Published : 2014-07-04
Chewing-gum makers hopes that smaller packs at lower prices can put some pop back into sales.
Kraft Foods Inc. is selling five-stick packs of Trident and Stride gum in the U.S. for 50 cents each, offering a more affordable size to appeal to customers who were balking at the higher-priced packs.
Gum titan Wm. Wrigley Jr. Co. plans to offer smaller and cheaper packs of gum starting next year, according to Denise Young, Wrigley's director of corporate affairs in North America. Wrigley is owned by privately held Mars Inc.
Kraft and Wrigley hope the smaller sizes will be cheap enough to land in the purses and pockets of consumers, especially teenagers, a group that has turned its back on more expensive, packs of gum. Packs of Trident, with 18 pieces, and Stride, with 14, sell for suggested prices of $1.29, a level that Kraft Chief Executive Irene Rosenfeld has was too much for teens to cover with pocket change.
"This pack provides us with an opportunity to re-engage with some consumers who left the gum category or who are entering convenience stores with less money in their pockets," Kraft spokesman Basil Maglaris said.
Gum becomes the latest food item to be hit with the shrink ray to try to appeal to cost-conscious consumers. Coca-Cola Co. recently launched 12.5-ounce bottles of pop for 89 cents as a smaller on-the-go complement to its 16-ounce and 20-ounce bottles. Heinz Co. also plans to introduce new sizes of products, like ketchup, to appeal to consumers who are struggling the most.
The moves pose some risk, since the sale of each product brings in fewer gross dollars. But companies hope that they sell enough of the smaller products to make up for sales lost out on entirely because the price is too high. Kraft expects sales of the smaller sizes to be incremental to its gum business, Maglaris said.
The upside is the smaller sizes have higher profits. In Kraft's smaller packs, each stick will sell for 10 cents. In the larger packs, each Trident stick sells for about 7 cents and each Stride stick sells for about 9 cents.
Kraft will prominently feature the smaller gum packs -- Trident, in original and spearmint flavor, and Stride in spearmint -- in convenience stores in standalone displays. In December, the 50-cent packs will be sold alongside the other gum. The company whipped up the strategy for smaller packs over the last three or so months, after seeing revenue for its North American gum and candy business fall double-digits in its fiscal second quarter ended June 30.
Kraft also hopes to try to wrest back some market share from the larger Wrigley, which makes Orbit, 5, Eclipse and Extra gum brands. Wrigley's U.S. sugarless gum sales were up 0.4 percent, to $1.25 billion, for the year-ended Oct. 2, while Kraft's fell about 6 percent, to $888 million, according to SymphonyIRI Group. The data exclude sales at Wal-Mart Stores Inc.
Trident is one of Kraft's billion-dollar businesses, and globally, gum and candy sales made up 10 percent of Kraft's revenue in fiscal 2010.
Kraft shares were recently at $35.20, up 11.7 percent on the year. The world's second-largest food company by revenue is planning to split itself up into a global snacks business, which will include gum, and a North American grocery business, which will house its cheese, Maxwell House coffee and other brands. Kraft reports fiscal third-quarter earnings Nov. 2.