Issue #4: A Kiss from Hershey
We are going back-to-back into action with another issue in this week's Confectionery Chronicles with brand-new highlights from the biggest brands in the game.
Work at the factory has come in hot so there is a lot to do and little time to discuss the details of my busy week but as always we are working on new and exciting things here at St.Moritz.
We have some new teams on deck that are starting very exciting projects and sales are looking good coming into the second quarter of the year despite all of the uncertainty of cocoa prices and of course the usual volatility of the Venezuelan market.
But I always see the beauty in the chaos, and I love my chaos although sometimes it can get to your nerves. But let me be worried and you have fun informing yourself about the latest and hottest stuff in the confectionery industry
ENJOY!!
Sweet Spotlights 🍭
The Snack Keeps Smiling Back
A lot of you might not know this but Campbell's Soup has diversified its portfolio over the years so much that its core business is now the area of snacking. They have acquired notable companies like Cape Cod Potato Chip Company and Pepperidge Farm. The latter has proven to be one of the most important strategic moves in the company's history.
The reason behind this is none other than the IP, Goldfish Crackers. Sure we might talk about other key brands like their Milano cookies or household items like rolls and slices of bread but Goldfish takes the crown when it comes to value, especially since Campbell's snacking division has decided to invest heavily in innovation and variety for their cash cow.
Goldfish has gained a lot of traction in the sense of brand awareness since 4 years ago when the brand decided to pivot in favor of innovation for their snacking line. This was mainly to broaden their market scope and appeal to many demographics.
Some of the tactics they have used to elevate sales have been creative and dynamic in a way that many legacy brands can learn to use to reinvent themselves:
-Collaboration with popular and regional brands like Frank's RedHot and appealing IP like Hello Kitty to reach several audiences
-New product formats like their Mega Bites which are 50% bigger than your average cracker but maintain the same net weight
-New and bold flavors for older demographics like Aged Cheddar, or appeal to savory tastebuds with Cheddar Jalapeno
-Play with both spectrums of flavours both Sweet and Salty to offer wider options at the time of snacking
-Agile innovation cycling by introducing several seasonal products and variations across the year
This is the winning formula that Campbell's has used to keep Goldfish a relevant brand after so many years in the market. Considering they launched the snack in 1962 after acquiring Pepperidge Farm, it is safe to say that it has grown to be in the Hall of Fame of snacks.
(An inside look at the innovation of Campbell Soup’s $1B Goldfish crackers brand | Food Dive)
Box it up
We have covered it here before but packaging is an integral part of the inherent success of a product when it gets to commercial shelves. Packaging must be both, flexible and attractive in terms of benefits and looks whilst also representing a small added price to produce the actual product.
But with time we get changes in consumer behavior that shift our preference for packaging in order to please the ultimate consumer and also to stay aligned with macroeconomic trends like the always important concept of sustainability. Therefore, I decided to dig deeper into this subject and analyze the top 4 packaging trends in the confectionery industry:
-Biodegradable materials: Consumers are no longer sharing the responsibility to be environmentally friendly as they now demand that their favorite brands transcend their environmental efforts into their packaging. Not only will consumers prefer to buy products that are packaged with recyclable material or made from the same, but they now demand it as one of the "must haves" in the area of packaging.
The use of biodegradable materials has increased by 118% since October 2018 and it's just rising as we speak for preferential packaging options.
-Personalization: Phygital has entered the market by storm, using packaging as a means to increase the brand's interactions with consumers via the use of augmented reality and QR codes. This has allowed logistics and marketing departments a lot closer since this type of interaction expands the spectrum of promotional chances and also increases brand loyalty.
For example, you can put a QR code on a Snickers bar in order to take you to a landing page for a promotional raffle in which you are able to get more data from your customers while also giving them the chance to win something cool.
-Bold and minimal designs: Both extremes of packaging have taken a more active approach to conveying an image to consumers. The amount of stimuli you provide in your packaging can be key to projecting your brand mission, vision and ideals to your customers in an effort to make them feel closer to the products they love. For example, some may convey elegance with a minimalistic approach that perhaps will transmit a premium feeling, while others might make it a lot bolder to convey a fun sensation of consuming the product
-Flexibility: This one is my favorite as it applies the notion of creativity to the top. Packaging must find a way to pop out and not only be pretty looking but also provide benefits to consume, store, and uniquely open the product. There are many examples but some of them can be a Lunchable model to store different items that make up a product, a zipper on a plastic pouch to conserve products or perhaps an easy open option to avoid opening up entire bags of cookies.
(Top packaging trends in confectionery (confectionerynews.com))
Cocoa Culture 🍫
Cocoa Price as of 23/05/2024
Well, after the little hike we had in the last few weeks, we are starting to see a drop in stability to almost reach the base of the rise that we saw around February 16th with optimistic feelings of reforms and farming projections that will help the price of cocoa go down and start taking us out of this crisis.
Mondelez - There is no Such Thing as a World Without Chocolate
Mondelez came into the highlights last week with a very positive view of the cocoa market both in 2024 as well as the upcoming 2025. The confectionery giants are still confident that chocolate will be a sector to invest heavily in throughout this crisis.
Mainly, Mondelez argues that chocolate has a very resilient market position as it is an integral part of people's lives coming close to being part of a person's identity and routine. Product loyalty and moreover brand loyalty of chocolate is also integral to remaining optimistic in the near future. Massive companies like Mondelez will be supported by the massive value of their brands including Cadbury and Milka which are non-negotiable in consumer's minds when it comes to selecting options to please their sweet tooth.
Another integral part that I found very interesting was the high barrier of entry into the massive production of chocolate. Mondelez appeals that as a high margin and complicated product to fabricate, chocolate possesses high entry barriers for new players to step in, specifically the biggest threat to these massive companies... Private labels.
Mondelez also highlights the importance of continuity in supply and sales by maintaining critical price points in line to keep demand flowing. In terms of supply, call options to secure new crop shipments will be ideal despite its current high costs as companies cannot and should not afford a shortage of product. Mondelez says it is covered with supply until the end of 2024 and it has now entered a strategic standpoint to start securing supply for 2025.
(Mondelez CEO upbeat about chocolate business’ long-term outlook | Food Business News)
Hershey Following Through
Following up with that last news, The Hershey Company is not far behind in terms of achieving financial success in 2024 as they have presented strong KPI achievements over Q1. Cocoa prices were also a big concern for the American giants but they have overcome it with sound financial, marketing, and operational practices, and it seems that they are almost out of the woods as the cocoa crisis might subside soon enough.
Still, it is important to note that the overall confectionery segment is up this year by 6.8% from last year and a margin of 35% over Q1 which has regulated difficulties in the chocolate segment by hedging its shortcomings in several areas.
Hershey has doubled down on taking advantage of the commodity inflation to allow price hikes for the chocolate segment by masking it as an overall effect of the economy which has deviated attention from the cocoa crisis from the consumer's point of view.
Another important factor is the constant and dynamic activity in diverse points of sales across the world to keep stimulating purchases and engagement with final consumers. Innovation and operational efficiency are also a key point to reduce costs in order to combat the cocoa price hike. Hershey has stated that they have adapted to a new ERP that has increasingly scaled their operational efficiencies which have helped in these dire times, while also being able to advance their innovation pipeline in this Q1.
All of this has built up a positive outcome for 2024 and has generated key KPI results this quarter like this:
-Consolidate net sales of $3.252 and increase of 8.9% over last year
-Net sales increase of 8.6%
-Earnings per share increase of $3.07 (3.7%) increase
(Hershey records profit rise in Q1 as domestic market holds steady (confectionerynews.com))
Flavor Fusion 🤯
Patriotic Brownies
A few months ago Second Nature Brands made a big move in the market by acquiring the popular brand "Sheila G's - Brownie Brittle" which had grown rapidly in the market as a healthier sweet option of the popular brownie dessert packed in a beautiful and classy aluminium 113 gram bag.
I am a big endorser of the brand as I believe it has an amazing taste and has a low calorie per serving which can satisfy your sweet tooth without incurring that many calories.
Brownie Brittles has introduced several variations and flavors of the popular snack like Blondies, Caramel & M&M's which solidified the brand's reach to several audiences along a great brand collaboration. Now that Second Nature Brands is at the helm, the company can now take advantage of many more resources and scale its operations to introduce new variations of its original snack.
They have decided to launch an Independence Day version with red, white, and blue M&M's which amplifies its partnership with M&M's and increases its seasonal offerings as a preview of what they can do for more holidays to come.
RK's & PB
Rice Krispy treats have been a classic snack and a powerhouse for cereal treats and bars in the confectionery market. It started as a way to expand the cereal lines into a snacking option to widen their presence in other areas of supermarket shelves while also boosting the brand of their cereal counterpart.
The treat has also been converted to a classic DIY house snack that mothers provide for their kids' lunch bags and for house parties for kids and adults to enjoy as it is a simple option to replicate at home.
One of the hard parts to replicate though is the gooeyness of the original product, and now Rice Krispies has doubled down on the gooeyness by introducing a new Peanut Butter version that brings in the classic spread flavor along with the usual marshmallow spread of the treat allowing for a unique texture and flavor experience.
As a lover of peanut butter and marshmallows, I am sure to try this one sooner rather than later!!
Gluten Free Ahoy!
Having a portfolio of multiple options is always beneficial for both the company and the consumer as you can manage to capture even more market share depending of the variety that you are offering.
Such is the case for Chips Ahoy which just announced the launch of its first-ever Gluten Free cookie in the market. It is a huge move by the brand owned by Mondelez as they have been quite some time developing this innovation.
Mondelez claims that more than allowing consumers to indulge in a gluten free cookie, they have focused on trying to emulate Chips Ahoy's unique flavor while also offering a crucial lack of gluten for celiacs across the country.
(Mondelēz introduces first-ever gluten-free Chips Ahoy! cookie - FoodBev Media)
Sugar Rush (Facts and Stories about your favorite snacks and candies)🧁
The Invention of the Chocolate Sandwich
A lot of us do not see the weight of the history that a brand carries over the years all the way to the supermarket shelf to an end unique experience for the consumer. Snacks, as simple as they might be, form an integral part of our nurture as they accompany us through our childhood, and their properties that allude to all of our 5 senses, send a nostalgic shock that can be rarely imitated in life itself.
Even more impressive is the idea of a snack being referential throughout several generations due to its undying popularity, such is the case of Oreos!
Oreos as we know is the best-selling cookie in the world being sold in over 100 countries with over 60 billion cookies sold every year. The cookie has been able to stay very relevant thanks to their amazing capacities for market pricing, packaging sizes, and of course flavor variety which are sometimes unique to each country in order to make the cookie more appealing to local markets.
However, the cookie was not the first of its kind. Sunshine Biscuits launched the Hydrox to market in 1908 4 years before the actual launch of the Oreo. Nevertheless, in 1902 a conglomerate of biscuit companies called National Biscuit Company (Or Nabisco) took the market by storm and quickly displaced Hydrox as the original cream-filled biscuit, and the rest is history.
Since then Oreo has never been matched in terms of being beaten in the cookie industry with many tools that we mentioned earlier, but also by cementing it as America's cookie with its original flavor being called the American flavor in many other countries in which the cookie presents a unique variety of flavors.
Perhaps another key aspect of recent success is the way we eat the Oreo. Various marketing practices by Oreo presented several ways to eat the cookie based on consumer behavior whether it was by separating the chocolate discs and eating the filling or dunking the cookie into a glass of milk, Oreo always accepted and promoted each of the ways the cookie was consumed, and even celebrated them!
The Oreo, which we do not know the exact origin of its name is bound to be a sure inclusion in the Snacking Hall of fame as its dominance is far from being over and it is still a magnificent product that appeals to older and younger generations alike.
Well, that is a wrap for another edition of the newsletter where we had some positive news about the cocoa market and great confectionery stories from products like Goldfish and Oreo that will surely pique the interest of some curious readers out there. If you feel this newsletter could interest other of your colleagues please feel free to share it around to find the latest news of the industry.
Strategy, Marketing and Business Development at GetMobi Disrupting Device Financing Risk Management
3moHi Samuel, I see that we have common interests (we follow the same companies), let's chat about device financing.