Drumming up business: the gorilla may have worked wonders for block milk chocolate but it's been a mixed bag in confectionery, as steep raw material price increases add extra bite to the credit crunch

Grocer, Oct 4, 2008

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Confectionery manufacturers are used to dealing with adversity. Just as well. The combination punches landed by anti-obesity campaigns, advertising restrictions and increases in energy and commodity prices in the past 12 months could easily have delivered a knockout blow to suppliers.

But not only is the industry still standing, but it has continued to defy the economic slowdown by increasing sales.

The total UK confectionery market was worth 4.5bn [pounds sterling] in the year to 15 June, up 3% year-on-year [TNS]. Not spectacular, but resolute enough, although volumes fell by 1.4%.

The standout performance came from chocolate, up 4.3% in value, with block milk chocolate up 7.3%, and 7.9% in the case of recipe. Volumes also increased by 4.1% and 3.9% respectively.

"Chocolate is pretty much recession-proof," says Fiona Dawson, Mars MD. "Even when times are tough, everyone deserves their small pleasures in life."

Mars itself paid scant regard to the crisis in the global economy when it paid $23bn for Wrigley in April. The deal has changed the face of global confectionery, bringing together iconic brands and freeing up the Wrigley business--so long a slave to its shareholders--to focus on building long-term sales. Wrigley will remain a standalone company and will assume control of Mars' sugar confectionery brands.

If Cadbury was unsettled by the deal it hid its fears well.

Fresh from the demerger of its drinks business, the newly streamlined company announced a 3% rise in half-year sales in August, despite price hikes of 50% in oil, 37% in cocoa and 29% in sugar. Cadbury remains the biggest manufacturer of confectionery in the UK, but its market share advantage has been reduced to just 1% over Mars, according to Nielsen.

In global terms, however, the Mars deal did knock Cadbury from its number one perch. And rumours followed that the now Uxbridge-based business was considering a merger with Kraft or Hershey, although the latter is now said to be working with investment bank JP Morgan on a deal with Cadbury's Swiss-based rival Nestle.

But Cadbury CEO Todd Stitzer isn't too bothered by size, he says. He wants to increase the company's margins, which for many years have trailed those of other fmcg rivals. And in this regard he must be mighty pleased with the continued success of chewing gum Trident and the return to form of Cadbury Dairy Milk following those iconic drumming Gorilla ads. The bad smell left by a salmonella outbreak in 2006 disappeared in a puff of nostalgia-filled smoke, as the sounds of Phil Collins filled the airwaves.

The same ad has since played out to Bonnie Tyler's Total Eclipse of the Heart, the new version being launched exactly a year after the original. The iconic Airport Trucks ad was also revived by Cadbury and will run in tandem with the gorilla until Christmas.

Nostalgia has been a recurring theme of the confectionery market this last year, not least with the return of Cadbury's cult chocolate bar Wispa.

Among a host of throwbacks to the 1990s, we've seen Opal Fruits gracing the shelves for the first time since 1998, Mr T urging Snickers fans to "Get Some Nuts!" and Maynards '"Setting the juice loose" again (see p64).

"The return of Wispa is a smart reprise," says Don Williams, CEO of branding and design consultancy Pi Global. "It's a simple format, iconic brand and was probably axed prematurely." Wispa will be back on the shelves permanently this autumn following "astronomical" sales.

However, after the splash made by Mars Planets and Trident in 2007, this year has been quieter on the NPD front, with most of the 13.3% innovation reported by TNS being brand extension-led. "It's more about continuous product improvement than coming up with totally different concepts that challenge consumers' beliefs about these categories," says Herwig Vennekens, Haribo Dunhills MD.

This is understandable, says Williams. "Given that nine out of 10 new launches fail miserably, it's undoubtedly safer to resurrect tried-and-trusted brands that still have resonance with the consumer than plough fortunes into NPD," he adds.

Nevertheless, innovation is driving growth in countlines. Cadbury's Creme Egg Twisted generated 6.3m [pounds sterling] worth of sales in its first four weeks/Nielsen 4w/e 16 June], and Mars Planets have already added 17m [pounds sterling] in incremental sales.

Meanwhile, Nestle has sold more than 23 million KitKat Senses bars since its launch this spring, according to UK trade communications manager Graham Walker.

"We set out to target younger women who want a snack that is permissible and indulgent. It has only 165 calories and you can bite bits off and save some," he adds.

The three key trends in the marketplace have been health, indulgence and sharing. The latter, in particular, remains a catalyst for innovation: think Mars Planets (see p63) and the significant investment by Nestle in its Quality Street and Black Magic brands.

Black Magic is certainly one to watch. After years of trying to modernise the classic black-and-white feel, unsuccessfully, Nestle gave it an expensive new/old look in September last year. Walker is reluctant to give sales figures but says "it has succeeded, and thankfully so given the time and money we spent on it.