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Wm. Wrigley Jr. Company (WWY)Stock (Food & Beverage Industry, Confectioners Industry, Consumer Products Industry)
The WM Wrigley Jr. Company (NYSE: WWY) is the world's leading chewing gum manufacturer and has grown sales in the last 5 years at a compounded annual growth rate of 11.3%, realizing revenues over $4.6 billion in 2006. At 2006 year-end, Wrigley held a 63% share of the chewing gum market worldwide and 59% share in the U.S. Atop the chewing gum industry, Wrigley is looking to opportunistically expand products beyond its core chewing gum franchise and source additional growth from its already strong international division. It also faces particular challenges from main competitor Cadbury Schweppes (CSG), the number two chewing gum player. While Wrigley earns approximately 90% of revenue from chewing gum, it has expanded into other confectionery products such as breath mints, hard candy and [[Mocha: Coffee and Cocoa|Chocolate]]. The company extended into non-gum confections by acquiring several brands from Kraft Foods (KFT), including Life Savers, Altoids, and Creme Savers, in 2004. In February this year, Wrigley bought majority control of a premium Russian Chocolate company, A. Korkunov, in order to further diversify outside of chewing gum. A large portion of revenue growth comes from outside North America, which accounts for only one-third of total sales. Key regions of focus include China, which remains largely untapped for chewing gum, and the U.K., a mature market where Wrigley's 99% market share eroded to 85% in a matter of months due to Cadbury's introduction of its Trident gum brand. Asia--especially China--remains a potentially lucrative market due to the large population size and relatively untapped customer base. Finally, Wrigley must deal with changes in consumer taste, especially in the U.S., where 77% of 2006 chewing gum sales was for sugar free gum (compared to 72% in 2005). Wrigley has responded to this trend by releasing several brands of sugar free gum, including the highly successful Orbit brand, which is the fastest growing domestic gum. Wrigley's dominance in North America is threatened by Cadbury, which skews 90% of its gum products to sugar free, compared to 77% for Wrigley.
[edit] Company OverviewWrigley was founded in 1891, when it introduced its first two brands of chewing gum: Juicy Fruit and Wrigley's Spearmint, both of which are still sold today. In addition to the original brands, Wrigley owns and sells chewing gum under the following brand names: Doublemint, BigRed, Boomer, Winterfresh, Extra, Orbit, Excel, Hubba Bubba, and others. Wrigley expanded into other confectionery products in 2004 by acquiring several brands from Kraft Foods (KFT), including Life Savers, Altoids, and Creme Savers. In February 2007, Wrigley acquired an 80% interest in the Russian premium Chocolate company A. Korkunov in order to further diversify its confectionery production outside of chewing gum. Wrigley depends heavily on international business, with approximately 63% of its revenue coming from sales outside of North America. The highest grossing region for Wrigley in 2006 was the EMEAI (Europe, Middle East, Africa, India) region, which accounted for 45% of total revenue. Asia currently contributes to 13% of Wrigley's total revenue but that could increase significantly as chewing gum consumption rapidly rises in China and other Asian markets.  [edit] Trends and Forces[edit] Asian Chewing Gum MarketOne of Wrigley's biggest potential areas of growth is the Asian chewing gum market. In 2006, 13% of Wrigley's total revenue came from sales in Asia with an operating margin of 26% (compared to 20% in N.A.). Wrigley has an opportunity to both capture new customers as well as increase the average servings per current customer, who purchases 15-20 servings annually. Wrigley currently owns four manufacturing plants in China and has made it clear that they intend to increase their presence in Asia with increased marketing expenditures in the region as the regional economy continues to gather steam. This potentially lucrative market has not gone unnoticed by other chewing gum companies such as Cadbury Schweppes, the company's main competitor. Wrigley's has already felt the sting by Cadbury's entry into the smaller and mature U.K. market.  [edit] Competition in the United KingdomCadbury Schweppes launched its successful Trident brand of chewing gum in the United Kingdom in February 2007. Before Trident's entrance, Wrigley held a near monopoly (99% share) of the chewing gum market in the region. Within the first four weeks of Trident's launch in the U.K., Cadbury Schweppes gained 4 percentage points of market share in the U.K. chewing gum industry. As of April 1, Cadbury Schweppes market share in the U.K. had grown to 15%. In an attempt to take back its lost market share of an estimated $500 million market, Wrigley launched several new products (Extra Ice Liquid, Orbit Complete) and increased its marketing presence for both new and legacy brands.  [edit] Sugar Free Chewing GumThe U.S. chewing gum market increasingly prefers sugar free chewing gum and sales are shifting away from traditional sugar sweetened products. In 2006, sugar free gum accounted for 77% of total chewing gum sales in the U.S., up from 72% in 2005. Overall sales of traditional chewing gum decreased 14% in 2006 while sales of sugar free gum grew 11%. Wrigley has responded to the trend towards sugar free gum by adding multiple brands to its arsenal in recent years. Its most successful entry, Orbit, is the fastest growing chewing gum brand domestically with sales increasing 23% from 2005 to 2006, when it generated $176 million in sales. Wrigley hopes to continue this momentum by continuing to add new products across gum categories, such as "5", a sugar free gum due to be released in the summer of 2007. "5" is different from Orbit and other currently popular chewing gums because it is going to be sold in stick form, rather than the popular pellet form. [edit] Moving Beyond Chewing GumWrigley is a self-proclaimed confectionery company, but 90% of its revenue comes solely from chewing gum sales. The company is in the process of trying to increase its focus on the 10% of revenue that comes from sales of other confectionery goods, such as breath mints and hard candy. One of Wrigley's significant ventures outside of chewing gum is the development and marketing of several confectionery brands bought from Kraft in 2004, including Altoids (breath mints) and Life Savers and Creme Savers (hard candies). These former Kraft brands accounted for approximately 8% of sales in 2006. Apart from these brands acquired from Kraft, Wrigley bought an 80% interest in the Russian Chocolate manufacturer, A. Korkunov, in early 2007 to dip its toe into the [[Mocha: Coffee and Cocoa|Chocolate]] industry currently dominated by giant Hershey Foods (HSY). [edit] CompetitionWrigley is technically a confectionery company, but the overwhelming majority of its business comes from the sales of chewing gum. As such, its main domestic and global competitor is Cadbury Schweppes (CSG). Like Wrigley, a large portion of Cadbury Schweppes' revenue comes from chewing gum. Cadbury Schweppes owns and produces popular chewing gum brands such as Trident and Stride. However, Cadbury Schweppes produces other confectionery products as well as soft drinks. Chewing gum accounted for 30% of total confectionery revenue for this competitor in 2006, worth approximately $1.5 billion. One major difference between Wrigley and Cadbury Schweppes is their product mix of sugar sweetened and sugar free gum; an overwhelming 90% of Cadbury Schweppes' chewing gum is sugar free, while only 77% of Wrigley's chewing gum is sugar free. This gives Cadbury Schweppes an advantage as the current consumer prefers sugar free gum. Currently, Cadbury Schweppes is taking market share away from Wrigley, both domestically and internationally (notably in the U.K.). Cadbury Schweppes is a larger company than Wrigley counting revenue from beverages and non-gum confectionery products, potentially giving them scale advantages in purchasing power, marketing and other resources. 
 Wm. Wrigley Jr. Company2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] References |
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