Introduction
Jolly Ranchers is a hard sugar candy brand that has been created by the Jolly Rancher Company. The company was founded in Golden, Colorado by Bill and Dorothy Harmsen in 1897 and specialized in the production of chocolate and ice cream (“The History”). Due to seasonal decreases in sales of ice cream, the producers branched out into hard sugar candies. In 1996, the Jolly Ranchers Company was sold to the Hershey Co. that expanded the production of hard sugar candies by introducing new flavors (“The History”). Currently, there are five flavors of Jolly Ranchers: cherry, blue raspberry, grape, sour apple, and a watermelon (“Jolly Ranchers”). This paper aims to outline the results of a market analysis of the Jolly Ranchers and candy category. The paper will discuss consumer trends, a political challenge, a technological change, and the transformation of the competitive landscape affecting both the company owning the brand and its closest competitors.
Analysis
Market
The global confectionery industry was worth $176.72B in 2016 and was led by producers from Western Europe whose sales amounted to $52.82B (“Dollar Sales”). The confectionery industry in the US was assessed at $34.9B in 2015 (“Confectionery Industry”). The industry subsumes three major market segments: chocolate confectionery, gum, and sugar confectionery (“Confectionery Industry”). The brand belongs to a candy category, which falls under sugar confectionery. Even though the industry is affected to a large extent by rising health consciousness of consumers who are worried about major downsides associated with sugar consumption, sugar confectionery has been steadily rising for many years. It is the highest-selling category within the confectionery industry. In 2016, sugar confectionery sales grew by 4% from the previous year and reached $11.3B (“Confectionery in the US”). It means that the current market environment is favorable for hard sugar candy manufacturers such as the Hershey Co.
Competitive Landscape
Hershey Co. holds a leading position in the production of hard sugar candy in the US (“Leading Vendors”). In 2016, the company’s value share of the market was 31% (“Confectionery Market Share”). Other major confectioners in the US are Mars (29.1%), Modelez (5.3%), Lindt (5.3%), Nestle (4.5%), Private Label (3.2%), and Ferrara (2.5%) (“Confectionery Market Share”). However, the top-selling vendors of the product are the Hershey Co., August Storck KG, Tootsie Roll Industries, and Spangler Candy Co. (“Leading Vendors”).
Jolly Ranchers is an iconic brand of the Hershey Co. that performs exceptionally well in terms of sales. Currently, the product’s sales are estimated at $88.8M (“Sales of the Leading”). The top seller in the hard sugar candy category faces competition from the following products: Werther’s Original ($86.1M), Private Label ($41.2M), Spangler Dum Dum Pops ($32.9M), Tootsie Roll Pops ($32.7M), Lifesavers ($31.6M), Charms Blow Pop ($30.9M), Spangler Dum Dums ($23.1M), Nips ($16.5M), and Original Gourmet ($13.4M) (“Sales of the Leading”).
The Hershey Co.’s net sales in 2015 were $742.1M, which represented a minor reduction from the previous year’s figure—$738.6M (The Hershey Co.). However, in 2016, the company’s total sales reached a new high of $744.1M (The Hershey Co.). The company expects a 2% increase in its net sales due to successful acquisitions in the previous year (The Hershey Co.). August Storck KG’s sales in the US are expected to reach $862.2M, which is a marked increase from the previous three years—$838.1M, $814.8M, and $802.1M (“August Storck KG”).
Tootsie Roll Industries’ net sales were $517.3M in 2016 and $536.6M in 2015 (Tootsie Roll Industries, “Annual Report 2016”). The company has ascribed a 3.6 percent reduction to unfavorable currency translation, deferred compensation, and poor timing of sales between the fourth quarter of 2015 and the first quarter of 2017 (Tootsie Roll Industries, “Annual Report 2016”). In 2014, net product sales of the confectionery manufacturer were $539.8M (Tootsie Roll Industries, “Annual Report 2014”). It means that a previously profitable brand portfolio of the company becomes less popular, thereby preventing the confectioner from reaching its profit goals. Spangler Candy Co.’s net sales in 2016 were $102.3M, which represents an increase from the previous two years–$101.1M and $100.2M, respectively (Scully 32; Spangler Candy Co.). The stable increase in sales might attract investors interested in the growing company.
Even though Hershey Co. expects a minor surge in its net sales, a shift in the competitive landscape has impacted sales of the hard sugar candy. A recent report reveals that “Hershey’s Jolly Rancher brand—the long-time leader in boiled sweets—has lost share given the shift toward chewy products” (“Confectionery in the US”). Therefore, the company should adjust to the changing preferences of consumers to retain and strengthen its leading position in the market.
The Macro Level
All producers of hard sugar candy are affected by the stagnation of disposable incomes of Chinese consumers, which inevitably leads to a decrease in sales. When it comes to the US retail sales of the product, the Hershey Co. and other confectioners should be wary of consumers’ dissatisfaction with artificial flavors. Pacyniak argues that “demand for natural flavors has increased by 35 percent since 2010 (“A Momentary Pause” 24). Furthermore, it has been noticed that exotic flavors lead to an increase in sales. New product launches are recommended to have the following flavors: melon, blackcurrant, and lime (Pacyniak, “A Momentary Pause” 24). Self-regulation within the industry associated with the reduction of candy advertising in child-directed media also affects the confectioners (Harris et al. 585).
The competitive landscape has also markedly changed in recent years. Top four candy manufacturers—Hershey, Mars, Nestle, and Lindt—accounted for 71% of the market share in 2014 (Nieburg). Small or medium enterprises (SMEs), on the other hand, saw 0.7-point share gain in the same year, which resulted in a 26% share of the candy market (Nieburg). The shift in the composition of the market was followed by new attempts of policymakers to reduce obesity levels in the US. In 2016, the US Food and Drug Administration (FDA) mandated confectioners to label their products with information on “‘added sugars,’ in grams, and as percent Daily Value” (“Changes to the Nutrition”).
A critical technology change that has a considerable influence on the confectionery industry is the development of cloud computing. Pacyniak reveals that even though confectionery manufacturers invest heavily in packaging automation, many of them show “an interest in logistics purchases, particularly with software (29 percent) and cloud-based investments (21 percent)” (“Candy Industry”). It follows that forward-looking companies have to review their expenditure budgets to streamline their supply chain management practices with the help of cloud computing.
Conclusion
The paper has analyzed the high-performing brand of the Hershey Co—Jolly Ranchers. It has been shown that despite the fact the current market landscape is favorable to the company, the brand owned by the candy producer faces fierce competition from both SMEs and other major players in the confectionery industry.
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