Sugar and Gum Confectionery

Transcription

1 Sugar and Gum Confectionery

2 Chris Wisson Senior Food Analyst Despite facing a challenging outlook of rising costs and falling user numbers, sugar confectionery looks to be well placed to remain a part of consumers snacking repertoires. As consumers are increasingly looking to balance healthy diets with indulgent treats, most users come to the sugar confectionery market to allow themselves a treat and lift their mood. 1

3 The Market Figure 1: Forecast of UK retail sales of sugar confectionery, by value, Figure 2: Forecast of UK retail sales of gum, by value, Source: Mintel/based on SymphonyIRI Group InfoScan Despite falling user numbers, an increasing focus on healthy eating, ageing population and rising sugar prices, the sugar confectionery and gum market has grown slightly by 6% over to 1.58 billion. However, a decline in the market value in constant 2006 prices suggests that growth in the market is coming through inflation. Soft confectionery such as jellies and gums remains the largest segment of the market at 44% of sales, supported by the success of soft fruit brands such as Haribo and Rowntree s Randoms. Mints hold a fairly static share of 14% in the market while gum has shown signs of improvement following years of decline, to stand at 19% of sales in Manufacturers have been proactive in terms of NPD, with own-labels in particular strongly ramping up their levels of product launches. The market appears to be following the trends in chocolate confectionery with a notable increase in sharing bags and price-marked packs. Soft jelly brands such as Haribo have shown strong growth through adopting this approach and are putting increasing pressure on the market s leading brands, Mars and Cadbury Trebor Bassett. Forecast Mintel expects the sugar confectionery market and gum segments to both grow by 10% over , to 1.4 billion and 327 million respectively in Growth of both segments will continue to be supported by high numbers of people allowing themselves small treats such as sweets, enthusiasm for NPD, population growth in the age group of core users and an increasing focus in NPD on building on trends such as healthier sweets and sharing formats. 2

4 While the leading brands are likely to continue investing heavily in NPD and advertising, rising sugar prices, financial pressures on households and an ageing population are likely to pose challenges to both, limiting growth to a certain extent. Market Factors Rising sugar prices squeezing manufacturer margins The retail price of sugar confectionery has risen in recent years in response to rapidly escalating sugar prices, with monthly averages increasing by around a third in 2011 over the previous year. Unpredictable yields and shortages have led to prices reaching record levels which manufacturers are finding increasingly difficult to absorb and not pass onto the consumer. The increasingly commonly adopted strategy appears to be driving sales through larger packs and aligning with consumers interest in reduced sugar options, something which gum has already done effectively by replacing sugar with sweeteners. Consumers to remain cautious over discretionary purchases Consumer confidence looks likely to remain unsteady in the short term with discretionary purchases limited. However, sugar confectionery is well positioned to capitalise on the enduring demand for small treats, with 55% of users identifying wanting a treat as a reason for eating sweets. The low cost of sweets and strong impulse orientation of the market suggest that it may be less at risk than other food categories. Meanwhile, people have cut back on activities such as going out, with more staying in, this trend contributing to the growth of formats such as sharing bags. Declining user numbers a threat to market growth Despite rising numbers of Brits who claim that they snack, sugar confectionery has lost users in all segments. An increasing proportion of heavy users for mints and sweets has helped support the segments, while gum s loss of both medium and heavy users has contributed to its falling market value in recent years. An ageing population may be problematic for certain segments An ageing population is likely to affect brands in different ways. The predicted 9% increase in over-55s is good news for the mint segment, with this group the most likely to eat mints. Hard confectionery such as boiled sweets and liquorice may also benefit, but this demographic shift is likely to be less positive for softer confectionery and gum for which the over-55s show decidedly low usage. Soft confectionery sweets such as jellies enjoy high usage among a broad age group, from the age of 15 up to 44. On the one hand, the 11% projected growth in the age group will help to drive market growth. However, declining numbers in the and age groups, who are also key users, will offset this to some extent. Gum will also rely on the high-usage age group to offset its very low usage in the older age groups. Companies, Brands and Innovation Figure 3: Brands retail value shares in sugar confectionery and gum, 2010 Other/Own label 50% Source: Mintel Ferrero 2% Haribo 8% Mars 20% Nestlé 8% Cadbury Trebor Bassett 12% 3

5 Mars and Cadbury under threat despite holding a third of the market The sugar confectionery market is relatively fragmented with the presence of a large number of smaller brands. Combined with own-label offerings, these smaller operators represent half of the total market which highlights the importance of this long tail to support sales. Mars remains the dominant company with a market share of 20% (equating to 312 million), although it has suffered a 5.5% decline in sales since 2008, reflecting the falling sales of its largest brands such as Starburst. The company s acquisition of Wrigley s in 2008 coincided with a slump in the gum market with Extra and Airwaves struggling. NPD and a reevaluation of existing products have generated some growth in 2011 with new consumers attracted to the gum market. The other main presence in the market is Cadbury Trebor which has also had a challenging couple of years and lost market share, the company s sales falling by -8.8% since Despite the success of its Natural Confectionery Co range, the company s Maynards and Bassett s sweets brands have struggled and the Trident chewing brand has slumped notably in sales. While Cadbury has rejuvenated gum sales by streamlining the range and extending its Extra Strong Gum portfolio, the company remains under increasing competition from other brands. Two of these are Nestlé (particularly through its Rowntree s Randoms brand) and Haribo, which have made great strides and driven growth in the soft fruit sweets segment. Both brands have tapped into consumer interest for sharing, flavour combinations and cost-effective larger bags to drive sales. There has also been renewed interest in mints with brands such Polo (Rowntree s), Tic Tac (Ferrero) and Mentos (Perfetti Van Melle) showing signs of growth. Healthier sweets grow in importance in product launches Manufacturers have responded to consumer interest for healthier foods with an increasing number of new product launches without additives/preservatives, less sugar and more vegetarian-friendly options. Own-label launches have grown rapidly since 2008 with almost a fourfold increase in their share of the total, meaning that they have now overtaken branded NPD. Soft fruit sweets such as jellies and pastilles are the most common segment for NPD at around a third of the total annual launches, reflecting their lead in sales. The share of gum has fallen from 19% to 6% since 2008, which may provide some evidence for its struggles to grow sales in recent years. Figure 4: New products in the UK sugar confectionery and gum market by most common claims, * 35% 30% 25% 20% 15% 10% 5% 0% No Additives/ Preservatives 28% Vegetarian 21% * January-August 2011 Low/No/ Reduced Sugar Source: Mintel GNPD * 7% Ethical - Environmentally Friendly Package 4% 3% Seasonal Low/No/ Reduced Allergen 2% 2% 2% Gluten-Free Children

6 Figure 5: New product launches: own-label vs brands, * 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 85% 15% * January-August % 20% 69% 31% 44% 56% * Source: Mintel GNPD Own-label Branded Mars and Cadbury drive advertising spend back into growth in 2010 Sugar confectionery has a fairly consistent and low adspend to sales ratio of 1-2%, reflecting the fragmented market, with only a small number of players of size and growing influence of own-label in the market. After a fall in 2009, adspend grew in 2010 as brands looked to capitalise on the consumer trend for small and affordable treats, with jelly sweets and gum in particular benefiting most since 2008 in terms of adspend. Gum s recent sales decline appears to tie into the segment s significant cuts in adspend, falling from 17 million in 2007 to 9.4 million in A slight renewal of focus on advertising in 2011 has helped generate sales growth which appears to be important to keep gum consumers engaged with the segment. On the other hand, sugar confectionery s growing sales are mirrored by increased annual adspend driven by the leading brands. Adspend in 2010 for the segment reached a peak of 15.5 million, with January- October 2011 adspend for sweets double that of gum. Mars and Cadbury s are the highest overall spenders on advertising, the former strongly supporting its Wrigley s products and Cadbury s investing in its Natural Confectionery Co range and Maynards Wine Gums. Nestlé (Rowntree s Randoms), Haribo and Ferrero (Tic Tac) have also invested heavily in promoting awareness of their brands. This has been successful for all three companies, with significant market share increases in recent years. TV advertising slumped from 2008 after Ofcom regulations were introduced which prevented the advertising of HFSS foods to children. However, brands now appear to have resolved this problem, with TV growing again in importance, to represent over two thirds of all adspend in Several highprofile campaigns have looked to capitalise on the increase in consumers staying at home in evenings. Press and radio advertising are also growing in importance, though continuing to play a niche role, as brands attempt to reach their target demographics more effectively. The Consumer Mints are the most widely eaten type of sweet Consumer interest in sweets continues to thrive with high usage across a wide range of types and only 8% not eating sweets of any type. Mints are the most widely eaten type of sugar confectionery at 66%, benefiting from strong interest from the over-55s who often shun the other sweets and gum segments. Nevertheless, mints only contribute around 14% to the value of the market, which instead relies on the next most used type of sweet, jellies, which account for 29% of market sales. Gum also enjoys reasonably high usage with one in two adults chewing gum. 5

7 Figure 6: Usage of sugar confectionery and gum, by type, August 2011 Base: 1,500 internet users aged 16+ Jelly-style sweets Toffees and caramels Liquorice sweets Loose, pick n' mix style sweets I have not eaten sweets or chewing gum in the past year Source: Toluna/Mintel Mints Chewing gum Boiled sweets Sugar-coated Chews Bubblegum Other Many consumers still like to treat themselves with sweets The most likely occasion for eating sugar confectionery and gum is as a treat/to lift a mood (55%). Similarly, 47% eat sweets to satisfy a craving which highlights the importance of impulse and emotional responses for the market. Sharing also comes across as a notable occasion with over a third eating sweets when offered by others. The market appears to have benefited from the trend of more people staying at home in response to growing pressures on household budgets. A third eat sweets while watching a film and usage is likely to have been driven by more people staying at home in the evenings. However, over two thirds of consumers have a narrow usage repertoire and only eat sweets on three or less occasions. % Figure 7: Usage of sugar confectionery and gum, by type, August 2011 Base: 1,388 internet users aged 16+ who eat sweets When I want to treat myself/lift my mood When I need to satisfy a sweet craving When offered by others At a cinema/while watching a film at home When sharing with others While driving/commuting When I need an energy boost When I've bought some for my children When I need help to concentrate None of these Source: Toluna/Mintel 4% 13% 12% 25% 29% 28% 36% 34% 47% 55% 0% 10% 20% 30% 40% 50% 60% Penetration of sweets and mints is fairly high, with seven in ten weekly users. Less than a quarter of sweet eaters limit their consumption to just one or two types of sweets, with (46%) eating three to six types. Women, under-45s and households with children show the highest usage of sweets, which drops off significantly among the over-55s whose engagement with the segment centres on traditional style sweets such as boiled sweets and liquorice. The usage of mints peaks among over-65s, retirees and women, although there is also notable interest among year olds. Gum usage is geared towards less frequent usage than for sweets, with only 53% of users chewing gum at least weekly. The most likely groups to use gum are women, and under-35s, particularly in the age group. Sharing and newness important for sweet eaters Sharing and newness resonate strongly with sweet eaters, with two thirds agreeing that they usually share their sweets and that they like to try new types. Those aged are the most likely group to embrace newness and adopt an enthusiastic and adventurous attitude towards the sweets segment. Flavour combinations and sour sweets are also showing signs of growing influence in the market, with recent launches such as TNCC s Guzzle Puzzle seeing a positive early response from consumers. % 6

8 Sweets also fare surprisingly well in terms of their health image with 45% of consumers thinking that sweets are healthier than they used to be, with only a quarter restricting how often they eat sweets because they are unhealthy. Additionally, only a third feel guilty about eating sweets with women most likely to hold these views. Consumer preference for the use of natural fruit juice (55%) and reduced sugar (40%) and the fact that, 85% of parents are happy to give their children sweets as an occasional treat mean that developments into healthier sweets have a good chance of being well received by the market. 71% of gum eaters like to have a pack handy which indicates a robust level of consumer engagement and interest in the segment. Half of users would like to see further benefits such as added vitamins/ calcium, suggesting potential for manufacturers to expand functional benefits beyond the widely seen dental health. Figure 9: Attitudes towards gum, August 2011 Base: 760 internet users aged 16+ who use Chewing gum or Bubblegum Figure 8: Usage of sugar confectionery and gum, by type, August 2011 I use chewing gum to freshen my breath I like to keep a packet of chewing gum handy I use chewing gum to keep my teeth healthy Base: 1,388 internet users aged 16+ who eat sweets I like to try new flavours of chewing gum I prefer the tab gum format (eg Airwaves) over stick gums I usually end up sharing my sweets I would like to buy a gum with added vitamins/calcium I like to try new types (or flavours/varieties) of sweets Using chewing gum helps me focus and concentrate I prefer sweets using natural fruit juice I use chewing gum when I'm stressed I am happy to give my child sweets as an occasional treat It's hard to choose a chewing gum because there is so much choice Sweet recipes are healthier than they used to be eg less E numbers, artificial colours I would not give my children bubble gum because it is unhealthy I would buy more sweets with reduced sugar % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Any agree % Neither agree nor disagree % Any disagree % Sweets are good value for money compared with other treats/snacks Eating sweets tends to make me feel guilty Source: Toluna/Mintel I rarely eat sweets because they are unhealthy Sweets are not as bad for you as chocolate What we think 0% 10%20%30%40%50%60%70%80%90%100% Any agree % Neither agree nor disagree % Any disagree % Source: Toluna/Mintel Gum users look for functionality Functionality comes across strongly for gum with 92% of gum users chewing to freshen their breath, with credentials such as keeping teeth healthy chiming with six in ten gum users. Usage peaks among the under- 35s, with users showing enthusiasm for new flavours (59%) and preference for the newer tab format (58%), highlighting the key role of product innovation in the market. NPD in the gum segment has slumped in recent years in tandem with falling sales and a large drop in adspend, although there were signs in the first three quarters of 2011 that increased NPD has helped to rejuvenate sales. Despite facing a challenging outlook of rising costs and falling user numbers, sugar confectionery looks to be well placed to remain a part of consumers snacking repertoires. As consumers are increasingly looking to balance healthy diets with indulgent treats, most users come to the sugar confectionery market to allow themselves a treat, lift their mood and to satisfy a sweet craving, something which has helped drive growth. Sugar confectionery enjoys a surprisingly positive image with 45% of users thinking that sweets are healthier now and only a third feeling guilty about eating them. There is also strong minority demand to see healthier sweets with two in five users stating that they would buy more sweets if they had less sugar. The appeal of better-for-you sweets is highlighted by the success of Cadbury s TNCC brand since its launch in

9 Reducing the sugar content of sweets may ultimately be a move that many manufacturers are forced to make. Rapidly increasing sugar prices pose a real threat to the market and may lead to further price increases having to be passed onto the consumer. The market s reliance on impulse buying and rising prices at a time when many consumer budgets are being squeezed may lead to increasing numbers questioning their discretionary purchases in this area. The market has recently followed the lead of Chocolate Confectionery and placed an increasing emphasis on the social aspect of snacking, tapping into the fact that the majority of users (66%) typically share their sweets. Brands have already capitalised on this with the launch of a wide range of sharing bags, which consumers often perceive as offering good value. With no foreseeable easing of consumer budgets, it is likely that sharing bags and round pound deals will continue to find considerable favour with the public. In recent years, innovation which genuinely offers something new has been well received by consumers. Products such as Rowntree s Randoms and TNCC s Guzzle Puzzle have been important in driving visibility of, and interest in, the category and the market will rely on developing examples like this to continue growing. Consumer desire for newness is strong, particularly in the high-usage younger age groups, which underlines the key role of NPD in maintaining engagement. Gum s struggles in recent years appear to have come partly from a lack of impactful NPD; it is perhaps no coincidence that an upturn in the segment s fortunes in 2011 has come with a fresh approach to product innovation and marketing support. The sugar confectionery market is relatively unique in terms of containing some brands which hold equally strong appeal for both children and adults. The likes of Haribo and TNCC in particular have seen significant growth in recent years on the back of their ability to blur the boundaries of adult and child-oriented sweets and in doing so, appeal to a wide cross-section of consumers. The future for the market looks relatively bright with consumers responding positively to NPD and eating a wide range of sugar confectionery across various occasions, their role as an affordable treat positioning them well in the short term. Healthier sweets, sharing and the ongoing battle against rising prices are likely to be influential in determining whether the market s fortunes remain sweet or start to turn sour. 8

10 Chris Wisson Senior Food Analyst Telephone +44 (0) Chris researches and writes reports on the UK food industry. Prior to joining Mintel in July 2011, he worked for M&S/Park Cakes as a Bakery Merchandiser and as a Business Analyst at Moët Hennessy. Chris has a first class BA degree in Geography. 9