According to Mark Scott’s article for BusinessWeek, the candy industry is consolidating and there are few places left to target for growth.  Miller Zell conducted a focus group earlier this year with shoppers aged 16-35 where we asked about their behavior when it comes to making candy purchases.  Most of the respondents, event the teen group, admitted that candy purchases are typically relegated to holiday and gum purchases.  Most indicated that health was a consideration in their candy purchases and while most candy is viewed as empty calories, gum is a necessary oral hygiene accessory.

 So where does this leave these confectioners?  In emerging markets like India; which brought Cadbury a 16.1% revenue increase last year.  Scott reports that emerging markets have an “insatiable appetite for candy [which] is fueling double-digit market growth.”  No wonder Hershey and Kraft want in on that action.  The predominance of their candy sales are domestic.  The western hemisphere only saw a 5.2% increase in candy sales last year.  Kraft actually reported a 5.7% decline.   

Scott goes on to detail why this fight for Cadbury is important to the other companies and the candy business overall.  However, in the grand scheme of things, it’s interesting to watch the consolidation of this particular category.  One has to wonder, if over time it will continue to significantly diminish in size, once the rest of the world adopts the western way and decides that the joys of candy aren’t worth the calories or cavities.  Do you think that the candy category will eventually go away as a major business and be reduced to a segment within a CPG?  Can you think of any other products categories where major players dissolved to segments of larger diversified consumer companies?

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However, whether the rise started before or after the crisis was declared, the fact remains that private label is infringing on the positioning of package food companies.  “When we come out of this economic slide, this is probably the single biggest thing that’s going to be facing branded-food manufacturers,” said Harry Balzer, chief industry analyst at research firm NPD. Fortunately, according to the article, CPG’s are beginning to realize this as challenge to their future sustainability. Read more here.

Al Wittemen’s article in the November issue of HUB Magazine refers to the online world as “second life.” According to Wittemen, most everyone has a second life, interactions that exist primarily through online experiences. So now CPG’s are trying to meld the best of both worlds, using the measurability of online activity to predict as well as influence offline behaviors. P&G seems to be at the forefront of this experiment. Wittemen describes their Tide.com site:

“It’s absolutely brilliant from a shopper marketing perspective. When you click on any of the various products, the entire shelf set comes up in a flash movie. If you remember, a few years ago every P&G shelf set was standardized so that it is nearly identical from store to store. This allows consumers to have an experience with Tide in any store, in the comfort of their own homes.”

The benefit of this type of online scheme is farming data on shopper behavior quickly and easily. Last week, P&G invested $7.5 million for a 1 percent stake in Ocado, a British online grocer. Tressie Long, spokeswoman for P&G said of the investment, “It’s an opportunity for us to deepen our understanding of unique shopper knowledge that Ocado offers. We see their business model as fertile testing ground for new ideas.”

P&G seems to understand that cost and price manipulations are not going to do the trick in the long term. It’s like we mentioned yesterday in reference to the Nielsen report that, “marketers will have to get much closer to their customers.” The second life concept presents a way to build that closeness. Wittemen muses that marketing will have to become more relevant. “Relevance are things that may be a little softer, but more meaningful in our lives. You have to have some relevance with people’s lives to connect with them on an emotional level.”

Progressive Grocer reported that Giant Food, a large northeast grocer, recalled several of their private label bakery products. Apparently, some of the products contain nut allergies that were not declared on the packaging and could be lethal. No illnesses were reported but better safe than sorry. I can hear my brand conscious friends declaring, “That’s exactly why I only buy named brands.” So could this be a strategy for CPG’s?

With the flailing economy taking its toll on main street CPG’s are trying to figure out how to keep market share when people are so increasingly focused on value. Lowering cost is an obvious option. But another option to challenge private labels is changing the emotional trigger from brand consciousness to trust and safety. If the perceived benefit is not cachet but health and well being for one’s family, CPG’s could be at an advantage. With bigger budgets for research and quality controls, CPG’s do have something to offer besides the fancy package. Carrying that message from traditional advertising, through to the store, using the shelf to communicate this value proposition right when brand loyal customers are waffling, could make a difference in whether or not CPG’s are able to hold on to those relationships.