Wrigley buys into top slots in China and India
Wrigley Jr has closed on a €215 million deal to acquire the Joyco
gum and confectionery businesses from Agrolimen, a privately-held
Spanish food conglomerate. The acquisition brings the Pim Pom,
Boomer and Solano brands into Wrigley's portfolio.
The world's largest manufacturer and marketer of chewing gum, with global sales of over €2.5 billion, Wrigley is still dominant but faces increasing competition from Nestle and Colgate-Palmolive.
This latest cash transaction is for Joyco's operations in China, France, India, Italy, Poland and Spain along with Cafosa, its chewing and bubble-gum base business.
"Our intent is to support our existing strategies and focus on growth synergies," said Ron Waters, COO of Wrigley. To that end, the talent, technologies, brands and distribution networks of Joyco will help accelerate our plans to expand Wrigley's participation in the broader confectionery arena, he added.
In China and Spain Joyco has the number one market position for bubblegum, and is number one in China and India for confectionery lollipops. Joyco also leads in bubble-gum in the high-fragmented, low-margin confectionery business in India where leading competitors include Perfetti Van Melle, Hindustan Lever, ITC and Nestle.
The US gum firm warned that the Joyco purchase is expected to have a slight negative impact on company earnings in the current year although is slated to positively impact Wrigley's profitability in 2005.
"The key drivers of acquisitions for the Wrigley Company hold potential for significant value creation," said Bill Wrigley, Jr, CEO of Wrigley, back in January when the deal was first announced.
Last week a new study showed that the natural flavours found in Big Red, a chewing gum brand manufactured Wrigley's, could beat the bacteria that causes bad breath. The findings suggest a new 'value-added' growth track for the gum industry, moving into the growing functional food fad as well as challenging the dominant probiotic dairy products market in Europe, currently worth around €1 billion.
"Our study shows that chewing gum can be a functional food, having a significant impact on oral hygiene over the short term, if it contains antimicrobial agents such as cinnamic aldehyde or other natural active compounds," said Christine Wu, professor of periodontics at the University of Chicago and lead author of the study.
Sugar-free gum is also a key driver for growth and has been enjoying a strong movement forward in Europe. In Spain alone a recent survey by market analysts AC Nielsen revealed that in 2001 sales of chewing gum rose by 10 per cent year-on-year to €121.9 million, compared to sales of sugar confectionery that increased by 6.3 per cent year-on-year.