Cover story: The Candyman Can

Posted on April 1, 2002 by Chief Marketer Staff

Who says it’s unhealthy to have a sweet tooth?

The candy aisle is thriving, bustling with activity, and swelling with new tenants.

Over the last 15 years, the $25 billion-plus category has been inundated with scores of new brands and products. But despite the hundreds of SKUs now available on the nation’s candy stands, the confection section is still all about one thing: the strength of core brands. Most volume is still driven by a relatively small set of “power brands,” many of which have been around for decades.

Four of the 10 highest-volume brands reside in Hackettstown, NJ, under the roof of Masterfoods USA, which quietly changed its name from M&M/Mars earlier this year. The low-key name change was hardly surprising, since the company has traditionally kept an ultra-low profile — hey, who needs a corporate presence when your 12 candy brands have some of the highest profiles in the world?

It’s not easy keeping things fresh with a core audience made up almost entirely of fickle youngsters, especially when some brands are 70 years old. But Masterfoods has succeeded through constant reinvention and selective innovation in both development and marketing — along the way keeping all efforts centered on the product.

“Job One is keeping the power brands strong,” says Bob Gamgort, vp and general manager of the company’s chocolate and M&M operations. “Job Two is finding new brands to fill in the spaces that the power brands can’t cover.”

In an industry where sales are driven almost entirely by impulse buys, that’s about as easy as getting an M&M to melt in your hand. But by regularly exercising the core brands, leveraging their strengths to launch new SKUs, and floating the occasional new product when necessary — all the while leaning heavily on consumer research — Masterfoods has met with sweet success.

Decades of history makes for great equity, which is why line extensions have become big businesses. New SKUs are used strategically to expand either the customer base or a product’s set of usage occasions. When research showed faithful Snickers snackers occasionally strayed when they hankered for something that made noise, Masterfoods gave them Snickers Cruncher. Sales exceeded $100 million in 2001.

Extensions helped the company’s sugar unit grow six percent in 2001 and twice that so far in 2002: The Starburst brand has birthed jelly beans, fruit chew pops, and most recently taffy-like Chewlicious; Skittles spread its wings with the 2001 debut of Sour Skittles (which doubled initial sales goals) and January’s launch of Mint Skittles (packaged in plastic tubes). Sour Starburst rolls out in July.

“You would think a new product launch would be about trial. But the reality is that the category represents a relatively low investment for consumers,” says Mike Browne, vp-marketing on the chocolate business. “Getting trial has never really been a big hurdle. You have to get break-through awareness early. That leads to trial and to staying power in the marketplace.”

New brands are introduced sparingly and assiduously, so as not to cannibalize existing sales. When Masterfoods found itself light on product for chocolate-gifting occasions, it introduced the female-focused Celebrations, which offers miniature versions of eight brands and went national last summer after a holiday 2000 test.

The company has been dually positioning some brands as it prepares a major invasion of snacks. In addition to extensions for the existing Kudos and Combos, a new product called Cookies & bows Aug. 5 with $50 million in first-year marketing support. A shortbread cookie topped with pieces of M&M’s, Snickers, Milky Way, or Twix, Cookies & will get heavy media play, extensive couponing, and sampling. TJ Paul, Rydal, PA, handles promotion and Grey Advertising, New York City, ads.

The launch is “one of the most significant initiatives for us in 20 years,” says Jim Cass, vp marketing-developing snackfoods. “This is a big deal.”

Passioned Play

Not that the company is a stranger to big-deal marketing. When it comes to strategy, few consumer packaged goods makers are better. Masterfoods runs the gamut from brand-specific campaigns to company-wide umbrella programs. (Make that division-wide, as a cross-promotion between Milky Way and parent McLean, VA-based Mars, Inc.’s Kal-Kan is highly unlikely.)

The candy maker also runs the range from small, co-marketing programs to global blitzes. And while it generally acts like a CPG with long-term planning and sizable lead times, it’s also nimble enough to move quickly when required. An American Red Cross tie-in for M&M’s last fall, for instance, hit shelves just weeks after it received the green light.

But what makes marketing executives proudest is a creativity that is conservative enough to maintain stability but edgy enough to generate buzz. “Anybody can do an FSI, reduce price, or offer bonus goods. It’s easy to buy a sales spike,” says Mike Tolkowsky, the sugar unit’s vp-marketing. “We’d rather run franchise-building events that are unique” and continue building sales after the promotion ends.

In the last 10 years, Masterfoods has moved from a media-driven strategy to an integrated marketing-communications model. Promotion is often the heart of the strategy. The bulk of ad duties are assigned to Grey and BBDO, New York City; most promotion work comes from TJ Paul or Chicago-based Surge @ DraftWorldwide; Marketing Drive Worldwide, Wilton, CT, handles “menu marketing.”

“We frequently say, ‘That’s a really cool idea, but will anybody ever talk about this?’” says Gamgort. “If the answer is no, we go back and say, ‘What can we do to make it more interesting?’”

Their answers have sparked more than a few conversations. The most recent came last month, when flagship M&M flipped the switch on the largest campaign in its 61-year history, a worldwide Global Color Vote that lets citizens of 78 countries select a new color (see story, pg. 46). A press release announcing the effort in January received more media attention than most overseas elections.

In general, the marketing team works 18 to 24 months ahead, stacking the calendar with both high-volume events (to double sales during the Halloween, Valentine’s Day, Easter, and Christmas periods) and numerous smaller programs.

Brand-specific campaigns are employed if there is anything new to talk about R&D-wise, if focus groups uncover a new customer insight, or if there’s a need to make additional noise in a specific window or with a particular retailer. Recent examples include the repositioning of Milky Way Dark as Milky Way Midnight (November 2001 PROMO) and the launch of Sour Skittles.

Sports (including NASCAR, soccer) and entertainment sponsorships are also common. Masterfoods hooked up with CBS’ Survivor last month for an effort that has shoppers entering on-pack codes at snickers.com to predict which contestant will be voted off the show each week; correct guesses earn an e-mailed coupon for a free Snickers. Votes double as entries into a sweeps dangling cash and a grand-prize stint as an “Honorary Survivor” during taping of the series’ next installment. (Product placement delivers Snickers as a Challenge “reward.”) Surge handles.

“A lot of people spend money to tie into a property,” says Anne O’Grady, New York City-based CBS’ senior vp-marketing and events. “Not everyone utilizes the brand. [Masterfoods] came in here to collaborate.”

Umbrella promotions, meanwhile, leverage economies of scale and allow the brands to be merchandised as a collective “to create a more powerful critical mass,” says Browne. “It’s about triggering merchandising and big in-store activity.”

Last fall’s Hit the Code, Win the Cash, for instance, united six brands in a two-pronged effort that had consumers looking under wrappers for prizes but entering codes online for additional chances to win (Surge handled). More than two million people participated. “Skittles and Starburst are Top 15 brands, but we’re not M&M’s or Snickers,” says Tolkowsky. “We can tag along with our big-brother brands to help give programs more scale and efficiency of sell-in.”

Cookies, Old and New

The company’s first major test of the on-pack/online model was an early 2001 game called Classic or Clunker, which ran on seven brands and gave away 100 cars ranging from a 1966 Corvette to a 1974 Dodge Dart (Surge handled). Masterfoods found the Internet to be so efficient that it now uses the Web for almost every consumer promotion.

All company Web sites collect data for use in future communications. “We haven’t seen the Internet as an effective vehicle for advertising,” says Gamgort. “Rather, we use it for direct marketing, as a cost-effective way to talk to [consumers].”

The Internet also allows tried-and-true concepts to be recreated with greater speed and broader creative scopes. Take the 1998 Chew the Clue campaign, which seeded Starburst packages with “mystery flavors” consumers identified by calling a toll-free number (five million people participated as single-unit sales jumped 25 percent). The program returns this month, this time running across 50 SKUs of Starburst and Skittles and sending players to chewtheclue.com for a chance to win some 400,000 prizes from a $1.1 million pool. Grey Interactive, New York City, handles.

Everything still begins with intensive research — this may be candy we’re talking about, but it’s not child’s play, and there are piles of psychographics hiding behind impulse purchases. “When consumers shop the candy aisle, they make a clear decision early on that they want either chocolate or sugar,” says Ellis Rowe, vp and general manager of the sugar team. “Then there are cascading decisions they make about size of candy, flavor, and texture.”

“The real premium is placed on understanding how consumers think about the category,” says Gamgort. “That’s the foundation for your marketing plan.”

And family is the foundation of Masterfoods. Being part of a privately held company helps immensely, marketers say, because there’s no Wall Street to woo quarterly. “You can make investments here that you couldn’t make anywhere else,” because there’s a greater willingness to spend against future returns, explains Gamgort. “This is a learning organization,” adds Rowe, a 24-year company vet. “It’s a company that learns from itself [and] from its mistakes, moves forward, and takes risks.”

This year will bring a greater focus on customized retail activity (Masterfoods marketers are assigned to brands, sales teams are grouped by trade account) as well as additional extensions. New products are always in the works, with more scheduled to hit market after Cookies &. “We’ve had good success and this mix is working,” says Tolkowsky. “But sometimes, that’s the best time for change.”

There’s no sense sugar-coating everything.