With a total market value of roughly $3.3 billion, the gum and mints category in the U.S. would seem a giant, and it is--to a degree. However, the category has languished in recent years, especially when considering the category accounted for $3.2 billion in sales in 1999. Unfortunately, the coming years look none too bright for the segment, either. Mintel (Chicago) predicts a 0.5% growth in sales, which will put the category at just over $3.4 billion. Those numbers are at current prices; when adjusting for inflation, the news is worse, with the category expected to see sales decline roughly 2.6% annually through 2009.
Mintel blames the problem at least partially upon limited shelf space. Gum and mints traditionally are stocked in the front end of the store, an extremely difficult spot to grow shelf space, particularly near the cash register, the traditional home of these products. Any newly introduced products often force retailers to remove lower-selling products from the shelves to make room.
Further complicating matters has been a failure to launch products truly unique enough to expand consumption or bring new users to the category. The users who are purchasing gum and mints do so for one primary reason, Mintel finds: fresh breath was cited by 56% of those surveyed, with “it's just a habit” and “instead of a snack” ranking well behind (24% and 16%, respectively).
Similarly, consumers of premium chocolates have a more pronounced reason for doing so. Mintel's research finds 40% of premium chocolate purchasers have bought the products as treats for themselves and, among 18- to 34-year-olds, the number rises to 52%, suggesting an opportunity to market the products to this demographic. In fact, one company already has made such a move; Godiva Chocolatier (New York) harnessed this opportunity in November 2004 to encourage 25- to 30-year-old women to indulge themselves with chocolate.
Keeps on Giving
Still further opportunity for the subcategory lies in encouraging consumers to complement gift purchases with a “box for home.” Gift giving ranks as the most popular reason for purchasing premium chocolates, and more than half of surveyed consumers with children believe they have more people for whom to purchase gifts each year. Mintel believes premium chocolate manufacturers would be wise to consider positioning a line of products specifically for parents in need of gifts for the people in their life and in the lives of their children.The indulgent and gift-giving possibilities aside, premium chocolates could benefit from, of all things, the perception of chocolate as healthful. The American Heart Association (Dallas) and the University of California at San Francisco in 2002 found certain types of dark chocolate cause blood vessel dilation within two hours of consumption, an indicator of a healthy cardiovascular system. Nonetheless, while chocolate can be said to have some healthful properties, science does not support some of the more extreme health-oriented claims for chocolate...yet. Still, manufacturers are working to produce and market chocolate with a guilt-free positioning.
May 2004 saw New Tree (Brussels, Belgium) release a Blackcurrant Dark Chocolate bar in the U.K. New Tree claims that the bars have more antioxidants than two glasses of wine, with the intention of combating pollution in the body, stress and UV rays. Similarly, Ecco Bella Botanicals (Wayne, N.J.) introduced Health by Chocolate Beauty Bar in the U.S. market in January 2004, purposing the product promotes healthy-looking skin.
The major food trend of the last couple of years, low-carbohydrate offerings, could be found even in the premium chocolate arena and actually provided something of a bright spot in the midst of a troubling period for one company. Russell Stover (Kansas City, Mo.) brands showed significant decreases during the period under review, but its Net Carb low-carbohydrate products were not included in the sales analysis. Since 2003, sales of these branded products nearly have doubled to $101 million, according to Information Resources Inc. (IRI, Chicago) data.
Not So Premium
The future would not appear much brighter for the sector, as Mintel projects sales will grow only 0.3% to 0.6% per annum through 2009, and that is at current prices. When adjusting for inflation, the category actually faces a 2.7% decline annually at food, drug store and mass merchandiser channels (FDM) over the next four years, to settle finally at around $638 million by 2009, a 13% total decline from 2004 estimated sales, in constant prices. Mintel does believe there is some potential, “As consumers tastes become more sophisticated, demand for premium chocolate should continue to become more mainstream.”Further opportunity for introductions in the premium chocolate subcategory could be the simple fickleness of the consumers, who are shifting their brand preferences, Mintel finds. Kraft (Northfield, Ill.) and Russell Stover of late have been losing sales to brands more recently introduced and to more exclusive varieties. As a result, the Fannie May (Chicago), Lindt and Ghirardelli brands (both owned by Lindt & Sprüngli, Stratham, N.H.) have made notable gains. Lindt & Sprüngli saw sales grow 39% between 2002 and 2004, while Fannie May has done “especially well” since 2002, Mintel reports, racking up a 33% gain in sales over that time frame. Yet these are not enough to compensate for the losses of those aforementioned major manufacturers: Kraft alone, the maker of Toblerone and Terry's chocolates, saw sales of its premium chocolates diminish 36% since 2002.
Kraft has been a subject of much attention in another section of the confectionery aisles of late: sugar confections. However, in this area, the company is making news primarily for its pending sale of a number of its largest brands. Wm. Wrigley Jr. (Chicago) is buying Kraft's LifeSavers and Altoids brands (as well as several other notable brands from around the world) for roughly $1.48 billion. Even before the purchase goes through, Wrigley controls the majority of the segment's sales, accounting for 16.4% of the market in 2003, largely the result of sales increases of 14% over 2001. The Hershey Co. (Hershey, Pa.) managed the second spot in the segment, even though its $442 million in sales represented almost a 10% decline from 2001.
In terms of the types of sugar confections consumers are enjoying, the segment is led by chewy candies, accounting for nearly 22% of sales, a total of $725 million in 2003. This represents a slight 2.7% growth over 2001. The market for sugar confections as a whole fell by 1.1%, led by significant drops in the breath freshener segment (23.5%), a 13.4% decline in regular gum, an 11.6% fall in hard candy and a 12.7% decrease in plain mints. Only two of the segment's 11 subcategories provided any real growth: sugarless gums managed a respectable 12.7% growth, but the true hero of the segment was in the form of diet candy, which reported a 98.7% increase. Nevertheless, Mintel concludes, “Soft sales in the remaining categories restrained real market growth.”
Kids Stuff
The foreseeable future does not appear much more promising, either. While the market is expected to continue growing at a fairly stable 13% through 2008, that equates to virtually no growth in constant prices. Much of the blame rests with a group that, heretofore, has been one of the segment's biggest strengths--children. The percentage of households with children will drop to 30.1% in 2008, from the 33.3% total in 1998. Young people are recognized as an established market for confectionery manufacturers, and their influence over products purchased is well-documented. With fewer households having children, Mintel believes the confectionery market will face reduced sales.
Further complicating matters is the increasing influence of diet and health concerns upon the consuming public. Popular diets have prompted manufacturers to innovate, and further variations of such eating plans likely will continue to task product developers. Low-sugar and sugar-free candies, in particular, have emerged in the wake of advancements in artificial--yet effective--sweeteners that actually promote dental health.
Gumming Up
Sugarless gum, in particular, has benefited from many of those sweetener advancements. Xylitol, mannitol, sorbitol and maltitol are just a few of the sweetening agents finding their way onto the ingredient legends of “sugar-free” products. Recent gum introductions have gone so far as to tout the inclusion of these ingredients on the front of the package, attempting to communicate the dental benefits that are key selling points of these innovations. In addition, these have resulted in sugarless gums with better and longer-lasting flavor compared to regular gum. Thanks in no small part to these ingredients, sugarless gum was the only sector of the gum and mints segment to grow over the last two years under review. Furthermore, Mintel proposes, sugarless gums have benefited from consumers' increasing demand for more-healthful products and lower-sugar foods, a result of concerns about obesity and diabetes, as well as the popularity of low-carbohydrate diet plans.Sugarless gums benefit in no small part from the popularity of gums in general. Mintel's analysis of Simmons NCS (New York) data shows gum with a substantial 62% household penetration. However, that analysis also shows further opportunity for the sugarless sector. In adults surveyed, 53% report using sugarless gum, while 71% use regular gum.
In terms of flavors, Simmons found 58% of adults choose spearmint, with wintergreen/winterfresh a close 55%. When posing the same question about flavors to teens, wintergreen/winterfresh commanded 75%, but second place went to the 63% demanding fruit flavor. Mintel's exclusive consumer research found that 63% normally buy specific flavors, with 73% of adults buying the same brand/type most of the time. Expanding the focus to include mints results in a market with a 79% penetration among adults and a whopping 95% of children and teenagers.
The future of the sugar confectionery market appears to be more of the same, as sales are expected to grow 13% by 2008, though that equates to no growth in constant prices. As mentioned previously, the diminishing number of households with children is a challenge, and diet and health concerns will remain at the fore. This does not necessarily portend a rash of “low in…” products, considering there is potential for confections with added nutrients, vitamins and more to appeal to health-conscious consumers. Mintel again suggests manufacturers consider the aging Baby Boomer market, consumers who have an increased attention to healthful foods, not to mention a spending power sufficient to afford premium-priced candies on a regular basis.
The information in this article was compiled from three of Mintel's market reports: “Premium Chocolate Confectionery,” “Gum & Mints” and “Sugar Confectionery.” For more information on a topic covered by a Mintel report, go to www.PreparedFoods.com and click “Mintel Research Reports” on the left navigation bar. To reach any of these reports, click “eating habits, food trends.”
