Mars attacks with plan for npd deals

Mars prides itself on being a leader, not a follower. But last week’s revelation that the company is talking to other food manufacturers about launching a raft of licensed products is reminiscent of what its main rival Cadbury has being doing for 15 years (MW September 18).

Mars has initiated talks with third-party food manufacturers to launch Mars-branded cakes, biscuits, desserts and any other synergistic food products. Specific plans are on the table for a Galaxy pudding produced by a division of Northern Foods. It expects to launch the products as early as next year.

Cadbury’s experience shows licensed products are commercially viable. The company says 20 per cent of its sales value comes from licensed products – cakes, mini-rolls, drinks, mousses and desserts. Cadbury has licensing deals with Ranks Hovis McDougall for ambient cakes, RHM Frozen for frozen cakes, Premier Beverages for drinks and Premier Biscuits for chocolate biscuits.

Mars is understood to be in talks with McVitie’s as well as Northern Foods over tying up its own licensing deals.

Mars marketing director Angus Porter explains the move into this new area: “We are looking at introducing licensed brands into any area which will not damage our brand and which will expand the category.”

He says the company’s policy is to create new markets and not cannibalise market share either from itself or its competitors.

“We do not do ‘me-too products’,” he claims. “The key for any product is differentiation.”

The licensed products will have to be radically different. For a company that does not do “me-too”, the plans look pretty similar to what Cadbury did 15 years ago with its first licensed product, Cadbury Cake, which it licensed out to Manor Bakeries in 1982.

However, one Mars source says: “I think these licensing deals have more to do with brand presence, that is ubiquity, than building the category.” This fits with Mars’ plan that every adult in the country will have seen the logo of its newly-launched boxed chocolates Celebrations at least 50 times by Christmas.

The plans to produce licensed products come after a year of unprecedented new launches. The company appears to have started a veritable avalanche of new product initiatives.

For over 40 years it churned out Mars Bars, Milky Ways, Maltesers and little else. But since the start of this year, Mars has introduced three genuinely different products. Last week it launched Celebrations, mini versions of Mars’ countline brands in a box. This follows the April launch of Flyte and the introduction of Mars Lite, revealed by Marketing Week in January, which is still on trial (MW January 24).

This spate of npd appears to be a response to the company’s static market share. Although Mars’ value share of the chocolate confectionery market has risen 0.3 per cent year on year, at 22.1 per cent of the market, it still languishes in third place behind Nestlé at 23 per cent and Cadbury at 29.7 per cent, according to figures from ACNielsen.

One difficulty Mars may face in its push into licensed products is that while Cadbury trades on the taste of its chocolate – the essence of its brand – Mars has always shied away from umbrella branding and instead has built up each individual product.

Rachel Brushfield, of brand consultancy Energise, says: “Cadbury licensed products benefit from the halo effect of the confectionery advertising. But Mars’ products are so diverse they will need strong support.”

In fact, Cadbury has not had much dedicated advertising for its cakes or biscuits at all. Manor Bakeries, which produces Cadbury Mini-Rolls under licence, has supported the brand in the past, but only with 1m. The other brands are promoted by Cadbury.

The timing of Mars’ move into licensed products may have been prompted by the increased marketing activity of its rivals. Nestlé, for instance, is increasingly using the diversity of its range of grocery products to drive sales. Witness the recent advertising campaign from J Walter Thompson which used the brand values of Nescafé as a foil for those of Kit Kat, and vice-versa.

Compare this with Mars, whose only products outside confectionery are its drink and ice-cream ranges.

Another pointer to the timing of the push could be Mars’ experience in the ice-cream confectionery market. One source says that when Mars launched ice-cream in 1984 it had not realised the scale of the commitment. Opening up the new area distracted it from its core confectionery brands, and it paid insufficient attention to npd. But now Mars has gone as far as it can with ice-cream, having converted all its bars. So the time has come to start innovating.

Insiders suggest Mars was damaged by its move into ice-cream. It may have created the category, but sources say it has failed to follow up initial innovation and is now losing market share. Mars has 7.9 per cent by value of the total ice-cream market this year, compared with 8.7 per cent last year (IRI InfoScan for all outlets, year ending March).

A Mars source says the company will have to work hard to make the licensed range work. Unlike Cadbury it will not be able to launch a biscuit and coat it with its chocolate. Instead it will have to find some way of capturing and converting the essence of the bar.

Cadbury has seen the problems created by trying to stretch its brand too far. In the Eighties, it sold off the brands which it had launched in an attempt to become the ultimate household name – mashed potato mix Smash, powdered milk Marvel and instant coffee Kenco.

Even when it decided to confine the Cadbury brand to chocolate-based products, and put heavier support behind “Cadburyness”, the run was not always smooth. It launched a cake version of its Fruit & Nut bar, but withdrew it a year later because the solid bar did not convert successfully.

Mars ice-cream was, however, a perfect example of category creation. Mars invented the countline bar ice-cream, a concept followed by Birds Eye Wall’s and Nestlé.

Celebrations, says Porter, is also creating a new category. With its youthful packaging and stay-fresh foil wrappers, it takes the boxed chocolate market into the youth area for the first time. “The fact that people can open the box and recognise every single sweet is a big selling point to younger people.”

More importantly Celebrations gives Mars a test vehicle for new products. The first version already includes Maltesers in a new form called Teasers.

So is the company shaking off its stodgy reputation? It is hard to see how Mars biscuits and cakes will be different enough to create a whole new category.

Brushfield says: “Mars traditionally plays very safe and will take one step where Cadbury’s has taken five.” She adds Mars’ move into licensed products comes now because in the past it has not felt confident enough about the strength of its core products.

But one source close to the company says: “I don’t think this will be just about taking a biscuit and covering it in Mars chocolate. Look at what happened with the Mars ice-cream – it converted the bar itself.”

Mars may be following Cadbury down the route of licensed products. But if the company’s boasts about how it leads rather than follows are to be believed, it will have to provide some radical product developments from the new licensing deals.