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?

Many reasons have been cited for Kraft’s interest in adding to their candy cache. One point of interest proposed by Erin Swanson, a Morningstar Analyst, is the lack of private label competition in the confectionery category. “Strategically, we believe the acquisition of Cadbury makes sense for Kraft as the firm stands to gain a larger foothold in the attractive confectionery industry (which is higher growth and higher margin than other categories in the packaged-foods space). Private-label competition is minimal in the confectionery market (in contrast to Kraft’s other segments), and the deal would not only expand the firm’s international presence but provide it with an expanded platform to distribute some of its existing brands.”

Cadbury, however, is still holding out, maintaining that shareholders would like to see the company remain independent. In addition, The Wall Street Journal reports that Cadbury’s third quarter sales figures were robust, making an acquisition appeal even more costly for Kraft Foods.

Several important dates are coming in the Kraft-Cadbury saga. Kraft is expected to release their third quarter results on November 3rd during which they may reveal their cards in the deal. November 9th is the deadline for Kraft to make another approach to Cadbury (based on the English rules of takeover engagement). It will be interesting to watch this one unfold in the coming weeks.

Kraft recently announced plans to increase “retailer-specific in-store marketing program[s] for Meal Solutions.”  Realizing that demand is increasing for this type of information in the store, the manufacturer is partnering with Meijer and other major retailers to roll out programs that will meet the need. This is a great example of retailers and manufacturers working together to improve everyone’s position on the chain. According to CPG Matters, Kraft’s Denny Belcastro stated that, “Ultimately, were looking to create a point of difference for our key retailers with meal ideas that provide solutions for their shoppers.”

Publix grocery stores have also heavily invested in the meal solutions idea with the Publix Apron’s program. Demo tables are set up in stores where shoppers watch as employees create simple, easy meals while they wait.  They can then sample the recipe (to make sure it’s worth the trouble), pick up a recipe card and gather all the ingredients in a case right beside the demonstration station. Publix has even opened Apron’s cooking schools featuring celebrity chefs and tested the idea of a Make-Ahead Meal store, although that didn’t go so well.

What do you think of the meal solution idea? What are some other creative ways manufacturers and retailers can work together to stimulate sales in the store environment?

Bryson listed Kraft, Kellogg and General Mills among companies that see value in continuing to pump monies into their advertising budgets. At that time, the manufacturers found that upping their marketing spending allowed them to pass on price hikes without losing the customer. That idea might be a harder sell this week. Things have changed and manufacturers will need marketing more than ever to stay competitive with value focused private labels. But how do you continue marketing, compete with private label pricing and stay profitable? The answer is value engineering.

It is imperative that manufacturers get the most out of their marketing dollars — particularly for marketing in the store where brands are placed alongside private labels. Partnering with a display and fixturing company that is strong in value engineering, has capabilities in multiple materials (sheet metal, wire, wood and plastic) as well as in house engineering can stretch those dollars. Creating modular design elements that allow multiple configurations, making use of fixtures engineered for easy installation and graphic change out without additional hardware requirements are all solutions that maximize in store marketing investments. Another solution is international sourcing. Just be sure you have a partner that has many years of international experience and employees on the ground inspecting factory production processes to ensure you get a high quality product. 

In Bryson’s article, Larry Light, former global CMO of McDonald’s, articulates the value of marketing in today’s economy. “Investing in brands during a rough economy can not only fend off share loss but also boost the brand’s trajectory when things improve.” Light’s research classified companies who spent more on advertising and marketing during a recession as “winners” and those who cut spending as “losers.”

According to Light, “Losers cut marketing in a recession, and the result is they simply accelerated their loss in market share after the recession.” Value engineering keeps your brand in the game.