Chewing-gum manufacturers are struggling. Their sales volumes and their revenues have been on the decline for the past 10 years or so. To give you a more quantified perspective, Rabobank estimated the drop in volume to be about 20% during the 2008-2013 half decade1.
I find the way that they managed this issue so far to be really interesting as it illustrates really well how so many categories are still using analog fixes for what really are, digital problems.
In the analog setting, most consumers bought chewing-gums not because they planned to do so, but because it was placed near the check-out counters in supermarkets. It is a pure impulse-driven product. Digital changed the rules. Now, fewer people visit supermarkets because of drive services and online retailers, and those who still come are less likely to pay attention to chewing-gums while queuing to check-out as smartphone screens are far more interesting than supermarket shelves.
As a result people buy less chewing-gums, and Wrigley’s, Mondelez & co are bleeding money. So far, they mainly tried three options to solve the issue, all of which are somewhat artificial:
- They started selling bigger packs to boost overall volumes. In supermarkets, most chewing-gums are sold as either big boxes or as a set of 5 smaller packs. This allows manufacturers to increase the average amount spent per purchase.
- They slashed their prices. Chewing-gums used to be some of the highest margin products one could find in a supermarket. Brands recently pushed back on their prices in many markets, which triggered boosts in volume. In France, the prices have been lowered by an average 15%, which led to a boost in volume of about 0.5%.
- Launch new products at a faster pace to stimulate growth. We now have chewing-gums with every possible shape, taste and packaging. A small-size supermarket in France will have on average about 30 different kinds of chewing-gum.
All these solutions can limit the damages in the short run, but fail to address the root cause of the issue, which is frequency.
What is really important, is not how much do people spend on chewing-gums, but rather how often do they buy them. On average in France, 4 people out of 100 buy chewing gums when they visit their supermarket. Take that figure to 5, and you increase your revenue by about $70M.
Relevant solutions will focus on creating new ways to trigger this purchase, and restore frequency at its previous, analog, level. Potential options could include:
- Automating the purchase by selling chewing-gums as a subscription, like others have done with comparable low-engagement categories like .
- Making the chewing-gums more visible in supermarkets. Wrigley’s tried installing LED-equipped merchandising in 40 shops in France, which led to a 15% boost in sales.
- Thinking about new ways to trigger impulse purchase in a digital world. For instance, we know that one of the reasons why frequency decreased, is because people now browse their smartphones while queuing for check-out instead of looking at what is around them. It creates an opportunity to push location-based targeted advertisements and/or to piggyback the retailers’ apps and push chewing-gums through it. Similarly, Amazon’s Dash buttons could be a great tool for the category.
As a final note, considering rationalizing product portfolios might be a clever idea. The focus on innovation of the past two decades made it really hard for consumers to navigate through the category, plus it most likely increased logistic and production costs. Savings could be made at that level, in order to increase expenditures on frequency-first projects and experiments.
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