From Russia With Love: Wrigley Buys Chocolate

by Nina Lentini, Jan 24, 2007, 5:00 AM

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Spurned in its earlier attempts to buy Hershey, the gum and candy maker Wm. Wrigley Jr. Co. has found a sweeter deal in Russian candymaker A. Korkunov. Yesterday, Wrigley announced it will buy an 80% stake in the premium-chocolate company for $300 million.

The move fits in with plans the company has long had to develop more indulgent products. In recent years, Wrigley has also expanded its candy business with such acquisitions as the Life Savers and Altoids brands from Kraft Foods.

Wrigley is the world's dominant chewing gum maker, with a U.S. market share greater than 50%--and an 80% share in some parts of Europe. Korkunov has some distribution in the U.S., but the focus of the acquisition is the Russian market, a Wrigley spokesman said. The company's largest markets are the U.S., Russia, China, the U.K. and Germany.

The Russian consumer market has boomed along with prices of the country's key export, oil. Many foreign companies, including Nestle and Danone have production there. The Korkunov factory, located in a Moscow suburb, is equipped to produce up to 25,000 metric tons of chocolate. The company exports 5% of its chocolates, according to the Korkunov Web site. Korkunov is about 1/50th the size of Hershey, with an estimated $100 million in 2006 sales.

Bob Boutin, executive vice president of Knechtel Laboratories, a Skokie, Ill., candy consulting company, sees the purchase as a potentially good extension and expansion.

"It's timely, in that gourmet chocolate has shown larger category growth internationally," he said. Boutin said the move also fits in with executive vice chairman Bill Wrigley's "very classy and forward-looking" vision.

Still, Boutin is watching performance of Wrigley's latest innovation, Altoids Dark Chocolate Dipped mints, before giving his final verdict.

Wrigley is gearing up for a Valentine's Day promotion of its Altoids Dark Chocolate Dipped mints called "Curiously Chocolate" with an integrated marketing campaign, including TV, print, out of home, online, sampling and public relations. The product targets an upscale market.

The company had tried to create buzz around the product, which was introduced before the winter holidays, by auctioning tins on eBay. That effort raised just $182.49 for the American Red Cross. Wrigley also leaked information to candy bloggers before the launch.

The chocolate Altoids are an attempt to revive the lagging brand. Poor sales have pulled Wrigley shares lower, and were part of Bill Wrigley's decision to step down as the company's chief executive officer in October. William Perez, who came from Nike, was named to replace him. Observers are watching as Perez reorganizes the company, and there are reports that senior executives are being let go.

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