Perfetti Van Melle Group in Packaged Food (World)

PERFETTI VAN MELLE GROUP IN PACKAGED FOOD
(WORLD)
December 2015
SCOPE OF THE REPORT
Scope
All values expressed in this report are in US dollar terms, using a fixed exchange Disclaimer
rate (2015). Much of the information in this
briefing is of a statistical nature and,
2015 figures are based on part-year estimates. while every attempt has been made
to ensure accuracy and reliability,
All forecast data are expressed in constant terms; inflationary effects are Euromonitor International cannot be
held responsible for omissions or
discounted. Conversely, all historical data are expressed in current terms; errors.
inflationary effects are taken into account. Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
Confectionery companies opinions, reader
discretion is advised.
US$183.2 billion
Refrigeration
Home
Laundry
Large Packaged
Appliances
Cooking HomeFood
Laundry Perfetti Van Melle is best
known for its brands Mentos
144,010
121,107
Appliances Appliances
132,745
US$2.2121,107
trillion and Chupa Chups. Some of its
strongest growth is taking place
Sweet and Savoury Snacks in India where its Center and
Alpenliebe brands have
US$125.2 billion benefited from a growing
appetite for sugar confectionery
and gum. Although the company
has some strong brands, it will
struggle as sugar confectionery
sales slow in Western markets.
The company needs to focus on
growth in China and India, and
potentially focus on new
products such as sweet and
savoury snacks.
Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 2

STRATEGIC EVALUATION
COMPETITIVE POSITIONING
MARKET ASSESSMENT
CONFECTIONERY
OTHER OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
APPENDIX
Perfetti focuses on expansion within India and China
Privately held Perfetti Van Melle is a global

confectionery manufacturer, and is ranked just
within the packaged food top 30. The company
is a top 10 global confectionery player (sixth in
2015), a status it owes to its second position in
sugar confectionery and third in gum.
Perfetti Van Melle has a global profile in
confectionery. In 2015, Western Europe was
superseded by Asia Pacific as Perfettis biggest
region, accounting for 37% of net sales. This
was due to the rise of India and China, but also
declining sales in Western Europe. Other key
markets include the US and Indonesia.
The company's best-known brands are Mentos, Perfetti Van Melle Group
Chupa Chups, Alpenliebe and Vivident. Milan, Italy and
Headquarters:
Developing its distribution in emerging markets Breda, Netherlands
has been a major priority for the company, Regional involvement: Global
reaching out in India to dabbawallas for Confectionery, sweet
Category involvement:
example who typically deliver lunch boxes to and savoury snacks
workers. The company moved into sweet and World packaged food value share
0.3%
savoury snacks in India in 2011, with the launch (2015):
of the Stop Not brand. World packaged food value growth
6.3%
(2014-2015):

Sales stall due to weakening Western demand
As a privately held company, Perfetti Van Melle Perfetti Van Melle Group: Net Sales
releases very limited financial information. 2010-2014
However, what data it does reveal indicate that
2,500
the company saw a decline growth in net sales
between 2008 and 2014, but a decline in the latter
year.
Sales stalled between 2013 and 2014, with total 2,000
net sales standing at 2,444 million. The company
splits sales roughly between chewing gum (37%)
Net sales ( million)

and sugar confectionery (63%). The acquisition of 1,500
Chupa Chups in 2006 gave it a notable boost;
however, beyond this investment, growth has
been largely organic, stemming from significant
growth in Asia Pacific and the Americas. 1,000
Perfetti Van Melle has launched several new

products, but it is relatively limited due to its
reliance on sugar confectionery and gum. New 500
products are aimed to target growing audiences in
China and India.
The companys lack of presence in chocolate
0
confectionery may change in the future it has 2010 2011 2012 2013 2014
recently launched chocolate flavoured Chupa
Source: Perfetti Van Melle
Chups. Note: Sales taken from Perfetti Van Melle website

SWOT: Perfetti Van Melle Group

STRENGTHS WEAKNESSES
Western Europe Affordability in Asia North America Limited portfolio

Perfetti is highly popular Perfettis products have North America is a key Perfetti needs to expand
in Europe, which has performed well in Asia, market for all its product portfolio as it
the highest global spend where sugar confectionery products, is exposed to long-term
on confectionery. This confectionery is very but Perfettis presence shifts away from sugar
has given the company popular. Perfetti has is minimal. This is a confectionery. At
a financial base for worked hard to ensure its serious disadvantage for present, the company is
expansion in Asia, products are affordable to the company compared in a weak position to
where its popularity has a large proportion of the to the likes of Mars and deal with these
surged. population. Mondelez. challenges.
OPPORTUNITIES THREATS
Expanding into new Toffees in China and Hostile regulatory Shifting demographics
products India environment
Given its wide array of Perfetti can leverage its There is a growing Sugar confectionery,
strong brands, global Alpenliebe brand to take clamour across the which Perfetti focuses
distribution capabilities advantage of the world for healthier diets, on, tends to be
and large revenues, popularity of toffees in with less consumption of consumed by younger
moving into other Asia, where they are a sugar. This is people. In many of the
products is possible. popular traditional treat particularly dangerous companys core markets,
Chocolate and other and a gift item. The for Perfetti, due to its the young population is
snacks should be brand could be exported strong focus on sugary declining, limiting sales
seriously considered. back to the West. foods. growth in the long term.

Key strategic challenges and objectives
Expanding in Indian market Move into sweet and savoury snacks

Perfetti Van Melle has carved out a strong In 2011, Perfetti Van Melle entered the Indian sweet
position in the Indian confectionery market by and savoury snacks market with Stop Not. This
offering single tablets of chewing gum for Rs1 range of sweet and savoury snacks was developed
and by expanding its distribution network to specifically for the Indian market, based on Indian
some 5,000 distributors spread over 2,000 urban taste preferences and using modern food
centres in India. In order to penetrate deeper into manufacturing processes. Although it is making slow
rural markets, the company has undertaken progress, Perfetti is testing the waters within markets
direct sales to smaller outlets. Such location- outside confectionery. Given the growing global
specific thinking is crucial in order to gain traction awareness regarding overconsumption of sugar,
in emerging markets. expanding its product portfolio could become a
global strategy.
Increased retail focus Vilification of sugar
Several confectionery manufacturers are More so than its rivals, Perfetti is extremely exposed
considering an entry into the retail market by to the growing vilification of sugar by transnational
creating their own stores. Perfettis strong brands organisations, such as the World Health
are conducive to retail expansion, and indeed the Organization and mainstream media. Unlike other
company is beginning to experiment with more of products, such as chocolate, sugar confectionery is
a retail presence. In the US, the company has likely to struggle to adapt to a more hostile consumer
created 75 stores within stores for the Chupa environment for high-sugar goods. It is also less able
Chups brand. This is a strategy that could be to convince consumers that is an indulgent, high
rolled out elsewhere, particularly other core quality treat, which is something chocolate
markets, such as Italy. manufacturers have succeeded in doing.

MARKET ASSESSMENT
CONFECTIONERY
OTHER OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
APPENDIX
Perfetti loses ground to core confectionery rivals with broader portfolios
Packaged Food: Top Players by Ranking 2010-2015 and Value Share 2015
% company
Company 2010 2011 2012 2013 2014 2015
share 2015
Nestl SA 2 2 1 1 1 1 3.3
PepsiCo Inc 3 3 3 2 2 2 2.3
Mondelez International Inc - - 2 3 3 3 2.2
Unilever Group 4 4 4 4 4 4 1.7
Kraft Heinz Group - - - - - 5 1.5
Danone, Groupe 6 6 6 6 5 6 1.4
Mars Inc 5 5 5 5 6 7 1.4
Lactalis, Groupe 11 9 10 10 10 8 0.9
General Mills Inc 8 7 8 8 8 9 0.9
Perfetti Van Melle Group 27 26 28 28 28 27 0.3

Emerging markets make up for weak performance in Europe
A: Perfetti moves into extruded B: While global confectionery C: Perfetti shows signs of moving
snacks for the first time in 2011. sales suffer due to poor into new ventures. It launches a
After slow initial progress, the performances in Western Europe chocolate Chupa Chups product
company has since gone on to and North America, Perfettis in Italy, as well as an online
launch its Stop Not brand in sales perform well as a result of a Chupa Chups store. Both tactics
India. In sugar confectionery, significant push in India, China are not strategic priorities for the
sales in core markets such as and Russia. The company is company, but if these moves
Italy begin to decline, a trend that particularly strong in gum and prove successful, they may
has continued over the last five toffees in India, and a good indicate a future direction for
years. performance in this period helps Perfetti.
overall sales growth.

Despite being competitive, Perfetti may lose ground to rivals
Perfettis core rivals are the top five largest

confectionery manufacturers in the world. As
highlighted, the majority of these companies
performed at a similar level to Perfetti over the
past five years, averaging between 5% and 7%
value CAGRs.
The difference between Perfetti and its rivals is
Mondelez International
Mars Inc Inc that, whilst Perfettis entire presence is based
on sugar confectionery and gum, its competitors
have a wider range of goods in their portfolios.
The top five confectioners all produce and
largely focus on chocolate.
Nestl SA
Whilst chocolate is facing similar problems to
sugar with regards to boosting volume
Hershey Co,
Haribo GmbH
The Ferrero Group
consumption, chocolate can appeal to
consumers with high purchasing power in
Western Europe and North America, and so
boost value growth. This is not the case for
sugar confectionery. The likes of Mondelez
have also been active in expanding into
products such as biscuits and cakes. Perfetti
may see its peers further consolidate their
positions in the future unless it does the same.

Asia Pacific becoming laboratory for new product development
With sugar confectionery performing poorly in

Western Europe and North America, more focus
will turn to Asia Pacific.
Indeed, whereas previously companies traditionally
launched products in the former markets before
exporting to peripheral markets, many new
products see the opposite. Hershey, for example,
launched its new toffee brand Lancaster in China,
before it launched in the US.
Perfetti is adopting a similar tactic. In 2014, it
launched its new Stop Not an extruded snack
product in India. Whilst the brand is still in its
infancy with regards to sales, it is easily
conceivable that such a snack could be popular
elsewhere. Given that the brand uses Indian
flavours, it could be suitable for markets with large
Indian diasporas, such as the US and the UK.
However, whilst launching new brands in Asia
Pacific is becoming increasingly common for
Perfetti, the company still has close ties to Western
Europe and, particularly, Italy. These ties mean
that Italy remains the companys strategic priority
for the time being.

MARKET ASSESSMENT
CONFECTIONERY
OTHER OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
APPENDIX
MARKET ASSESSMENT
Perfetti Van Melle has foothold in Asia Pacific but losing out in the West
Perfetti Van Melle generates virtually all of its sales from confectionery. Its presence in sweet and savoury
snacks in India remains negligible. Asia Pacific was the companys largest market by value sales in 2015
making up 37% of its global total, led by China and India. Indonesia and Japan are also major markets for
the company. Confectionery in Asia Pacific is expected to post a 4% CAGR over the forecast period.
Western Europe represented 36% of value sales in 2015. Within sugar confectionery, the region is
expected to record a minor contraction CAGR between 2015 and 2020.
Latin America is a relatively weak region for Perfetti Van Melle, which generated sales of US$389 million in
the region in 2015. Brazil accounted for 64% of these sales. Latin America is expected to achieve a 2%
value CAGR in sugar confectionery between 2015 and 2020.
In Eastern Europe, virtually all of Perfettis sales take place in Russia. The region will a slight decline in
sales of sugar confectionery over the forecast period, as consumers switch to chocolate confectionery and
the market becomes saturated.

MARKET ASSESSMENT
Absence from chocolate confectionery looking unwise as sales stall
In 2015, Perfetti Van Melle derived 63% of its This shift in perceptions will cause sales of gum to
confectionery sales from sugar confectionery, decrease by US$278 million in North America between
and 37% from gum. Both products are suffering 2015 and 2020. Given Perfettis relatively limited
from negative images. Sugar is being vilified as exposure to the region, this decline will do little
more health reports are published warning of the damage, but it will need to strengthen in Latin America,
effects of overconsumption. This is leading to Middle East and Africa and Asia Pacific, where its
calls for sugar taxes which penalise high-sugar share is far behind the likes of Mars and Mondelez.
products. Over 2015-2020, sugar confectionery is Absence from chocolate confectionery will continue to
expected to post a 2% CAGR globally. Gum is undermine Perfettis overall confectionery presence.
increasingly viewed as antisocial in the West, and The company is also absent from notable indulgence
seen as a major contributor to littering. products such as ice cream. Re-entering chocolate is a
long-term consideration for the company.
Note: Bubble size shows company share of category in 2015. Range displayed 0.9-23.3%

MARKET ASSESSMENT
CONFECTIONERY
OTHER OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
APPENDIX
CONFECTIONERY
US and China overtake Italy in sugar confectionery
Mentos, Chupa Chups and Alpenliebe are Perfettis

three key interests in confectionery, and give it a strong
presence in mints, lollipops and toffees. Sales of sugar
confectionery are spread globally China, the US and
Italy are Perfettis three largest markets.
Between 2010 and 2015, the company added US$110
million in sales in the US. This is owing in part to its
pushing of several brands, most notably Airheads, which
has doubled its market share in the country. The brand
has successfully ridden on a wave of popularity for gums
jellies and chews, at the expense of boiled sweets such
as Mars Life Savers.
Having been the companys leading sugar confectionery
market in 2010, Italy now ranks third, due to its
impressive growth in China and US. In China, Perfetti
achieved an 8% CAGR over 2010-2015 in China; this
compares with a 1% annual average decline in Italy.
The companys key interest in China is Alpenliebe,
owing to the importance of toffees, caramels and nougat
in China, which are associated with holidays such as the
New Year Festival. Milk chews are also highly popular,
and the company launched Alpenliebe Zhichun in 2015.

CONFECTIONERY
Dwindling interest in sugar confectionery a constraint on growth
This graph highlights the companys performance in sugar

confectionery against the overall market. There is certainly some
cause for optimism for Perfetti in the likes of China, Indonesia,
Turkey and Brazil, its sales are growing more quickly than the overall
market. However, in Western Europe and other significant regions,
market growth is low at a 0-3% CAGR regardless of whether
market share is being gained. This provides further evidence that
Perfetti needs to diversify it is currently being constrained by a
decline in interest in sugar confectionery.
Negative growth, High growth market,

Perfetti losing share Perfetti gaining share
Low growth irrespective of

market share gains/losses

CONFECTIONERY
Mars dominates gum; Perfetti strong in Western Europe and Asia
While gum sales for Perfetti Van Melle have

fallen in Italy, sales in India, US, Brazil,
Turkey, China and Indonesia have risen
substantially, mitigating the weakness of
domestic sales.
Perfetti has a particularly keen eye for local
flavours. In 2013, the launch of the latest
flavour, paan, developed specifically for the
Indian market. was backed by a TV campaign.
A similar eye for detail is behind the launch of
other products within sugar confectionery,
such as Alpenliebe Zhichun, a milk chew, in
China.
Growing per capita consumption of gum has
been driven by rising disposable incomes, as
well as an increasingly appreciated message
that gum can aid in dental health and help
maintain fresh breath.
Sales of gum are expected to fall by a further
15% in Italy over 2015-2020. Given that it
generates more than Perfettis second and
third largest gum markets combined, this will
significantly impact its global market share.

CONFECTIONERY
Young population could help gum in China and India
China will overtake the US to become the largest gum market by 2020, with sales expected to reach
US$4.4 billion. However, Perfetti has a relatively small share of 8% in the market, which is dominated by
Mars Wrigley brand. Mondelez has made significant leaps in China, too. Both companies have been
successful in targeting younger audiences particularly millennials, who represent an extremely prevalent
demographic within the country and are able to leverage their more highly developed distribution
networks. It is possible that these two companies will further consolidate their market shares as a result.
The other largest growing market in Asia Pacific, India, paints a more optimistic picture for Perfetti. Here,
Perfetti has a 56% market share, owing to its Center brand. This market is predicted to grow by US$288
million between 2015 and 2020. The company has priced gum very competitively in India.
Beyond these and certain other markets, such as Brazil, there is relatively little growth anticipated. Gum
may lose some of its popularity as tobacco sales decrease across the world, as one of gums primary
functions is for improving the breath after smoking.

CONFECTIONERY
Old habits die quickly in the US as gum sales decline
Euromonitor Internationals forecast model indicates that a number of cultural factors play a significant role
in gum consumption in both China and the US, though these factors differ.
The US is the worlds largest gum market, and consuming the product is a well-established habit, which is
shown on the left hand side. This maturity makes it difficult to create additional sales and, as the light blue
habit persistence metric indicates, this high base is steadily eroding. Simply put, there is a long-term shift
away from purchasing gum.
In China, the opposite is true gum is growing from a low base in per capita terms, and so the habit of
eating gum is still being formed. In addition, Chinas high GDP growth is expected to boost overall
consumption of consumer goods, and gum is no exception to this, as indicated by the dark blue segment. In
a market such as the US, there is relatively little manufacturers can do to combat these soft factors, other
than to move into similar products, such as mints.

CONFECTIONERY
Alpenliebe well positioned for growth due to popularity of toffees
Alpenliebe is well positioned to benefit from growth in the Chinese toffees, caramels and nougat market as
the number one ranked brand in 2015. Gift giving is a major driver of sales of these products. Manufacturers
often launch gift packs of toffees, caramels and nougat around holiday occasions. For example, Perfetti
launched Alpenliebe metal gift packs for 2013 Lunar New Year.
There are several sizeable markets for the product, but US, India and Brazil are growing particularly well.
India and Brazil are significant markets for Perfetti Van Melle, with market shares of 20% and 3%,
respectively, in 2015. However, in both, Alpenliebe has been losing ground to rivals. Its chief Indian rival,
ITC Groups Candyman, has performed particularly well since 2010, improving distribution and targeting low
price points. Consequently, it has increased share by five percentage points. One of the key reasons for
Perfettis growth in Asia Pacific is that sugar confectionery commands lower unit prices Alpenliebe sells for
Rs1 compared to Rs5 for a typical chocolate. Given the low purchasing power of consumers, sugar
confectionery is an affordable snack.

CONFECTIONERY
Impressive performance in China gives Mentos a strong platform
Mints accounted for 30% of Perfettis sales in sugar confectionery in 2015. It has a strong presence in both
standard and power mints, with Mentos and Smint, respectively. China and the US will lead absolute growth
in mints between 2015 and 2020. In all of Perfettis markets, the focus is on standard rather than power
mints. After several years of declining share in China, Perfetti saw a significant improvement in performance
in 2015, with its share rising from 13% to 16%. Whilst this is some distance behind Mars (60%), Perfetti is
far ahead of the rest of the pack, and can utilise this platform to further strengthen its Mentos brand across
sugar confectionery.
Perfetti has a significant share of the mints market in the US. The problem is that power mints continue to
account for the majority of growth value sales are expected to grow by a 4% CAGR in power mints,
compared to a 1% CAGR for standard between 2015 and 2020. This is important because the Smint power
mint brand remains marginal, with sales of US$2 million in 2015. Perfettis main competitors, Mondelez and
Mars, are able to leverage their superior confectionery distribution networks. Other important markets will be
Indonesia and Japan, with the latter an important market for Perfetti, where it has a 29% share in mints.
Japan presents a real opportunity given declining gum sales.

CONFECTIONERY
Potential for lollipop growth limited due to health concerns
Chupa Chups and Alpenliebe are Perfetti Van Melles

key brands in lollipops. The companys largest
markets are China and Russia. The company has
something of a monopoly in a number of lollipop
markets, with an average value share of 51% in those Philippines
markets in which it is present, and a global share of
23%. However, almost all growth is occurring in
China. Excluding high inflation countries, such as India
Venezuela, China accounted for 83% of all sales

growth over 2010-2015. Chinas growth will slow
down over 2015-2020, to a 3% CAGR. Lollipop sales
and thus Perfetti are far too reliant on one market. Vietnam
Lollipops will struggle, particularly in Western Europe

and North America. These products generally appeal
to younger people and are purchased by parents. China
However, ageing populations and a growing wariness
of sugar are narrowing the target audience for such
products.
Consequently, there is little choice but to remain
focused on Asia Pacific, which has a young
population rising consumer expenditure. Aside from
China, the Philippines and Vietnam may be potential
areas for growth.

MARKET ASSESSMENT
CONFECTIONERY
OTHER OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
APPENDIX
OTHER OPPORTUNITIES
Perfetti should emulate Stop Not globally
Stop Not was launched in Indian extruded snacks Growth of Sweet and Savoury Snacks
in 2011. To date, Stop Nots market share is too versus Sugar Confectionery Globally
small to measure; however, it has a valuable asset 2015-2020
in the Perfetti Van Melle distribution network in
India, of some 5,000 distributors servicing around Asia Pacific
700,000 outlets. 6
The attraction for Perfetti in entering the Indian Western Europe

4
Australasia
sweet and savoury snacks market is clear, given 2
that extruded snacks will see a 15% CAGR, or 0
absolute value growth of US$945 million, over -2
2015-2020. After several years of slow progress, North America Eastern Europe
Perfetti is beginning to ramp up its ambitions for

the Stop Not brand. At the end of 2014, the
Middle East & Africa Latin America
company launched Stop Not Stixz.
However, the focus should be on creating savoury
snacks in other markets. Utilising Indian flavours
could prove popular in a number of regions, such
as Western Europe and North America, which have
Despite a higher base, sweet and savoury
large Indian communities as well as a broader
snacks are outperforming sugar
affection for Indian cuisine. confectionery globally.
There is a strong case for this: sweet and savoury
snacks will largely outperform sugar confectionery Sugar Confectionery % CAGR 2015-2020
in all regions over the forecast period. Sweet & Savoury Snacks % CAGR 2015-2020

OTHER OPPORTUNITIES
Targeting Western Europe for savoury snacks is an option
Western Europe may well be a suitable market for Perfetti to experiment with sweet and savoury snacks.
The company has extensive distribution networks and pre-existing agreements with retailers for its
confectionery goods. Spend on snacks is also extremely high, at US$46 per capita.
Western Europe is also the region where Perfettis problems are most acute, with consumption of sugar
confectionery declining and Perfettis market share stalling. The company should target fragmented
markets, such as nuts, where there are a number of small players operating. This would help cut costs and
expedite entry into the market.
Launching a new product type would not be straightforward it would require entirely new supply chains
and extensive research and development, which would entail significant set-up costs. Arguably, therefore,
an acquisition strategy would be more suitable. Perfetti has past experience of this, having acquired Chupa
Chups in 2006. There is stiff competition, however, with many confectionery manufacturers currently
looking to broaden their presence in savoury snacks due to their high value growth.

OTHER OPPORTUNITIES
Sweet and savoury snacks undeterred by economic headwinds
Euromonitor Internationals forecast model indicates that, across Western Europe, sugar confectionery
shown on the right hand graph will be affected by soft drivers between 2015 and 2020. In many core
markets, such as Germany, Italy and the UK, the habit of consuming sugar confectionery is being eroded.
Declining habit persistence (coloured in light blue) will contribute 0.5 percentage points to the UKs 2%
decline in volume sales of sugar confectionery, for example. Soft drivers such as health awareness and
product competition are important factors in the anticipated
In contrast, sweet and savoury snacks which are expected to see positive volume growth across Western
Europe are less affected by soft drivers and will instead be boosted by increased habit persistence. It
could be the case, therefore, that gains in sales of sweet and savoury snacks are achieved at the expense
of sugar confectionery. Sweet and savoury snacks are more versatile than confectionery, and so are able to
cater to different demands. There is consequently more potential for innovation, which is an advantage in
countries with high levels of spending on food.

OTHER OPPORTUNITIES
Chocolate confectionery and ice cream also possibilities
Perfetti exited the chocolate confectionery category in 2010, and the company may be regretting this
decision. Chocolate slightly outperformed sugar confectionery over 2010-2015, posting a 6% CAGR,
compared to 5% for sugar confectionery.
The long-term problems for sugar confectionery are less accentuated for chocolate. Both are seeing
volume sales growth slow down, but chocolate is able to achieve value sales growth despite this, because it
can appeal to different spending capacities for different audiences. For example, chocolate has more
opportunities for premiumisation. Perfetti should consider re-entering chocolate confectionery. The
company may have to acquire a small chocolate manufacturer in order to get started. Mondelez has
enjoyed success combining sugar confectionery with chocolate via its Dairy Milk Marvellous Creations
range, which Perfetti may be able to emulate using its Chupa Chups range.
Other products to consider are impulse ice cream, to which sugar confectionery brands are easily
translatable.
Sales Growth of Various Snack Products 2015-2020
160,000 4
Retail sales 2015-2020
% CAGR 2015-2020
140,000
(US$ million)
120,000 3
100,000
80,000 2
60,000
40,000 1
20,000
0 0
Sweet and Savoury Chocolate Ice Cream Sugar Confectionery Gum
Snacks Confectionery
Retail Sales 2015 (US$ million) Absolute Value Growth (US$ million) 2015-2020 % CAGR 2015-2020

MARKET ASSESSMENT
CONFECTIONERY
OTHER OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
APPENDIX
BRAND STRATEGY
Top Perfetti Van Melle brands in 2015
Perfetti Van Melle: Leading Brands by Value Sales Mentos heads up Perfettis predominantly mid-
Performance 2010-2015 market confectionery portfolio and, with Chupa
Chups, is its only global brand. It generates
Absolute value growth revenue in every region, while the rest of the
% CAGR
Brand (US$ million)
2010-2015 companys portfolio consists of regional and local
2010/2015
brands. These key secondary brands include
Mentos 8.7 669.0 Happydent, Fruit-tella, Alpenliebe and Vivident.
Chupa Chups 4.4 142.6 Alpenliebe has the potential to become a leading
brand for Perfetti, due to its popularity in India and
Alpenliebe 9.1 229.0 China. At present, 93% of Alpenliebes sales stem
Vivident -0.8 -14.5 from Asia Pacific.
The strong growth for the Mentos brand over the
Big Babol 4.8 52.0 review period was due in large part to the brands
Happydent 2.2 24.8 gradual roll-out into the gum category, as well as
strong growth in mints in emerging markets.
Airheads 16.7 112.6
Alpenliebes growth has been almost exclusively
Fruit-tella 6.5 56.3 due to the brands strong position in the lollipops
Golia 0.0 -0.3 and toffees, caramels and nougat categories in
emerging markets. Toffees are especially popular
Frisk 2.4 17.2 in these regions, and are a better long-term bet
Daygum -3.1 -25.8 than lollipops.
A major problem is the lack of growth for Perfettis
Smint -0.6 -3.5 other brands, with the exception of Airheads.

BRAND STRATEGY
Licensing an important part of company strategy
Sugar confectionery is particularly popular among younger audiences. As this is Perfettis strongest product
category, targeting younger demographics is an important component of Perfettis confectionery strategy.
Engaging in licensing agreements with toy and apparel manufacturers allows Perfetti to raise brand
awareness among children and young teenagers. Perfettis licensing strategy is extensive. In the second
half of 2014, the company agreed a deal with apparel retailer H&M to create fashion accessories which
feature the Chupa Chups logo. This appears to be a particularly savvy move and will help contribute to the
evolution of the brands image.
Perfetti should continue to push licensing, as it allows the company to create brand awareness in white
spaces. The strong identity of Perfettis brands is a significant advantage over its rivals, and it should do all
it can to leverage this.
Source: Flickr

BRAND STRATEGY
Iconic brands could perform well in retailing
Chupa Chups and several other Perfetti brands lend themselves well to developing their own stores.
Indeed, the company has pushed a store-within-store strategy in the US with its lollipop brand, in
collaboration with confectioner ITSUGAR. Although Chupa Chups sales have declined substantially in the
US, the new deal could help achieve significant growth.
This strategy could be applied globally. Rival companies such as Mars, Hershey and Lindt have launched
flagship stores for brands such as M&Ms. Besides its flagship stores, Hershey has also developed its own
store-within-store concessions in a number of US department stores.
The benefits of creating such a shop is that, beside generating useful value sales for the company, it
improves the image of a brand that is performing poorly globally. In core markets, Chupa Chups is no
longer a novelty but is viewed as an unhealthy product to be avoided. Creating a store experience revives
this novelty appeal and positions the brand as an occasional treat and gift item, which may add value.

BRAND STRATEGY
Innovation in packaging essential
With sales of sugar confectionery and gum declining in Western Europe, Perfetti needs to work harder to
attract consumers attention. It can do this by effectively utilising white spaces, such as via concessions, as
well as improving packaging.
White spaces are gaps that can be exposed within the crowded marketplace that confectionery occupies.
Perfetti can utilise innovations in packaging in order to produce goods that command a higher unit price, in
turn generating higher margins, as packaging can play an important role in creating interest in products.
The company has launched Mentos NOWmints in metal boxes. This is something of a departure from
Mentos traditional wrapped packaging, and gives the product a premium cachet. The company has used a
similar design for its Frisk gum in Japan. Perfetti should take more risks when it comes to packaging. This
could allow the company to generate more profit, as packaging innovation is generally accompanied by unit
price increases. Miniaturised packaging is especially popular in developing markets.

MARKET ASSESSMENT
CONFECTIONERY
OTHER OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
APPENDIX
OPERATIONS
Packaging and distribution strategy innovations
As a major global sugar confectionery and gum player, Perfetti Van Melle's distribution strategy is extensive
and multi-tiered. The company uses a wide variety of distribution channels, of which supermarkets,
hypermarkets and convenience stores are the most prominent. The company has had notable success in
India, where it sells its products through dabbawallas, which are lunchboxes delivered to workers.
The impulse retail channel is a key distribution channel for the company, in particular in gum. Gum has
gained a mass consumer base and become an impulse product. Consequently, the company is placing its
products near to check-outs in retail outlets. However, in Western Europe, retailers are coming under
increased pressure to ban confectionery products from check-outs. This has already occurred in the UK.
This will put more emphasis on attractive packaging in order to entice consumers.
The development of its distribution strategy in emerging markets has been another key focus for Perfetti,
with the company benefiting from the expansion of major retail chains in these markets.
Packaging innovation is an important strategy for the company. Key launches have included Mentos UP2U
and 3D, and Mentos Mints in pocket bottles that can be stored in pockets. The company has benefited
greatly from the introduction of plastic bottle packs, which are similar to containers for vitamins. A similar
packaging format has been used for Chupa Chups Fruit Flavours Universe. Such convenient packaging
formats are essential for adding value in Western European gum markets.
Perfetti has a global manufacturing base that comprises 32 production sites. Its activity is concentrated in
Europe and Asia Pacific. In the former region, a large number of facilities are located in Italy and the
Netherlands. In Asia Pacific, India and Indonesia are key manufacturing bases, while Japan and China are
other prominent hubs. In China, the company has plants in Shenzhen and Shanghai. Outside these
regions, Perfetti Van Melle has facilities in the US, Mexico, Brazil, Australia and the Middle East.

MARKET ASSESSMENT
CONFECTIONERY
OTHER OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
APPENDIX
RECOMMENDATIONS
Developing products for local markets
Push Alpenliebe globally Global expansion for Stop Not

According to Perfetti, Alpenliebe is present in 45 The Stop Not brand has considerable points in its
countries worldwide. However, 86% of the brands favour. India is among Perfetti Van Melle's
sales occurred in China and India in 2015. strongest markets in terms of distribution to small
Alpenliebe has fast become one of Perfettis most retailers. The Stop Not brand can therefore benefit
successful brands. It is almost equal with Chupa from an existing retail base and Indias huge
Chups in terms of sales, and will almost certainly growth in expenditure on foods. However, the
surpass Chupa Chups in the next five years. popularity of Indian cuisine and snacking is
Pushing into Brazil, Western Europe and the US is global. With some tinkering, Stop Not has the
a must. Toffees are also more popular amongst potential for global appeal. Germany, the UK and
older consumers, which other sugar products US are all potential markets for the brand.
struggle to appeal to.
Acquire to move into savoury snacks Re-examine chocolate market
Perfetti is too exposed to low growth and a drift Flat sales growth has been a problem for the
away from sugar confectionery, especially in company for several years. Quite simply, sugar
Western Europe and North America. Whilst the confectionery is no longer delivering a good
company should not abandon sugar confectionery performance. Chocolate is proven to be able to
by any means, it should certainly look to diversify grow value sales, despite experiencing the same
its portfolio into new products, such as sweet and headwinds as sugar confectionery. Perfettis mix of
savoury snacks. It currently has the distribution but expertise in confectionery and excellent distribution
lacks the production capacity for this an strategies in emerging countries means the
acquisition should be considered. company should reconsider chocolate.

MARKET ASSESSMENT
CONFECTIONERY
OTHER OPPORTUNITIES
BRAND STRATEGY
OPERATIONS
RECOMMENDATIONS
APPENDIX
APPENDIX: COMPETITOR ANALYTICS
Competitor Analytics tool
Competitor Analytics is a new tool from Euromonitor International that focuses on fmcg companies and
competitors. It visualises the retail sales footprint and performance of more than 25,000 companies by
geography and product category.
Competitor Analytics also maps the competitive landscape for each of these companies, allowing users to
see with whom each company competes and in which specific markets. To do this, the tool calculates a
numeric distance between competitors, allowing the user to track how the competitive landscape is
evolving and which companies are becoming strategically more or less similar.
For a detailed explanation of the graphics in each of Competitor Analytics four tabs Overview,
Competitors, Treemap and Overlap Matrices please refer to the following slides.

Overview
The Overview tab (shown in the graphic below) provides a global snapshot of a companys sales footprint
and performance, highlighting where it is winning and losing by country and product category.
It shows company (GBO) retail value sales and absolute growth by countries and categories in current
terms and US dollars at a fixed exchange rate for the years spanning 2008 to 2014.
The grey bars represent value sales in the selected Start Year, while the green bars show the subsequent
absolute value sales increase between the user-selected start year and 2014. Red bars denote a retail
value decline over the same time period.

Competitors
The Competitors tab (see graphic to the

right) plots the competitive distance
between the selected focal company (in
this case Unilever) and its competitors.
The vertical axis measures the size of
market overlap between two companies,
and is the metric for quantitatively
measuring competitive distance. The higher
a company is on the vertical axis, the bigger
a competitor it is for the focal company.
Meanwhile, the horizontal axis captures
each companys total retail value sales over
the selected time period, irrespective of
market overlap.
Flat lines (eg Nestl in the chart to the right)
indicate that a competitors total sales are
growing, but mainly in markets where the
focal company is not present.
Lines moving steeply upwards (eg Procter
& Gamble) show that competitive similarity
is increasing strongly over time relative to
overall retail sales growth.

Market Overlap
Market Overlap is a measure of

competitive distance between two
companies in retail value terms.
It is calculated as the sum of the
smaller of the two companys
retail value sales in each of their
common country/category (aka
market) combinations. The sum of
these observations indicates a
total Market Overlap.
In 2014, Procter & Gamble and
Unilever were present in 711
common markets (see right)
across the global fmcg universe.
In US deodorants, Procter &
Gamble was the smaller of the
two, and thus defined the Overlap.
In US hair care, Unilever was
smaller and thus defined Overlap.
Replicating this exercise across
all 711 markets in which both
companies were present yields a
total 2014 Overlap of US$23,420.

Treemap
Treemap (as shown in the graphics below ) shows either overlap with a competitor (the left graphic) or
individual company sales (the graphic on the right) by product category and/or country.
The size of each box indicates the proportional size in US dollars of a country, category or market relative
to the total overlap or sales for the geographies and industries selected.
The colour gradient reflects sales or overlap growth/decline over the selected time period. The darker the
green, the higher the growth, and the darker the shade of pink/red, the stronger the rate of decline.

Overlap Matrices
Overlap Matrices (as shown in the graphic below) compare two selected competitors (Unilever Group vs
Procter & Gamble Co) in terms of their respective presence across countries and product categories.
The darker the colour shading, the higher the companys retail value share in that market. The graphic
below shows that Procter & Gamble has a strong share in hair care in China, whereas Unilever is weaker.
Overlap Matrices also highlight respective market gaps and potential white space opportunities. Dark grey
boxes indicate that one of the two companies shown is present in that market, but the other company is not.
A light grey box means that neither of the two selected companies is present.

APPENDIX: INDUSTRY FORECAST MODEL
About Euromonitor Internationals Industry Forecast Model
The Industry Forecast Model is a new tool from Euromonitor International that integrates intuitive,
judgment-based forecasting with the quantitative techniques of an econometric Industry Demand Model.
The Industry Demand Model assesses the relationship between several historic quantifiable independent
variables (demand drivers) and historic retail volume sales for different markets that Euromonitor tracks.
In identifying these relationships, the model estimates elasticities for each statistically significant demand
driver, including income growth, changing retail prices, demographic trends and retail channel trends.
Multiplying these elasticities by corresponding year-on-year growth forecasts for each demand driver allows
the Forecast Model to build annualised retail volume and value forecasts for a market in a given year.
While estimated demand driver elasticities are constant, forecast demand driver growth can change over
time. For example, forecast GDP growth for a given year is regularly upgraded or downgraded in
Euromonitor Internationals Macro Model to reflect changing economic and sociopolitical conditions.
In turn, changing only forecast growth for GDP in this example allows the Packaged Food Forecast Model
to create multiple retail forecasts that capture the impact of these changing macroeconomic conditions.
Impact of Russia GDP Shock on Chocolate Confectionery Retail Volume Forecast in Russia
2015 real GDP % Chocolate income Income effect on 2015 chocolate %
growth forecast elasticity chocolate growth volume growth
Baseline Forecast
+1.43 0.37 +0.53pp +1.41
(June 2014)
Updated Forecast
-3.82 0.37 -1.41pp -0.55
(December 2014)

Soft drivers and the Industry Forecast Model
The power of Euromonitor Internationals forecasting methodology is that it blends statistical modelling with
local market observations reflecting local industry consensus. As such, retail market forecasts also rely on
the insights and expertise of Euromonitors global analyst network. Euromonitor analysts work closely with
the Industry Demand Model to ensure that it remains consistent with their empirical observations,
guaranteeing that quantitative and intuitive expectations fully complement each other.
Euromonitor analysts also capture all the demand drivers beyond the scope of the Industry Demand Model.
These soft drivers remain critical to future retail sales, but are either fundamentally unquantifiable or have
no globally comparable data with which to measure them.
Soft drivers are captured and measured exclusively by empirical research from Euromonitor analysts, and
their overall positive or negative impact is estimated on top of the results of the Industry Demand Model.
Demand Driver Soft Demand

Forecast Demand
Elasticities: Drivers:
Driver Growth:
From Industry From Country and
From Passport
Demand Model Industry Research
Industry Forecast Model

Growth decomposition explained
To help understand and illustrate the impact of each demand driver to a markets retail growth performance
and prospects, Euromonitor International employs a graphical tool called growth decomposition.
The fundamental idea behind growth decomposition is that a product categorys retail sales performance
and future prospects can be explained through changes in underlying demand factors.
As explained above, the impact of demand driver change to retail market sales can be calculated by
multiplying a demand drivers observed elasticity by that demand driver rate of change over a period of
time. Multiplying demand driver elasticity by forecast demand driver growth yields the percentage points of
overall retail growth that that specific demand driver is contributing to the market forecast under review.
In addition, Euromonitor analysts estimate the impact of soft drivers to overall retail growth via their
empirical research. The relative impact and importance of soft drivers can be shown alongside that of the
measurable demand drivers identified by the Industry Demand Model.
In the growth decomposition visual below, the percentage points of growth that each demand driver is
contributing to overall market growth are illustrated in the coloured segments of the stacked bar charts.

Significance and applications for growth decomposition
By attributing a fraction of overall retail growth to each contributing demand driver, overall category growth
can be decomposed. In doing so, an extensive picture of underlying market fundamentals and processes
on a category-by-category and country-by-country basis can be provided.
Ultimately, growth decomposition allows Industry Forecast Model users to:
Identify different demand drivers that affect historic sales, and will likely impact future market prospects;
Evaluate the relative importance of different demand factors over time and then identify which factors
generate the highest deviations in historic - and ultimately future - consumption;
Illuminate the underlying market dynamics for each product category;
Measure and predict the effects of demand driver shocks, either expected or hypothetical;
Facilitate scenario analysis by generating understanding of which demand factors can be influenced by a
manufacturer or retailer and which are beyond their control.

Key applications for Industry Forecast Models
Quarterly Forecast Restatements

Regularly updated retail market forecasts to reflect latest macro expectations (ie,
quarter-on-quarter real GDP growth revisions) for all markets.
1
What If? Scenario Analysis
See and compare how a hypothetical event (ie Eurozone recession, China Hard
Landing, Grexit) stands to impact different market forecasts.
2
Growth Decomposition and Demand Driver Elasticities
Understand, compare and respond to the forces driving expected market growth
across different product categories and countries.
3
Assess Market Potential
See the ceiling on retail volume or value sales and growth, regardless of a specific
forecast scenario. How much more can that market really grow?
4

FOR FURTHER INSIGHT PLEASE CONTACT
Jack Skelly
Analyst Food
Jack.skelly@euromonitor.com
RELATED ANALYSIS
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PERFETTI VAN MELLE GROUP IN PACKAGED FOOD

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 2

Perfetti focuses on expansion within India and China

Privately held Perfetti Van Melle is a global

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 4

Sales stall due to weakening Western demand

Net sales ( million)

Perfetti Van Melle has launched several new

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 5

SWOT: Perfetti Van Melle Group

Western Europe Affordability in Asia North America Limited portfolio

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 6

Key strategic challenges and objectives

Expanding in Indian market Move into sweet and savoury snacks

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 7

Perfetti loses ground to core confectionery rivals with broader portfolios

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 9

Emerging markets make up for weak performance in Europe

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 10

Despite being competitive, Perfetti may lose ground to rivals

Perfettis core rivals are the top five largest

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 11

Asia Pacific becoming laboratory for new product development

With sugar confectionery performing poorly in

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 12

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 14

Absence from chocolate confectionery looking unwise as sales stall

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 15

US and China overtake Italy in sugar confectionery

Mentos, Chupa Chups and Alpenliebe are Perfettis

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 17

Dwindling interest in sugar confectionery a constraint on growth

This graph highlights the companys performance in sugar

Negative growth, High growth market,

Low growth irrespective of

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 18

Mars dominates gum; Perfetti strong in Western Europe and Asia

While gum sales for Perfetti Van Melle have

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 19

Young population could help gum in China and India

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 20

Old habits die quickly in the US as gum sales decline

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 21

Alpenliebe well positioned for growth due to popularity of toffees

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 22

Impressive performance in China gives Mentos a strong platform

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 23

Potential for lollipop growth limited due to health concerns

Chupa Chups and Alpenliebe are Perfetti Van Melles

Venezuela, China accounted for 83% of all sales

Lollipops will struggle, particularly in Western Europe

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 24

Perfetti should emulate Stop Not globally

The attraction for Perfetti in entering the Indian Western Europe

that extruded snacks will see a 15% CAGR, or 0

absolute value growth of US$945 million, over -2

Perfetti is beginning to ramp up its ambitions for

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 26

Targeting Western Europe for savoury snacks is an option

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 27

Sweet and savoury snacks undeterred by economic headwinds

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 28

Chocolate confectionery and ice cream also possibilities

Euromonitor International PACKAGED FOOD: PERFETTI VAN MELLE GROUP PASSPORT 29