In the context of stagnating chocolate confectionery sales, manufacturers are trying to leverage their flagship brands by extending them into ice cream, cakes or even biscuits in order to build brand equity, and ultimately, revenues, reports Euromonitor International.
The benefit of extending known brand names into other markets is threefold. In the first instance, it builds brand awareness, making the confectionery product more likely to be the subject of an impulse purchase. Secondly, use of known brands practically guarantees the success of the new product, where a totally new brand might fail. Finally, and perhaps most importantly, brand extensions guarantee revenues when confectionery sales are traditionally slack, such as in hotter weather, or when they come under threat from competing product formats.
Mars spearheaded the confectionery brand extension policy into ice cream, setting a precedent which has been avidly followed by companies such as Nestlé and Cadbury Schweppes, while the latest developments in 2002 and 2003 include extensions into cake bars and biscuits.
Mars led the way with ice cream
At the forefront of confectionery brand extensions, Mars’s ice cream portfolio mirrors that of confectionery, with Mars, Galaxy/Dove, Snickers, Bounty and Twix all commonly found in the ice cream cabinet, as well as sugar brand Starburst.
This policy offers Mars significant potential economies of scale, particularly in relation to advertising and promotional investment. There is a major emphasis on encouraging impulse purchase, which ideally suits the promotion of the Mars range, although 2001 witnessed a shift in focus with the launch of several bulk brands. Chocolate confectionery brands fit well within the recent premiumisation and more indulgent nature of bulk ice creams.
Cadbury has also extended many of its confectionery products such as Flake, Bourneville, Crunchie and Refreshers into impulse ice cream. Nestlé, on the other hand, which has been aggressively developing its overall ice cream business, has been slower at promoting its confectionery brands, although KitKat does appear in an impulse ice cream format.
Cake bars and chilled desserts popular
Mars also teamed up with United Biscuits in the UK to develop its Galaxy and Milky Way brands into individually wrapped cakes, while Cadbury Schweppes offers its Fudge brand as a cake, and builds on the equity of the Dairy Milk brand for its Mini-Rolls.
Nestlé, however, avoided cakes, preferring brand extension into chilled desserts, making use of its substantial dairy expertise. This is one of the few sectors where Nestlé pipped Mars to the post in terms of product development, having launched Milkybar, Rolo and Smarties desserts long before Mars’ tie-up with Eden Vale to develop Galaxy, Milky Way and Bounty in the UK.
Biscuits are latest extension
In 2003 both Mars and Nestlé extended some of their confectionery brands into biscuits. The filled/coated sweet biscuit market is forecast to grow considerably faster than the countline market between 2002 and 2007. As health and wellness issues become more important, consumers view even indulgent biscuit varieties as less unhealthy than countlines, making this a key sector of interest for confectionery manufacturers.
Mars’ Bisc& range includes biscuits topped with M&Ms, Twix, Mars and Bounty, while Nestlé has launched biscuit versions of Milkybar and Smarties. Mars’ product, in a similar fashion to Cadbury cake bars, are individually wrapped items available in multi-packs, designed to take advantage of snacking and lunch box trends. By contrast Milkybar biscuits come in a traditional paper tube, while Smarties biscuits are in a stand-up pouch. Thus both are targeted more at in-the-home consumption and sharing trends, reflecting a difference in strategy among the confectionery market leaders.
Brand awareness, where next?
Nestlé has also been very keen to develop and extend brands within the confectionery market in order to respond to growing consumer sophistication by segmenting brands along age and gender lines. While KitKat Chunky cannibalised KitKat sales, brands like Milkybar have been extended within confectionery in order to widen the consumer base, rather than just splitting sales. Thus Milkybar Munchies are labelled ‘For Adults’ while Milkybar Choos are aimed at very young children.
The company has gone even further with its number two core confectionery brand Smarties, using tie-ups with companies like Ritter Sport and Haribo in Germany to launch tablets and jelly-filled Smarties at the end of 2002. White and milk chocolate tablet bars followed in the UK at the start of 2003. While Smarties may have lagged behind in terms of product development over 2001 and most of 2002, Nestlé is now trying to update the brand’s image by increasing the formats in which it is available within confectionery, in addition to extending the brand into biscuits. This is on top of moves made in 1998 and 2000 into the chilled desserts and ice cream markets.
Further development for Smarties could be used to revitalise Nestlé’s declining packaged cake sales such as Yes in Germany, or could be used to leverage the company’s expertise in children’s breakfast cereals.
For Nestlé, as indeed for all confectionery manufacturers, the key to brand extensions is maintaining brand interest and increasing usage occasions without cannibalising the core product. Whether manufacturers respond to this challenge by segmenting the brand along age lines, or whether they extend it into new markets depends on the maturity and development of the market the brand is located in. Thus in the same way that flavour variations are often country-specific, so are brand extensions, highlighting the importance of local knowledge within the context of a global marketplace.
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