Wm. Wrigley Jr. Co.

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Wm. Wrigley Jr. Co.

founded: 1898

Contact Information:

headquarters: 410 n. michigan ave
chicago, il 60611 phone: (312)644-2121 fax: (312)644-0097 url: http://www.wrigley.com

OVERVIEW

Wm. Wrigley Jr. Company is the number-one maker of chewing gum in the world. It has about a 50-percent share of the domestic chewing gum market and its international sales are responsible for more than half of its annual revenues. It sells its products to over 120 countries. Sales of gum account for 90 percent of the company's revenues. The Wm. Wrigley Jr. Company manufactures a broad range of chewing gum, including Big Red, Doublemint, Extra, Freedent, Spearmint, and Winterfresh. Its Spearmint, Doublemint, Juicy Fruit, Big Red, and Winterfresh brands are manufactured specifically for the domestic market and are responsible for most of its sales. Wrigley has a long-standing reputation as a conservative but stable company.

COMPANY FINANCES

Over the last three years Wrigley has seen solid gains in sales and profits. Its 1997 sales were $1.9 billion, and its net income was $272 million, or $2.34 per share of common stock. The company's 1996 sales totaled $1.8 billion, and its net income was $230 million, or $1.99 per share of common stock. In 1995 it saw sales of $1.7 billion, while that year's net income was $224 million or $1.93 per share of common stock.

ANALYSTS' OPINIONS

According to stock analysts, Wrigley is a financially solid, stable company that, historically, has shown to be cautious when moving into new markets. Analysts point to its strong underpinnings, which include very strong and consistent earnings growth over the last decade and the fact that the company has been debt-free. These factors make the company a good choice for those investors willing to pay more for its shares, but who like its reputation as a "safe haven."

HISTORY

In 1892 William Wrigley Jr., a youthful and successful door-to-door soap salesman, began giving away chewing gum as a bonus to his customers. Soon his customers were asking to buy his spruce-paraffin gum rather than his soap. Wrigley saw the market potential for a vastly popular product and soon began developing and manufacturing a chicle-based chewing gum. Wrigley had been working closely with Zeno Manufacturing, the company from which he had been purchasing his give-away gums. In 1898 Wrigley merged with Zeno, forming what is known today as the Wm. Wrigley Jr. Company. The mainstay of the company remains its Spearmint, Juicy Fruit, and Doublemint gums.

During World War II, American troops abroad created a tremendous demand for chewing gum, at a time when chewing gum ingredients were in short supply. Wrigley decided to discontinue providing its Spearmint, Doublemint, and Juicy Fruit to the domestic market to ensure that overseas troops did not have to go without. Meanwhile, on the homefront the Wrigley name was kept alive in the American consciousness with a "Remember This Wrapper" advertising campaign, which promised abundant supplies of the company's popular chewing gums once the war ended.

The company faced a different kind of challenge in the mid-1970s. With the growing awareness of health and diet, sugar-free products were flooding the market. Initially, Wrigley resisted responding to the trend toward sugar-free products, and as a result lost market share to its competitors who manufactured gums sweetened with a sugar substitute. (The company also resisted other trends: only in 1971 did it raise its price for a pack of gum by $.02, the first price increase in decades.) Wrigley instead opted to offer its customers Freedent, chewing gum aimed at denture-wearing gum lovers. Not until 1984 did it venture into the sugar-free candy market with the introduction of its Extra sugar-free gum line. Wrigley later offered sugar-free Freedent gums and bubble gum-flavored Extra.

Domestic chewing gum consumption fell from 215 sticks per capita in 1978 to 168 sticks in 1986. The market recovered, to 183 sticks per capita in 1992. But even amid this market turbulence, Wrigley's prices remained the same: in the mid-1990s, a five-stick pack of Wrigley's gum cost $.25, the same price it was in 1987; in contrast, both cigarettes and candy have increased in cost. In 1992 Wrigley posted earnings of $141 million on revenues of $1.3 billion. Wrigley sales grew 18 percent domestically in 1993; in 1994, the chewing gum market was estimated to be $2 billion, of which Wrigley easily commanded half. The market dropped again in 1996, thanks to weak sales of sugar-free gum and bubble gum; however, Wrigley's net sales increased by 5 percent over 1995 sales.

STRATEGY

Wrigley's basic marketing strategy has always been to emphasize brand recognition through strong advertising "pull" in retail stores wherever its products are sold. The idea behind this strategy is that the consumer will become so familiar with a product's brand name that he or she will always equate the product (chewing gum) with the brand (Wrigley). For Wrigley, this strategy has obviously worked; Wrigley's familiar chewing gum pack is one of the most recognizable brands in the world. Wrigley's sales representatives take special care to help retailers with the design and layout of the company's displays. Wrigley also spends much of its advertising budget on television ads because it sees that television advertising is a way of reaching a wide audience at a relatively low cost. Overall, Wrigley's marketing strategy is summed up well in a 1994 Brandweek article: "Wrigley built a reputation for making one product consistently well and selling it at a consistently low price. For 60 years, the gum sold for a nickel a pack. It takes few risks when it comes to the core product, but one [product] was almost seven years ahead of the curve: value pricing. Unlike most of its competitors, Wrigley doesn't rush new products and ad campaigns." And, according to Lisbeth Echeandia, Editor of Confectioner magazine, "Wrigley's way of doing business only looks easy; there's usually a lot more going on than they're given credit for." Undoubtedly, whatever new challenges Wrigley faces, this tradition-bound company will challenge its competitors the same way it always has: methodically and armed with the same marketing formulas that has made the company a market leader. As Wrigley vice president-Corporate Affairs, William Piet enjoys reminding people, "Half of Americans chew gum and half of them chew Wrigley's."

CURRENT TRENDS

Wrigley has been favorably influenced by both the health/fitness craze and the antismoking campaign of the last few decades. When the U.S. government banned smoking on domestic airline flights, Wrigley initiated an in-flight ad campaign targeted at smokers. The company's "When You Can't Smoke" ad is considered one of its most successful marketing campaigns, and as a result Wrigley is now pushing its products as an alternative to smoking . In the mid- and late 1990s Wrigley began promoting gum chewing as a health benefit. Its Extra sugar-free brand is being advertised as beneficial to dental hygiene when chewed after meals. Apparently, the company's association with the World Dental Federation has added credibility to this campaign.

PRODUCTS

The Wm. Wrigley Jr. Company manufactures a broad range of chewing gums, including a sugar-free gum and a gum for denture wearers; however the company's mainstay continues to be its popular sweetened brands. The company's subsidiaries include Amurol Confections, makers of novelty chewing gums; L.A. Dreyfus Co., which manufactures chewing gum base; and Northwestern Flavors Inc. Wrigley manufactures its chewing gum in three factories in the United States and in 11 foreign plants. Its subsidiaries also manufacture other confectionery products. In addition to manufacturing and marketing children's bubble gum brands such as Bubble Tape and Big Little Chew, the Amurol Company produces various non-gum candies, such as a line of suckers, dextrose candy, liquid gel candy, and hard roll candies. Amurol's products are also being sold overseas, the largest markets being Canada, Brazil, and Japan. The L.A. Dreyfus Company's main business is the production of chewing gum base, which it does at one domestic and one overseas factory. It manufactures this product not only for Wrigley and its wholly owned associated companies, but also for other chewing gum and specialty gum manufacturers in the United States and abroad. Northwestern Flavors, Inc. processes flavorings and refines mint oil for Wrigley and its subsidiaries.

FAST FACTS: About Wm. Wrigley Jr. Co.

Ownership: Wm. Wrigley Jr. Co. is a publicly owned company traded on the New York Stock Exchange. CEO William Wrigley owns about one-third of the company.

Ticker symbol: WWY

Officers: William Wrigley, Pres. & CEO, 65, 1997 base salary $500,000; Martin J. Geraghty, Sr. VP, 61, 1997 base salary $288,000; Douglas S. Barrie, Group VP, 64, 1997 base salary $408,750; Ronald O. Cox, Group VP, 59, 1997 base salary $345,417

Employees: 8,200

Principal Subsidiary Companies: Wm. Wrigley Jr. Co.'s subsidiaries include: Amurol Confections Company; L. A. Dreyfus Company; and Northwestern Flavors, Inc.

Chief Competitors: Wrigley is arguably the leader in the chewing gum market. Its closest competitor isthe American Chicle Group, which is owned by Warner-Lambert. Other competitors include: Huhtamaki and Nabisco Holdings.

CORPORATE CITIZENSHIP

The Wm. Wrigley Jr. Company, in the words of its CEO, "neither seeks the limelight nor blows its own horn." During its early years Wrigley was one of the first companies in Chicago to provide subsidies to its work-force to encourage workers to use the local public transportation system. This not only meant fewer cars on the road, but also substantial savings for those Wrigley employees commuting by bus or train. As mentioned, during World War II Wrigley discontinued making its domestic gums to ensure an adequate supply to the oversees troops. The company was a charter member of the "Keep America Beautiful" campaign that was launched in 1953. And although chewing gum manufacturing produces almost no air or water pollution, Wrigley is proud of its environmental record. The company states in one of its informational booklets that it has always taken a proactive role in clean air standards. Its senior management enforces stringent monitoring of all environmental, safety, and health (ESH) practices and systems in Wrigley offices and factories in the United States. Overseas it claims that it is one of the few multinational manufacturers that maintain similar ESH standards at all its factories; in some overseas locations Wrigley's standards are often more stringent than those of the local governments. The company is also active in numerous community programs with such organizations as the NAACP, The United Negro College Fund, The Caption Center, Prentice Women's Hospital and Maternity Center, Salvation Army, United Way, Hugh O'Brian Youth Foundation, and other nonprofit groups.

CHRONOLOGY: Key Dates for Wm. Wrigley Jr. Co.

1892:: William Wrigley Jr. begins marketing chewing gum
1893:: Juicy Fruit and Wrigley's Spearmint are introduced
1898:: Wrigley merges with Zeno, forming the Wm. Wrigley Jr. & Company
1910:: Wrigely's Spearmint becomes America's top selling brand
1916:: Buys a share of the Chicago Cubs baseball team
1919:: Goes public
1924:: The landmark Wrigley building in downtown Chicago, Illinois, is built
1932:: William Wrigley Jr. dies and his son Philip takes over the company
1944:: World War II causes Wrigley to only be able to produce one type of gum—Orbit, initially made for the troops
1962:: Wrigley launches a very successful campaign in England to illustrate circumstances in which gum chewing was and wasn't acceptable
1971:: The price for a package of gum is raised from $.05 to $.07, the first price raise in 50 years
1979:: Hubba Bubba debuts
1984:: Extra sugarfree gum is introduced
1990:: Wrigley begins advertising its gum as an alternative to smoking
1997:: Wrigley closes its Santa Cruz, California, plant

A WHOLE WAD OF FUN TIMES TWO

"Double your pleasure, double your fun. That's the statement, of the great mint, in Doublemint gum." This well known advertising campaign by the Wm. Wrigley Jr. Co. has been successful in marketing the Doublemint gum brand since the late 1930s. The campaign began on the radio, where advertisements featured two piano players or two violinists or two comedians delivering their shticks. Twins wearing identical hats and chewing Doublemint gum were featured when Wrigley's began promoting the gum on billboards. Because of the wide recognition of the twins campaign, Wrigley's has used variations of it to promote the gum to this day, where they can be seen on television.

GLOBAL PRESENCE

Wrigley has operated in Europe for 80 years; it controls 80 percent of the chewing gum market in Germany and Britain. Its growth in eastern Europe is estimated at 20 percent annually since 1989. In the 1990s Wrigley began "pumping millions into overseas expansions," according to a 1994 Brandweek article, in order to take performance pressure off its domestic operations. Although the company's construction of plants in India and Poland were part of this strategy, these operations were not expected to become profitable until 1998 or 1999. The company has established operations in eastern Europe and, in 1993, opened a factory in China. Construction of a $25-million factory in St. Petersburg commenced in 1996 and production is expected to start in early 1999. Although the company's primary global operations are concentrated in central Europe and Scandinavia, it has increased its Asian distribution significantly in the late 1990s. Wrigley has distribution channels in China, Hong Kong, Malaysia, the Philippines, and Taiwan. Until the mid-1990s Wrigley had not made an effort at entering the Latin American markets, primarily because of local governments insisting on joint ventures. The company had reached a distribution agreement with Grupo Industrial Bimbo to distribute candy in Mexico. Bimbo's Ricolino confectionery began national distribution of Wrigley chewing gum in May 1993. In 1997 Wrigley's 10 largest foreign markets were Australia, Canada, China, France, Germany, Philippines, Poland, Russia, Taiwan, and the United Kingdom (measured by shipments).

EMPLOYMENT

The Wm. Wrigley Jr. Company offers its employees a wide range of benefits, and it has done so since the company's founding. In the 1920s Wrigley was the first company known to give its employees the day off each Saturday; this perk was traditionally reserved for top-echelon management. Today, its benefits include education, such as on-site job training and English as a Second Language courses, as well as education-assistance programs, job sharing, and leaves of absence.

The Wm. Wrigley Jr. Company closed its Santa Cruz, California, plant in 1997. By 1996 the company had eliminated about a third of the employees through transfers, retirement, or termination. "By any measure, the process of closing a facility is difficult," wrote William Wrigley, in the company's 1996 annual report, "but everyone involved is stepping up to meet the challenge."

SOURCES OF INFORMATION

Bibliography

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rudnitsky, howard. "chicle is chic." forbes, 8 november 1993.

sec form 10-k (annual) report, 25 march 1998. available at http://www.sec.gov/edaux/formlynx.htm.

sec form 14a, (executive compensation), 25 march 1998. available at http://www.sec.gov/edaux/formlynx.htm.

the story of chewing gum and the wm. wrigley jr. company. chicago, il: the wm. wrigley jr. company, 1992.

warner, fara. "chewing up competitors with an ancient marketing formula; wrigley founder's marketing mantras still guide gum king." brandweek, 4 july 1994.

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"the wrigley way: continuing our legacy of social responsibility." chicago, il: the wm. wrigley company, 1994.