A Constant Race

Published in CSP Daily News

Wrigley poised for purchases, innovation

CHICAGO -- When W. Wrigley Jr. Co. bought candy brands Life Savers and Altoids earlier this year, many analysts said it signaled the start of a buying spree as the world's dominant chewing gum maker looks to take a bigger bite out of the candy market.

But with the recent opening of a new $45 million research facility in Chicago, Wrigley is sending a message that its future growth also hinges on concocting new gums and candies of its ownalong with some twists on old favorites, said the Associated Press.

What has driven our business...[image-nocss] is innovation and new ideas, CEO Bill Wrigley Jr. said in a public appearance last week as he debuted the new research center on Goose Island. Consumers want to see new things. It's a constant race.

The growing popularity of sugar-free gum brands that promise to whiten teeth or fight tooth decay have made the gum market a sought-after category for candy companies.

U.S. gum sales rose 6% to $1.04 billion during the 52 weeks ended August 7, according to Information Resources Inc. (IRI). Sugar-free brands grew 8.2% and accounted for more than 70% of U.S. gum sales.

Wrigley is hoping to capitalize on that popularity, in part, through innovationa dramatic departure from a company that marketed just three products during its first 85 years of existence, through the mid-1970s: Wrigley Spearmint, Doublemint and Juicy Fruit.

Wrigley, the 41-year-old great-grandson of founder William Wrigley Jr., has boosted product development since taking over in 1999. Its 14 brands include the top three U.S. gum brands: Extra, Orbit and Eclipse. Spicing up old reliableslike pellet forms of Big Red and Juicy Fruitalso has boosted growth.

Chicago-based Wrigley is not alone in its quest for the cutting edge of gum and candy. Rival Cadbury Schweppes PLC has been nipping at Wrigley's heels since its $4.6 billion acquisition of Adams chewing gum from Pfizer Inc. in 2003. The deal gave the London-based company Dentyne and Bubblicious, cementing its No. 2 spot in chewing gum worldwide. Cadbury's Trident brand is No. 4 in the U.S. with $92.9 million in sales for the 52 weeks ended August 7, trailing Wrigley's Extra ($152.3 million), Orbit ($128 million) and Eclipse ($95.7 million), according to IRI.

Cadbury fired a shot across Wrigley's bow this summer with the launch of the first sugarless gum with a liquid center, marketed in the U.S. as Trident Splash. Our view is that we've out-innovated Wrigley, Cadbury spokesperson Andraea Dawson-Shepherd said, adding the company expects to open its own new science and technology center in East Hanover, N.J., in December.

When asked about the innovation battle with Cadbury, Bill Wrigley replied, "We're winning that war at this point in time.

Both companies say their facilities eventually will house hundreds of scientists tinkering with new flavors, textures and features such as teeth whitening. Each also includes sensory testing areas for consumers to rate the latest creations.

Wrigley's global marketing might and gradual expansion into candythe extension of Eclipse into the mint market, for examplehave produced solid financial growth in recent years. Quarterly revenue topped $1 billion for the first time ever in the second quarter, and profits were up 11% last year.

While Wrigley said its total confections strategy relies on scientists whipping up new candies in the new labs, many analysts suspect the company will broaden its product portfolio through more acquisitions.

There are a lot more sales to be had in the confectionary aisle, said Morningstar analyst Mitchell Corwin, adding that chewing gum represents just 13 percent of global confection sales. Wrigley now is not shy about making acquisitions, and I think there will be more in the future.

Indeed, Bill Wrigley has eschewed the company's long aversion to dealmaking. His first foray flopped: A bold, $12.5 billion bid for Hershey Foods in 2002 that was rejected by Hershey's board. But the $1.48 billion cash purchase of Altoids, Life Savers, Creme Savers, Sugus and Trolli gummy candies has given it a firm foothold to climb higher in the candy market. He said there are all kinds of possibilities that are out there for acquisitions, but declined to elaborate.

In the meantime, he said the company is hard at work creating new traits for its newly acquired candies. I can guarantee you you'll be seeing innovation behind all of those products, Wrigley said.