocolate and confectionery sales for the Pennsylvania-based company were $1.6 billion in 1983. Hershey's is estimated to account for slightly more than 15% of the nation's candy business.
While many other manufacturers followed Hershey's to the new price, M&M Mars, the country's top candy seller with about 18% of the market, resisted the price increases and played up that decision by putting a "Still the same price" label on its products.
New Jersey-based M&M Mars eventually decided to put the price increase into effect this year, but the entire process momentarily created a two-tier price system that had wholesalers rushing to make large volume purchases and boosting sales in the final months of 1983.
While that activity boosted sales within the industry, M&M Mars is hoping to get the same results from consumers with a plan to make candy eating more acceptable, even with today's older and more health-conscious population. M&M Mars, which is an official sponsor of the Los Angeles Olympic games, announced a plan at the National Confectionery Wholesalers Association meeting to reposition candy by presenting it as a snack food with many positive attributes. Dividing snacks into three candy categories--"indulgent," "permissible," and "good for you"--M&M Mars says its objective is to move candy from the indulgent category to the more favorably perceived permissible category, where it would compete directly with foods like potato chips and crackers in the $23 billion snack category. A new force
On the candy shelves, Mars and others may find themselves with a powerful new competitor as the result of a massive consolidation last year. By purchasing Beatrice Foods' Confection Unit, the Leaf Confection Company and General Mills' Donruss division, Huhtamaki Oy, a Finnish company, has made Leaf into the fourth largest confection manufacturer. (M&M Mars, Hershey and Peter Paul Cadbury are the top three.)
Huhtamaki's purchases brought the company a stable of very familiar brand names including Clark Bar, Good and Plenty, Whoppers, Malted Milk Balls, Milk Duds, Switzler and Jolly Rancher, to go with products like Hellas chocolate bars, Panda licorice and Xylitol that were already associated with Huhtamaki Oy's smaller subsidiary, Finnfoods Inc. of Englewood Cliffs, N.J.
Leaf is expected to quickly use the new clout a company of its new size--sales are estimated at $290 million--can afford. The competition has already taken notice. Bill Deeter, a spokesman for M&M Mars, says he thinks Leaf Inc. will be a "very solid competitor," adding that competing against it and the other candy companies "is enough to keep you up at night."
A Nestle spokesperson agreed that Leaf will be a "formidable" competitor.
Huhtamaki Oy's move reflects what candy industry observers see as increased interest by foreign firms in the United States confection market. Trade publications say 13% of the U.S. confection market is foreign owned following Huhtamaki Oy's moves and Nestle's acquisition of Terson's Ward-Johnston.
While the Huhtamaki Oy consolidation gave the category's big companies a new competitor, the big companies are returning the favor by invading the niches previously held by smaller companies.
The strategy of many small companies has been to avoid head-on competition by pursuing markets too small or specialized for major firms to enter. But as the big companies look for ways to increase their market shares, these niches have come under attack. For example, seasonal novelties, a major business for smaller firms such as Palmer, have come under attack by big companies with products like Creme Eggs, an Easter novelty now offered by Peter Paul Cadbury. Hershey's introduction of the Skor brand, which resembles the Health Bar, suggests that specific "taste" or "recipe" niches may also be vulnerable. A treat again
For both the big and small companies, one of the best results from 1983, was the return of a safe Halloween. The occurrence of the fatal Tylenol tamperings in the fall of 1982 combined with the publicity given similar reports on candy--many of which proved false--not only dropped Halloween sales that year, but threatened the very existence of the holiday.
As the holiday is crucial to the sales of major manufacturers and the existence of smaller candy firms, the industry made a pointed effort to have an incident-free Halloween last year. The major trade organizations--the Chocolate Manufacturers Association, the National Confectioners Association and the National Candy Wholesalers Association--jointly sponsored efforts to ensure Halloween's future that ranged from a hot-line service to handling tampering complaints to television commercials espousing the benefits children receive from Halloween.
An absence of tampering incidents and the campaign helped produce a very successful 1983 Halloween, so successful in fact that one manufacturer says many retailers had to reorder early to meet consumer demand.
In the coming year, consumers should expect many of the marketing trends they have seen to continue. Along with its Olympic affiliation, Mars will maintain its snack food focus, also pushing a quality and freshness image. Hershey, which has diversified into ventures such as restaurants and food service, will be pushing a few major new candy products, including Take-Five, Reeses Pieces with peanuts and Golden Pecan. Peter Paul Cadbury has taken another approach, introducing products into the U.S. that have been successful in foreign markets.
Candy industry experts are optimistic that 1984 will see improved performance, mainly because of the higher bar prices, the better outlook for Halloween and the likelihood the big selling items, like M&Ms, will be in plentiful supply. Sugarless share soars
Like their counterparts in candy, gum manufacturers will feel the effect of the Huhtamaki Oy consolidation. The purchase of Leaf Confection and Donruss gave the Finnish company 85% of the gumball market.
However, the main news in gum remains sugarless products. Better technology has led to better tasting, longer lasting, sugarless gums, and with the emergence of NutraSweet there is no reason to believe this segment will do anything but grow.
The National Candy Wholesalers Association says total domestic chewing gum sales topped $1.1 billion in 1983, a gain of about 5% from the previous year, with slightly more than a quarter of that going to sugarless gums. Regular stick gum remains the top seller with 40% of sales. But as in many other categories, NutraSweet, Chew On, which comes in spearmint and peppermint and will be marketed to teen-agers and adults, the prime chewers of sugarless gums.