Microeconomics: Product Evaluation
Microeconomics: Product Evaluation Free Essay
Wrigley’s Spearmint is a classic chewing gum with a 120-year history, sold in 180 countries. It is remarkable because of its long-lasting mint flavor, and smooth and soft texture. Wrigley’s Company occupies more than one-third part of the global chewing gum market and operates in oligopoly conditions. The saturated market of Northern America and the consequences of economic crises in Western Europe can explain the decreased interest in Wrigley’s Spearmint. Moreover, a considerable part of real-life communication is substituted by online interaction, where a fresh breath is not necessary. A price increase will result in a minor change in demand. Current advertising for Wrigley’s Spearmint needs to be redesigned to promote ideas outlined on its corporate website. Furthermore, it should be placed on the Internet, at fast-food restaurants, dentistry, and dietary clinics. Ukraine, Russia, Turkey, countries of Latin America and Asia will presumable have the increased incomes and should be a priority for sales.
William Wrigley Junior founded Wrigley’s Company in 1891 in Chicago, Illinois. It is a leading producer of chewing gum, lollipops, and chewy candies, which are sold in 180 countries under such brands as Wrigley’s Spearmint, Juicy Fruit, Orbit, 5™, Doublemint, Extra, Skittles, Altoids, Starburst, and Life Saver. In 2008, a private company Mars Incorporated acquired the company (Wrigley, 2013). Wrigley’s Spearmint is a classic chewing gum remarkable because of its strong and long-lasting mint flavor, and smooth and soft texture. It is made of a synthetic binding base, corn syrup, glycerin, mannitol, and a mint extract (Wrigley, 2013). This brand was launched in 1893 and initially, it was offered as a free package with a can of baking powder (Wrigley, 2013). During World War II, American soldiers received Wrigley’s Spearmint as a part of their food provision. Philip Wrigley, President of the company wanted to support the national army in its military mission (Wrigley, 2013).
Wrigley’s Company is the largest manufacturer and distributor of chewing gum on the global market with a share of 33.7%. Mondelez International Kraft, another U.S. company, has the second-largest market share of 28.5%. Italian Perfetti Van Melle group has a market share of 7.8%, and Japan Lottery Group occupied 5.7% of the global market. Thus, American companies jointly occupy 62.2% of the market and compete with each other (Rodrigo, 2013). In 2012, the world gum industry generated 26.4 billion USD, which is only an increase of 1.7%. In 2011, the growth was 7.7%, which is the record after the recession in 2008-2009, when the global sales dropped by 2.5%, from 23.2 billion to 22.4 billion (Rodrigo, 2013). According to Euromonitor International, in the period between 2011 and 2012, Western Europe’s sales fell by 4.2%, from 5.7 billion to 5.4 billion. Surprisingly, in 2011 and 2012, sales in the United States and Canada fell by 1.8% and 1.9% respectively from 4.7 billion in 2010 to 4.6 billion USD. Sales in Latin America grew by 1.7%, reaching 5.3 billion USD, and Asia Pacific demonstrated a considerable growth of 6.3% reporting about 6.7 billion USD in 2012 (Rodrigo, 2013). The U.S. National Confectioneries Association (NCA) explained the drop in the U.S. market as its oversaturation. A decrease in U.S. sales can be explained by the apathy of young people toward chewing gum. Moreover, in recent years young people have lower incomes and purchasing power (Rodrigo, 2013). Regarding determinants of demand, the number of buyers who use chewing gum for the refreshment of breath has decreased with the growing popularity of social networking communication. Thus, nowadays, Facebook accounts for 158, 855, 349 active users, who reside in the United States, which is 51, 21% penetration of the population (Socialbakers, 2013). Twitter, YouTube, Amazon.com, Google+, and Yelp are also popular social network websites with a big number of daily visits. Approximately 30% of the United States citizens use services of dating websites, such as e-Harmony, Match.com, and Spark Networks (Online DatingBook, 2013). Online gaming encounters 40 million Xbox Live subscribers and 77 million registered members on the PlayStation Network (Online Gaming Statistics 2012, 2012). Furthermore, European Union countries are still affected by the euro crisis, and the average 5.5% sales increase in 2012 will be reduced to 3.3% in 2013. In Ukraine, Russia, and Turkey, which are fast-growing economies and the salaries may be inflated by 10%, 9%, and 8% respectively. In 2013, the salaries will be increased only by 2.9% in North America, whereas they will be by 9% higher in Latin America. Salary growth in Asia is expected to reach 7.5% (HayGroup, 2013).
Besides, the price for Wrigley’s Spearmint has not been changed for several years. In the United Kingdom, a 7-pack Wrigley’s Spearmint equals GBP 1.49 (USD 2.31) (MySupermarket, 2013). In the United States, 4 packs of 7-Pack Wrigley Spearmint costs 22.99 USD, consequently, one pack is 5.75 (Amazon, 2013). Price elasticity of demand is a value calculated as a correlation between the proportionate changes in quantity to the proportionate change in price. Since the price for Wrigley’s Spearmint was unchanged for the previous two years, thus, a proportion between the price in 2011 and 2012 equal to one (QuickMBA, 2013).
According to research, conducted in 2010 by the School of Economic Sciences at Washington State University, spearmint occupies 13.8% of the mint flavor category, which is 51% of the total gum sales (Toro-Gonzales, Yan, Gallatdo & McCluskey, 2010). Taking into consideration the said above and the fact that Wrigley’s Company occupies 33.7% of the global gum, its share in the global gum industry equals 4.65% (13.8%/100%*33.7%). In 2011, the total demand for Wrigley’s Spearmint was 1.21 billion USD ((USD26.4 billion-1.7%)/100*4.65%). In 2012, the total demand for Wrigley’s Spearmint was 1.23 billion USD (USD26.4 billion/100*4.65%). Consequently, price elasticity of demand equals to 0.0165 ([USD1.23 billion-USD1.21 billion]/USD1.21 billion /1). Therefore, the demand is inelastic, and a price change will have less change in demand.
The global market of chewing gum is a typical oligopoly with a high concentration ratio. Smaller gums manufacturers can hardly enter the market to compete with the big suppliers, especially in the United States. High setup and operational costs will not allow establishing competitive prices, whereas large manufacturers can economize on scales. Furthermore, small companies cannot afford investments in the research and development of the product. Unlike them, Wrigley’s has established a science institute that is aimed at advancing scientific research to explore the benefits of chewing gum (Wrigley, 2013). Finally, strong brands gain the trust and loyalty of their customers, who appreciate high quality, reasonable prices, stable relations, and successful advertisement.
Wrigley’s has always proved in its advertisement that chewing gum is healthy for indigestion and teeth, it freshens the breath, which is vital for close relations, and brings energy and enjoyment from life. Moreover, the advertisement highlights the long-lasting taste, which makes people smile and close their eyes in pleasure. In 1910-1920, the advertisement was a printed material with pictures and simple mottoes like “Fine for digestion, fine for teeth”, “Wrigley’s Spearmint is my protection against indigestion”, or “Time flies pleasantly with Wrigley Spearmint.” In 1960, Wrigley’s Spearmint presented a cartoon, where a cartoon stick was making a fire for the picnic and laying the table for a meal (1960’s Wrigley’s Spearmint Gum Commercial, 2009). In the 1980s, Wrigley’s Spearmint showed videos with nice music and lyrics, where people of middle age are having a nice time on a picnic, fishing, or cycling, and a stick of gum makes their time and communication even more pleasant (80’s Ads: Wrigley Spearmint Gum, 2011). In the 1990s, Wrigley concentrated on freshness and longer effects (Wrigley’s Spearmint, 2007). In 2004, Wrigley’s Spearmint package contained the slogan “Ever better, longer-lasting”, which highlighted the longer-lasting refreshment effect. On the corporate website, Wrigley advocates eco-sustainable production and packaging (Wrigley, 2013). Moreover, Wrigley’s gives recipes of hot gods, associating itself with the fast-food industry (Food Network, 2013).
Wrigley’s Spearmint is recommended to redesign its advertisement to make in compliance with modern tendencies and the company’s old values. The advertisement should be mainly promoted through the Interment, a chain of fast-food restaurants, dentistry, and dietary clinics. Furthermore, Wrigley’s should concentrate its selling efforts on countries, which will have increased salaries and stronger purchasing power.
A sustainable environment is a main global concern. Wrigley’s should launch a massive advertising campaign with a focus on the sustainable environment message, which is advocated on its corporate website. In particular, a leaf of spearmint might be a symbol of modern eco-trends in the food industry. A green fresh leaf, which meets all eco-standards, can be associated with a mint herb that was not damaged by radioactive sun, acid rains, harmful fertilizers, and contaminated solid and air. Ecological ingredients, sustainable production, and renewable packages are the company’s competitive advantages, which should be promoted even more actively. Young people might be induced for buying Wrigley’s Spearmint by their intuitive sense of solidarity with eco-values. Moreover, the retro design of the advertisement might be attractive for senior people who were involved in the hippy movement when they were young and energetic. In the 1960s, hippies advocated freedom and getting back to nature (Schwanke, 2013). Thus, nostalgic feelings may lead to increased sales. In addition, an emphasis on a 100-year success might be attractive for consumers, who appreciate quality and stable relations. Since old brands deserve customers’ respect and loyalty. Furthermore, focusing on the benefits of digestion and tooth care may be effective for people who visit clinics and care about their diet and oral hygiene. Finally, Wrigley’s Spearmint might be a sponsor of national sports competitions or cultural festivals to demonstrate its commitment to patriotic values. Concerning the content, an advertisement should contain an eye-catching image and a stylish motto. For example, William Wrigley Junior is keeping in his hands a blue planet with an umbrella above it made of spearmint leaves. The motto might be “Greener, healthier and happier.”
Because online communication has become more popular, the brand gum should be placed on Facebook, Twitter, YouTube, Amazon.com, Google+, Yelp, e-Harmony, Match.com, Spark Networks, and other online gaming platforms. While communicating online, people will see the image hundreds of times and it will be imprinted on their subconscious. While shopping, such people will start buying Wrigley’s Spearmint as a regular thing dictated by their subconscious. Furthermore, Wrigley’s Spearmint should be advertised in fast-food restaurants as a supplementary product for a meal. The main idea is that eating out can be both pleasant and healthy. A stick of gum served with the meal would be a beneficial marketing approach to establish a strong association between a meal and the brand gum. When going to a picnic or birthday party, which is associated with eating and communication, people, who were given a stick of Wrigley’s Spearmint gum for refreshment in a fast food restaurant, might prefer to buy a pack of it for their needs. Finally, dentistry and dietary clinics can also contribute to the Wrigley’s Spearmint promotion. Since people who care about their diet and teeth hygiene are very sensitive to recommendations, thus, they may be enthusiastic about buying the brand gum.
Wrigley’s should plan bigger sales in various parts all over the world where salaries will be higher compared to the previous year. In particular, Ukraine, Russia, Turkey, and countries of Latin America and Asia should be a priority. Increased salaries will result in stronger purchase power. The food industry will benefit from it to the greatest extent since food is vital for people’s health and life, and the improved well-being is reflected in the increased food purchases. With efficient promotional support, a pack of chewing gum might become a habit.
To sum up, being a classic chewing gum for more than 100 years, Wrigley’s Spearmint is sold in 180 countries. Wrigley’s is the main player in the global chewing gum market and operates in oligopoly conditions. Decreased interest in Wrigley’s Spearmint can be explained by the saturated markets of the United States and Canada and the uncertain economic environment in Western Europe. In addition, real-life communication was substituted by online communication minimizing the effect of gum as a breath freshener. Wrigley’s aimed at a sustainable environment, healthy digestion, and teeth care should be adopted from the corporate website and promoted through the Internet, fast-food restaurants, and dentistry and dietary clinics. Countries with the expected increase in incomes must be a priority for sales.