Kraft bets that Trident can provide growth
The global gum market is poised to grow at 4.5% annual rate for the next few years.
In addition, with the launch of Trident's global campaign, the company looks to focus on the chewing gum market, which shows a promising growth potential.
Globally, Kraft competes with players like PepsiCo (PEP), General Mills (GIS) and Kellogg (K). We currently estimate a $41.83 price for Kraft Foods, which is about 10% above the market price.
The new marketing campaign deviates from the usual focus on the health benefits of its product and instead focuses on the emotional benefits associated with the product in order to appeal to a wider range of consumers.
The campaign will run in at least 17 countries, including the U.S. and the U.K. Gum companies have been trying to come up with ways to make gum appealing to a broader consumer base. Even the packaging has evolved over the years. For example, flashy packaging for kids, stylish packs for young adolescents or special packaging targeted for health conscious consumers.
Global gum market growing impressively
Kraft owns the Trident brand which has around 29% market share in the global gum market. Its market share has been relatively stable for the past couple of years so we don't expect the company to eat up its rivals' market share significantly. Although, with the Cadbury acquisition, Kraft has access to a much wider range of distribution networks so we may see some gains in market share in the coming years.
Kraft is well poised to benefit from the growing demand for gum globally. The gum market is dominated by three major players: Wrigley, Trident and Lotte. Even if the company is not able to gain market share, there will be sufficient revenue addition for the company as we expect the global gum market to grow at an annual rate of 4.5% for the next few years.
Growth in countries like China, Taiwan and India is expected to be even higher at 5.9%. Currently, the global gum market size stands at $14.6 billion, which we expect to rise to $19.6 billion by the end of our forecast period.
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