Gum holds its ground globally

Tuesday, 01 September 2009

Euromonitor International rounds up the current global retail gum market and makes a few predictions for the future Demand for gum is predicted to remain stable despite the current economic situation. Increasing health awareness and the pressure to ‘feel and look good’ in times of recession will drive demand for sugar-free and functional gum at a global level. Furthermore, gum’s relatively low price and its ‘affordable indulgence status’ will contribute to stable demand across the regions. Eastern Europe and Latin America offer potential Euromonitor International predicts global gum retail sales to reach US$23.2 billion by the end of 2009, up 5% on 2008. Western Europe and North America will continue to account for the bulk of this figure, with respective shares of around 24% and 22%. In terms of growth, Eastern Europe and Latin America offer the greatest potential, with retail sales expected to increase by 8% and 10% respectively in 2009, compared with just 3% in Western Europe. The gradual expansion of the middle-class consumer base in urban areas will continue to drive up demand for sugar-free and functional gum in emerging regions and is expected to underpin growth of gums sales at sector level.   Sugarised gum, however, still accounts for a large share of sales in regions like Asia-Pacific and Latin America because of its relatively low unit price, which makes it affordable to low-income consumers. Interestingly, research shows that functional and sugar-free gum are benefiting from the current economic crisis. As consumers become more apprehensive about losing their jobs, the importance of products that target health and appearance is increasing. Global functional and sugar-free gum sales are, therefore, set to perform relatively well and will grow by 4% and 2% respectively in retail volume during 2009. Mars gains leadership Gum is a fairly consolidated market, with four companies – Mars Inc, Cadbury Plc, Lotte Group and Perfetti Van Melle Group – accounting for more than 77% of global retail value sales in 2008. Private label still holds a rather modest share, claiming less than 1% of global retail value in 2008. The huge importance of impulse outlets to gum distribution and the lack of any retailer private label products in the functional segment, are responsible for private label’s minimal share of the global gum market. As a result of the 2008 merger with Wrigley, Mars gained the leading position in the global gum market, accounting for 35% of total value sales that year. The company was followed closely by Cadbury Plc, which commanded 29% of total gum sales in 2008. Cadbury’s main strength is sugar-free gum. The company accounted for almost a 40% global retail value share of the category in 2008, according to Euromonitor International estimates. The fourth position in the global gum rankings is taken by Lotte Group, which accounted for just 7% of total retail value in 2008. Unlike the other global players, Lotte Group is mainly present in the Asian market and its importance in gum at regional level is almost negligible elsewhere. Lotte Group, however, is market leader in countries like Japan and South Korea, where it commanded a 60% and 63% share respectively of retail value sales in 2008. Discounters benefit from recession Small grocery retailers and supermarkets and hypermarkets are the most important retail outlets for gum. They are predicted to command respective shares of 34% and 30% of total retail value sales in 2009, according to Euromonitor International projections. Supermarkets and hypermarkets are particularly important in regions like Western Europe, where they account for around 36% of gum retail value sales. In contrast, small grocery retailers command a larger share in emerging regions. In Latin America, for instance, supermarkets and hypermarkets account for around 15% of retail value sales. This is because of the greater importance of corner shops in the region, as well as the wider presence of low added value sugarised gum. The latter commands relatively less shelf space in supermarkets and hypermarkets and is traditionally sold through smaller outlets. Discounters continue to hold a relatively minor position in the gum market, especially in regions like Latin America and Asia-Pacific. Globally, gum sales through these outlets are predicted to represent just 7% of total retail value in 2009. Interestingly, sales of gum through discounters are predicted to gain ground on supermarkets and small grocery outlets as a result of the channel’s strong price positioning in the market. This competitive advantage is particularly important in the current economic climate as cash-strapped consumers turn to indulgence products that offer value for money. Health puts pressure on sugarised gum sales Health-related issues will continue to put pressure on demand for sugar confectionery and sugarised gum in developed markets, which will, in turn, slow sales of confectionery products at a sector level. Interestingly, sugar-free gum is predicted to continue to perform strongly and will grow globally by 7% in retail value in 2009, driven by robust demand in emerging countries. At regional level, maturing consumer demand and economic uncertainty in developed regions such as North America and Western Europe will constrain further growth of confectionery at a global level. In 2009, sugar-free gum and functional gum will continue to gain ground on sugarised gum in both developed and emerging markets. Sugarised gum, however, is predicted to remain the most important category in terms of sales in regions like Asia-Pacific and Latin America as a result of its relatively low unit price. Interestingly, sugar-free lines within sugar confectionery will continue to perform well in 2009 but will remain relatively small in comparative terms, according to Euromonitor International estimates. Innovation focuses  Interestingly, exotic new flavours in lines featuring premium packaging are becoming a common strategy for sugar-free and functional gum manufacturers wishing to increase brand differentiation and expand their consumer base in developed markets. One key example was the introduction by Wrigley GmbH of 5 Gum in the German market in June 2009. The new line is available in two flavours, mint and tropical. Its resealable packaging combines the convenience of a cigarette box with the sophistication typically found in chocolate boxed assortments. 5 Gum was heavily supported by a television campaign and targets middle-class consumers between the ages of 18 and 29. Interestingly, the inclusion of energy-giving properties is gradually extending from snack bars to sugar confectionery and chewing gum. One key example in 2009 was the introduction of Amazon Guarana Buzz Gum from Rio Trading in the UK market. The new line targets busy professionals that need an energy boost in their daily activities and is marketed as an ideal gum for ‘those needing a quick pick-me-up’. Guarana Buzz Gum contains guarana extracts, which are traditionally used in confectionery products claiming energy-boosting properties. Emerging regions lead growth Gum sales are forecast to grow at an average rate of 2% in constant retail value from 2009 to 2014, according to Euromonitor International projections. By region, emerging markets such as Eastern Europe, Africa and the Middle East and Asia-Pacific are expected to see the most dynamic growth. However, per capita expenditure in Africa and the Middle East and Asia-Pacific will still remain low, at US$1.00 and US$1.30 respectively in 2014 compared to the US$4.00 global average. Sugar-free and functional gum are predicted to continue to see strong growth over the 2009-2014 period, tapping into the growing demand for health-oriented products both in developing and developed markets. Euromonitor International forecasts that sugar-free gum and functional gum will grow by 16% and 12% respectively in constant value terms over the 2009-2014 period, gaining further ground on sugarised gum lines. Functional gum, however, is set to remain of relatively minor importance in Latin America and Eastern Europe, where it is predicted to account for less than 3% and 9% of total value sales respectively by the end of 2014. Research shows that lack of awareness of the health benefits of functional gum among middle-class consumers will remain the main obstacle to stronger growth of its consumer base in these regions. In contrast, sugarised gum is forecast to decline by 0.3% in constant value terms over the 2009-2014 period. Sugarised gum will suffer from a negative health perception among consumers, who are predicted to continue trading up to sugar-free and functional products. This will particularly be the case in developed regions such as North America and Western Europe, where consumers have higher purchasing power. Conversely, sugarised gum will still account for a large part of sales in less developed countries, due to its relatively low unit price. In countries like Morocco and Colombia, for instance, sugar-free gum is predicted to command 70% and 65% respectively of gum retail value sales by the end of 2014, according to Euromonitor International projections. Euromonitor International emphasises that educational campaigns that better highlight the benefits of functional products on consumer health, for instance, are vital to expanding the penetration of these products among middle-class consumers in emerging markets. Flavour and brand recognition remain the most relevant gum characteristics in many South American and Asian markets, where consumers are still unaware of the benefits of functional ingredients. A strong flavour to freshen the breath, for instance, is still preferred over the claim of whitening teeth. www.euromonitor.com

 

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