Wm. Wrigley Jr. Co.

Dec. 21, 2004
New generation ushers in speculation of change at the gum empire.

The chewing-gum empire of the Wm. Wrigley Jr. Co. was shaken in March when its president and CEO, William Wrigley, 66, died unexpectedly. He had led the company that bears his grandfather's name since March 1961, following in the footsteps of his father, Philip, who held the same post for 36 years. The loss resulted in the advancement of Wrigley's son, William Wrigley Jr., 35, to the top post of the chewing-gum industry's dominant player, which produces such familiar brands as Juicy Fruit, Freedent, and Big Red.

The new leadership also has industry analysts speculating about what, if any, changes the fourth generation of Wrigley may usher in. Few are likely in the short term, given the suddenness of Wrigley's ascension, suggests John McMillin, senior consumer-industry analyst at Prudential Securities Inc., New York.

"He probably needs to get his feet wet," McMillin says.

It could be argued that Wrigley has been in training to lead the company all his life. He has worked full-time at Wrigley since 1985, been heavily involved in the manufacturer's international operations, and was increasingly involved in overseeing its strategic direction at the time of his father's death.

 Even so, the move "happened sooner than anyone would have thought," says McMillin. Under those circumstances, "you don't go in with six things you want to do."

Wrigley has big footsteps to follow. Under his father's guidance, the company has shown solid profitability for years, and its revenues continue to increase annually -- albeit at a sluggish pace recently. Net sales for 1998 totaled $2 billion, a 3.5% increase over the previous year, and net earnings rose to $304.5 million, a 12.1% increase. Both are new high-water marks for the company, according to its annual report.

The elder Wrigley also took the company truly global, increasing its international penetration from a few dozen countries to more than 140. International markets drove the improvement in 1998's results, with China the single biggest contributor to the company's overall volume gains.

More than 50% of Wrigley's net sales last year came from outside North America and most future growth likely will emanate from those markets, analysts say. The company recently opened a factory in St. Petersburg, Russia.

Domestically, Wrigley owns the chewing-gum industry, with a market share that hovers around 50%. Its competitive edge in global markets is equally strong, where it has demonstrated enviable historic volume growth. Major competitors include Nabisco Holdings Corp., makers of Bubble Yum and Care*Free gum; and Warner-Lambert Co., which produces Trident and Dentyne chewing gum.

Despite its dominance, Wrigley has its share of challenges. The company's international growth has slowed recently, particularly in Russia and in the Asia/Pacific region, where volume sales were up last year but not as sharply as in previous years. Overall, international unit volume grew slightly more than 6% in 1998, compared with 17% in the previous year.

In the U.S. Wrigley contends not only with a mature market, but statistics indicate that sales of regular (sugar) gum -- which is Wrigley's stronghold -- are on the decline. McMillin says Wrigley's market share in the sugar gum category could be as high as 75%.

Industry watchers describe the company as conservative, wary of diversifying its product line or raising prices in the U.S. A younger generation could change all that, they say.

McMillin believes that the gum manufacturer should do something to "contemporize" its Juicy Fruit brand.

"I hope over time the younger Mr. Wrigley jazzes it up a bit," he says. 

McMillin and others also note that it has been a while since the company launched a new product in the U.S. That was before Wrigley introduced Eclipse, a sugar-free gum, last month.

The observation was not entirely true even before May, but product introductions in the U.S. recently have all come from Amurol Confections Co., a Wrigley subsidiary that primarily manufactures novelty gums such as Big League Chew. Last year Amurol Confections introduced Stay Alert, a caffeine gum, and this year Everest, a "high-intensity mint gum," according to the company.

Stock watchers also speculate that the younger Wrigley may be less conservative in spending money. The company carries no debt and is underleveraged, in McMillin's opinion.

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