How Mars tries to adapt to grow confectionery sales in US - interview
Mars believes it can grow through end-to-end collaboration
The US food industry is facing some significant challenges, from rising concern over health and wellness, to the growing awareness among consumers of sourcing and supply chain issues and to new consumption patterns. Katy Askew spoke to Tracey Massey, president of Mars Inc's Mars Chocolate North America division, and Casey Keller, president of its Wrigley North America confectionery division, to find out how the company is responding.
One in three adults in the US are considered obese and, as the nation's waistline grows, so too does concern around obesity and associated chronic diseases such as heart disease and type 2 diabetes.
US legislators may lag countries like Mexico and the UK, where governments have introduced fiscal measures to try to combat obesity. Nevertheless, the US obesity epidemic is increasingly in the spotlight and the food industry in the country is facing growing scrutiny.
Not least is this true for the confectionery sector, Tracey Massey, president of Mars Inc's chocolate business in North America, concedes. "The food industry is facing a significant challenge – satisfying demand for convenience and choice while tackling health concerns related to over consumption of calories, fat and sugar. For the chocolate and confections industry, in particular, moments like these can bring an identity crisis."
Growing awareness of health issues has contributed to a sluggish outlook for US confectionery sales. According to research firm Technavio, the US confectionery market is expected to see a compound annual growth rate of just 1.57% through to 2020 - and the majority of that is expected to be weighted towards premium or sugar-free options.
As the largest chocolate group in the US, with brands including M&M's, Dove and its namesake Mars chocolate, Massey argues the company can find opportunity in adversity. "It provides a platform where we can either stay in the shadows or step forward. By facing these challenges we can drive the industry – and its growth – forward," she suggests.
Messey is quick to highlight the progress Mars has already made in this regard. "At Mars, we've already taken steps forward by being the first to move calorie counts to being displayed prominently on the front of all of our packaging, the first not to market our chocolate to children, the first to reduce portion sizes to no more than 250 calories per serving, and the first to lower levels of saturated fat," she claims.
Mars was an early backer of initiatives to reduce advertising aimed at children in the US, among the companies signing up to the Council for Better Business Bureaus' Children's Food and Beverage Advertising Initiative back in 2007.
In May this year, Mars also joined the International Food & Beverage Alliance-backed pledge to phase out industrially produced trans-fats from their foods. Alongside other global food companies, including Mondelez International, Nestle, Kellogg and PepsiCo, Mars agreed to the common goal to reduce the trans fats in their products to "nutritionally insignificant levels" - which the industry organisation said was less than 1 gram of trans fat per 100 grams of food - worldwide by the end of 2018 at the latest.
Meanwhile, in February, Mars said it would remove all artificial colours from its human food products in an effort to meet "evolving consumer preferences" for products made using natural ingredients. The change will be implemented over the next five years and - while many of its products are already free from artificial colours – Mars said extending this to its entire portfolio of confectionery and food brands represents a "commitment of significant depth and breadth".
Massey says: "Mars has committed to removing artificial colours from all of our human food products, and we continue to make progress toward using more naturally-sourced colours. As we make these changes we will provide absolute transparency about our ingredients in our labelling."
Mars has frequently adopted a collaborative approach to health issues. However, the company has also proven itself willing to "go against the grain" of the broader food industry by lending its support to recommendations from the World Health Organization and the US Dietary Guidelines advisory committee to limit added sugar to 10% of daily intake, Massey says. The company also supports the labelling of added sugars, she notes.
While Mars is keen to take the lead on issues such as health and wellness, the group believes ultimately its business, the communities in which it operates and its customers all stand to benefit from close cooperation, Casey Keller, the president of Wrigley North America, adds.
"We believe that real growth – for our business, for our industry, for the economies in which we operate – will stem from mutuality. As an organisation, we are keenly focused on driving value for all participants in our value chain," Keller says.
This approach has lead Mars to invest significantly in its US production base, Keller suggests. He cites a recent US$50m investment in its facility in Yorkville, Illinois, where the addition of a new Skittles line expanded the site's workforce by 25%.
"Mars believes in advancing the local communities where we live and work through economic investment and job creation. In the last five years alone, we've invested US$1bn in US factories and operations and created more than 1,000 US jobs," Keller stresses. "We will only grow if we do the right things to bring value to all of our stakeholders."
On sourcing, Massey observes Mars is "strengthening standards" in its own supply chain through certification and working directly with suppliers. The company has – for instance – set a target that all of its cocoa will come from certified sustainable sources by 2020.
"We work directly with farmers, farming families and farming communities to find the best ways of increasing productivity and empowering communities in our 'vision for change' demonstration program in Cote d'Ivoire. We are setting up 25 cocoa development centres in the country to reach 50,000 farmers, beginning in Soubré — the country's main cocoa-growing region. We will then work with industry partners to create an additional 50 centres to reach an additional 100,000 farmers."
The company's philosophy of "mutuality" extends beyond Mars' own operations and supply chain to inform its dealings with its retail customers, Keller insists. "We are committed to not only our growth as a company but as an industry. As we strive to be the most mutual company in the world we partner across segments with retailers to improve category growth across chocolate, pet care, gum and candy."
To do that, Mars needs to offer the right products across all purchase moments. In the US, as elsewhere in the world, consumption patterns are evolving and new channels are growing. While e-commerce has not witnessed as significant a boom in the US as in markets such as China or the UK, how and when consumers make purchase decisions is becoming more fragmented. Mars believes it can use its category leadership and expertise to ensure it remains relevant to new purchase spaces.
"We are laser-focused on bringing the customer and consumer closer to our organisation and at the heart of our decisions – listening, sharing insights and evolving to meet their needs across all channels," Keller says. "Wrigley and Mars Chocolate have more than 100 years of category leadership in gum, mints, non-chocolate candy and chocolate. As category leaders and trusted partners, our goal is to help retailers drive impulse sales in the spaces where shoppers make purchases, which we call "transaction zones," spanning from the front end to pharmacy, self-checkout, mobile, curbside pick-up and buying online to pick-up in stores."
Keller believes that can be achieved by continuing to meet different consumer need states through its diverse portfolio.
"Regardless of where purchases take place, shoppers are looking for balanced choices at checkout that satisfy all of their needs – whether that is to be refreshed, rewarded or reminded at the end of their shopping journey. Each traditional front-end category plays a role in this, including the confectionery category. For example, gum and mints satisfy the shoppers' need to refresh themselves; non-chocolate confections and chocolate satisfy the shoppers' need for a reward at the end of the trip. Meeting shoppers' needs with the right assortment available in the right places will help leave them feeling good about their retail experience."
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