CASE STUDIES

Haribo Case Study

Reinvigorating the sugar confectionery market by focusing on health and comfort trends
Reference Code: CSCM0273 Publication Date: September 2009

DATAMONITOR VIEW CATALYST

This case study looks at Haribo and how the company has addressed key challenges in the sugar confectionery sector. The firm is one of the leading players in the European market, but has had to adjust its business strategy to be in line with consumer demands for healthier food. In addition, the sector is experiencing a boost in adult consumers due to growing nostalgia and comfort trends.

SUMMARY
The European sugar confectionery market is worth over $24 billion, but growth has been slowing due to increasing consumer awareness and concern over health issues. This has prompted the sector to address health trends with products that are less calorific and have fewer artificial elements. Haribo is one of the longest serving and leading companies in the sugar confectionery segment, which has long focused on marketing to both adults and children. With new restrictions on advertising and growing concern over health, the company is targeting adults more with advertising designed for this purpose. The company is addressing the health trend with the new Haribo Lite range of candies that are less calorific and healthier than its conventional products. The latter have also been overhauled to be healthier and now feature no artificial colors. In addition, Haribo has an opportunity to address the nostalgia trend more clearly to prevent its competitors from stealing its adult customers and gaining market share.

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ANALYSIS The sugar confectionery sector is addressing health and comfort trends to reverse falling growth
Growth in the sugar confectionery sector is slowing due to consumers' growing concern for their health
The European sugar confectionery sector was worth a substantial $24.6 billion in 2008, with the largest regions in terms of value being in Russia, Germany and the UK (see Table 1). In the top five leading European countries, the value of the sector is forecast to have a falling or static growth rate in the 200813 period, highlighting the impact of consumers' concern that candies are bad for their health (in that they are generally regarded as being high in sugar and artificial colors and flavorings). Datamonitor defines the sector as including the following categories: caramels and toffees, gums and jellies, hard boiled sweets, medicated confectionery, power mints, regular mints and other sugar confectionery.

Table 1:

Leading countries for sugar confectionery in Europe by value, US$ m, 200313

Industry

Region

2003

2008

2013

CAGR 200308

CAGR 200813

Sugar confectionery

Russia Germany UK Ukraine France

4,426 3,162 2,811 1,435 1,207

5,747 3,293 3,017 2,519 1,341

7,143 3,463 3,226 3,909 1,466

5.4% 0.8% 1.4% 11.9% 2.1%

4.5% 1.0% 1.4% 9.2% 1.8%

Europe overall

20,553

24,591

29,099

3.7%

3.4%

Source: Datamonitor's Market Data Analytics

DATAMONITOR

Manufacturers have responded to the slowdown with products that are focused on health and comfort
In order to enhance the growth rate of the sector, sugar confectionery manufacturers are addressing consumer concerns over health by launching healthier candy options and, in addition, are attempting to make confectionery appeal to adults as well as children by marketing its nostalgic allure (and therefore addressing comfort trends) to maximize their potential consumer base.

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Leading claims in sugar confectionery have a focus on health

Highlighting the fact that European sugar confectionery manufacturers are focusing on enhancing the healthiness of their products is the chart shown in Figure 1, which shows that four of the top five claims in new product launches have a health focus. The leading claims for the year to August 2009 was 'no sugar', followed by 'no artificial color', showing that manufacturers are concentrating on removing two often criticized elements from their products. Meanwhile, the sector is still highly focused on marketing its products to children, highlighted by the presence of the 'kids' tag in the top five leader board. The leading claims show that manufacturers are keen to enhance their reputation among consumers and encourage them to continue purchasing their products for both themselves and their children by improving the healthiness of the products.

Figure 1:

Health claims dominate the leading claims of the past year in European sugar confectionery launches

Top five claims in new sugar confectionery launches in Europe, August 2008-09
90 80 70 60 50 40 30 20 10 0 No Sugar No Artificial Color High Vitamins Kids No Artificial Flavor

Source: Datamonitor's Product Launch Analytics

Number of SKUs

DATAMONITOR

A significant proportion of Europeans are choosing foods that comfort them

As well as health, manufacturers are focusing on comfort and nostalgia trends to encourage more consumers to purchase their products. This has been witnessed by the emergence of old-fashioned sweet shops both on the high street and online, most notably the UK online store aquarterof.co.uk, which sells sweets such as cola bottles and sherbet lemons. In addition, the trend has been seen in the wider confectionery market, where in the UK, discontinued brands such as Wispa and

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Drifter have been successfully revived, while Starburst candies briefly changed to their original Opal Fruits branding. Such revivals aim to capitalize on the nostalgia trend among adults for sweets from their childhood, as these offer the potential to provide comfort, especially during the current poor financial climate. Datamonitor consumer research found that a significant proportion of European consumers were choosing comforting food and drinks on an increasing basis (see Figure 2). This was especially the case in Russia, where 44% of survey respondents said that they were choosing these products more or significantly more frequently. Other European respondents were less enthusiastic about them, but nonetheless around a quarter of consumers in Germany, Italy, Spain and the UK were more frequently choosing comforting foods, showing a significant portion of society has a growing interest in these products.

Figure 2:

A significant proportion of Europeans are growing more interested in comfort foods

Question: In the past six months, please indicate to what extent you have done the following more or less frequently: Chosen comforting food and drinks
100% 90% 80% 70% % of respondents
39% 14% 27% 12% 25% 17% 11% 20% 20%

60% 50% 40% 30%

69% 48%

62%

65% 64% 64% 57%

44%

20% 10% 0% France Germany Italy Neths. Russia Spain Sweden UK

26% 17% 26% 11% 24% 17% 23%

More or s ignificantly m ore

No change

Les s or s ignificantly les s

DATAMONITOR

Source: Datamonitor's Consumer Survey, August 2008

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Haribo is a leading brand in the European sugar confectionery sector that has been successful in targeting both adults and children
One of the leading European sugar confectionery companies is Haribo, which achieved substantial sales of $715m in 2008. The company's success has been achieved by addressing health and comfort trends, which have enabled it to tap into a growing consumer base of both adults and children.

Haribo was formed in Germany in 1920 and has grown strongly in international markets
Haribo is a long-term player in the sugar confectionery market, being formed in Bonn, Germany in 1920 by Hans Riegel (the name is an acronym for Hans Riegel Bonn). The company has grown internationally over the years, entering the US market in 1982, while remaining under the ownership of the Riegel family. It is now run by the founder's two sons, Hans and Paul Riegel. As shown in Table 2, Haribo is the fourth strongest company in the European sugar confectionery sector, with a market value share of 5.4%. However, the sector is quite fragmented, being made up of many small players, and the leading company in the region, Cadbury, has only an 8.6% share. Haribo currently exports its products to more than 105 countries, while producing its goods in five factories in Germany and 13 elsewhere in Europe. The company also has sales offices in almost every European country and in the US, demonstrating its strong international presence. The company's product line now includes an extensive line of sugar confectionery, including the following: Gold Bears (the company's first mass-produced product and logo), Starmix, Build-A-Burger, Happy-Cola, Eggstras, Fantasy Mix, Fizzy Cola, Liquorice Favourites (including Liquorice Wheels and Liquorice All-Sorts), Pasta Frutta, Kiddies Super Mix, and Tropifrutti.

Figure 3:

Haribo has factories and sales offices around Europe and the US, but exports globally

In addition to five production works in Germany, today HARIBO has 13 other factories in Europe. There are also sales offices in almost every European country and in the US.

Source: Haribo.com

DATAMONITOR

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Table 2:

Leading five players in the sugar confectionery market in Europe, 2008

Company

Brand

Market value share

Cadbury Plc Trebor Bassett Kent Wedel Adams Cadbury's Others Halls La Pie Qui Chante Saila Kiss Cool La Vosgienne Clorets Hacks Babayevsky Confectionery Concern OAO All Perfetti Van Melle Others Mentos Chupa Chups Fruitella Frisk Smint Rocky Fruiteros Haribo GmbH & Co. KG Others Haribo Happy Cola Leaf International Others Leaf Lakerol Red Band/Venco Villosa Chewits

8.6% 2.4% 1.1% 1.0% 0.9% 0.8% 0.8% 0.6% 0.5% 0.2% 0.2% 0.1% 0.1% 0.1% 6.5% 6.5% 6.0% 3.9% 1.0% 0.6% 0.4% 0.1% 0.1% 0.1% 0.1% 5.4% 2.9% 2.5% 0.1% 5.2% 2.8% 1.2% 0.5% 0.3% 0.3% 0.2%

Source: Datamonitor's Market Data Analytics

DATAMONITOR

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Figure 4:

Haribo has an extensive sugar confectionery portfolio in Europe

Source: Datamonitor's Product Launch Analytics

DATAMONITOR

The company has a longstanding focus on marketing to both children and adults
While sugar confectionery is traditionally associated with being consumed mainly by children, Haribo recognized early on in its formation that there was an opportunity to market its products to adults as well. In the mid-1960s, the company changed its German advertising slogan Haribo makes children happy, adding to it the phrase and adults too. The English version was also changed, to: Kids and grown-ups love it so, the happy world of Haribo. This highlights how the company has long recognized that adults enjoy consuming sweets as they have a comforting element that reminds them of their childhood. Recent research highlights how much adults enjoy sweets. According to ACNielsen research in 2008, adult levels of penetration within the gums and jellies subsector are only slightly lower of those of children: where 80% of children aged five to 15 enjoy eating them, it found that seven out of 10 adults aged 16 to 44 and six out of 10 in the 4464 age group like to buy them. Adult consumption of sugar confectionery is also acknowledged by the current generation of Haribo: "Gums and jellies consumption isn't just confined to children. They remind adults of their childhood in a positive way." Herwig Vennekens, managing director of Haribo Dunhills (the UK division), as quoted in The Grocer, 2008

Haribo has changed its marketing strategy in line with stricter regulations by focusing more on the adult consumer
By focusing on the adult consumer as well as children, Haribo can lessen criticism that it is marketing an essentially unhealthy product to children. Of course, Haribo would argue that its products are treat items that are not meant to be consumed in large numbers on a daily basis. However, with various countries banning the advertising of high fat, sugar and salt products to children, Haribo has had to respond by targeting its marketing more towards adults than children.

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The company has addressed restrictions on marketing to kids by directing its TV adverts towards adults
Haribo faces restrictions on advertising its products to children in many countries. In the UK, regulator Ofcom outlawed the advertising of 'junk food' on TV during dedicated children's programs, and adult programs that could appeal to children, in 2006. The ban included foods that are high in fat, salt and sugar and so covers sugar confectionery. In response, Haribo started advertising its products on TV in a way that would appeal to adults. An advert for the brand from 2009, for example, saw a man being interrogated by his young daughter over who ate all the 'fried eggs' from a Haribo's Starmix bag. The advert is a tongue-in-cheek way of showing that adults often eat sweets secretly to conceal their liking for them. This style of advert could appeal to parents and adults in general who secretly enjoy sweets and could encourage more consumption among this consumer type.

Haribo has moved its kids marketing online where regulations are less stringent
While Haribo faces advertising restrictions on TV, it has more freedom to promote its products to children on the internet. The company runs the Haribo Club, which people can apply for online and in the UK enables anyone "from three to 103" to receive newsletters and sweets five times a years. Interesting to note, however, is the fact that the company is keen to point out that these sweets come in "portioned controlled bags", showing how it aims to be a responsible company even online, where restrictions are less stringent.

The company has addressed the health trend with the new Lite range and by reviewing its product ingredients
Along with addressing marketing restrictions, Haribo has also focused on enhancing the healthiness of its products, in line with consumer concern over obesity and health-related issues. In 2007, Haribo introduced Haribo Lite, a new range of fruit-flavored and fruit-shaped gums that contain no artificial colors, only 0.1g of fat per 100g, 30% fewer calories than its conventional products and 40% less sugar. This followed the company's more extensive overhaul of its products in 2006, when it began removing artificial colors from its gums and jellies. By January 2008, all Haribo bags of gums and jellies produced in the UK used non-artificial colors. Such a response shows how the company is keen to address consumer issues in order to retain a healthy bottom line. "Confectionery is very much under scrutiny because of widely publicized concerns over obesity. Consumers are now looking more closely at the nutritional content of all products, and manufacturers have responded by introducing 'healthier' products." Herwig Vennekens, managing director of Haribo Dunhills, as quoted in The Grocer, 2008

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Haribo could capitalize on the nostalgia trend but faces competition from others keen to exploit this
While Haribo has successfully addressed the health trend, it could focus more on the nostalgia trend to encourage more consumption among adults. As noted previously, various online sites such as a quarterof.co.uk, alongside high street stores, have opened to capitalize on growing demand for nostalgia sweets. In addition, Thorntons has introduced a Sweet Shop section to its website that sells sugar confectionery. As these of the kind of sweets Haribo produces, such as cola bottles and gummy bears, the company could possibly enhance business by focusing more on nostalgia. In particular, the firm could change its packaging to focus more on this, introducing a line that has packaging designed to appeal to adults and their desire to reminisce about their childhoods. Such a focus could enable it to compete more strongly against a recent rival to the brand, Rowntree Randoms, which entered the UK market in 2009. The product is being marketed to appeal to adults rather than children as a fun-loving brand that reminds them of the sweets of their youth. The brand could take market share away from Haribo, attracting adults to the brand who would normally purchase Haribo, and is therefore one the company needs to be wary of.

Figure 5:

Rowntree Randoms and Thorntons Sweet Shop are new rivals to Haribo's sweet confection range

Rowntree Randoms and Thorntons Sweet Shop were both launched in 2009, targeting adults with a nostalgic product.

Source: Datamonitor analysis

DATAMONITOR

Conclusion
Haribo continues to perform strongly as a main player in the European sugar confectionery market. The company's introduction of the Lite range and its health overhaul of its portfolio show how it is responding positively to consumers' criticisms of the sector and their overall health and obesity fears. While it has long maintained that it is positioned towards both adults and children, recent regulations have made it more important to focus on adult marketing. However, the company has an opportunity to take this further by addressing nostalgia trends, which could safeguard its position against new entries into the sector and see it become an all-round player loved by every age group.

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APPENDIX Case study series

This report forms part of Datamonitor's case studies series, which explores business practices across a variety of disciplines and business sectors. The series covers a range of markets including food and drink, retail, banking and insurance, pharmaceuticals and software. Each case study provides a concise evaluation of a company that stands out in some area of its strategic operations, highlighting the ways in which the company has become one of the best in its field or how it deals with different problems encountered within that sector.

Methodology
This case study was compiled using a collection of both primary and secondary research, including Datamonitors own consumer survey fieldwork. In addition to this, writing this case study also involved researching innovative product formulations on Datamonitor's Product Launch Analytics Database, alongside an extensive review of secondary literature and other in-house sources of information such as Datamonitors Market Data Analytics tool.

Secondary sources
Nestl UK to roll out Rowntree Randoms, Marketing Week, January 2009 Sugar rush, The Grocer, May 2009 Sweetness & light, The Grocer, April 2008 Haribo, Talking Retail, February 2008

Further reading
Datamonitor (2009) Global Consumer Trends: Sensory, July 2009, DMCM4693 Datamonitor (2009) Sprinkles Case Study: capitalizing on the comfort trend with an everyday treat offering, July 2009, CSCM0252 Datamonitor (2009) Global Consumer Trends: Health, June 2009, DMCM4691 Datamonitor (2009) Lifestyle & Socialization Trends in Childhood: Implications for CPG, April 2009, DMCM4670

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Disclaimer
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