Confection giants find gummy sales anything but soft

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For a snacking giant known for its popular Reese’s and Kisses brands, one of Hershey’s tastiest growth opportunities lies in a treat lacking the peanut butter and chocolate responsible for much of its sales. During the last few years, the Pennsylvania company has spent big money to boost its presence in the fast-growing gummies category.

“Our expectation is that [soft and chewy candies like gummies are] going to continue to outpace category growth, and for us, that’s a big opportunity,” Dan Mohnshine, Hershey’s vice president of marketing, U.S. confection, grocery and protein snacks, said in an interview. “When we look at the strategy of expanding our presence on the shelf, expanding consumer occasions, this is a big difference from what we have on the chocolate side of the business.”

Mohnshine said demand for gummies — which largely centers around its fruity Jolly Rancher brand — was increasing before COVID-19, but spiked during the pandemic as consumers snacked more at home. It hasn’t let up since, continuing to post growth in the “mid-to-high-single-digits.”

Gummies offer several advantages that are harder or impossible to replicate with chocolates, Mohnshine said. Several different flavors can be put in one bag. They’re also shareable, seen as a good value, don’t melt and are viewed as a more permissible indulgence. These attributes help candies such as Jolly Rancher attract shoppers by giving the public additional choices and meeting new consumption occasions.  

The pandemic upswing prompted Hershey to spend millions of dollars to shore up its gummies production capacity, which is expected to surge 50% in 2024. The sweet and salty snacks manufacturer now has additional flexibility to boost innovation, invest more in promotions and get additional SKUs carried at retail.

Jolly Rancher recently debuted Awesome Reds, a sour gummy mix with flavors like cherry, pomegranate, watermelon and fruit punch. Michele Buck, Hershey’s CEO, told analysts in February the company also plans to launch a new gummy in 2024 as part of a partnership with basketball star Shaquille O’Neal.

“We get to combine his tremendous connectivity with consumers, especially young diverse consumers, who are our key target on the gummy segment,” Buck said. “There is a huge opportunity to bring gummies to the market.”

‘How high is high’

The surge in popularity of the soft candy comes as consumers across all demographics show a growing interest in snacking, with candy one way to meet that need. The gummy candy market is forecast to reach $750 million in 2032 from $495 million this year, a compound annual growth rate of 6.4%, according to data from Market Growth Report.

Mike Gilroy, vice president of trade development and sponsorship at Mars Wrigley, said gummies offer candy makers a nearly unlimited canvas for innovation. Confectioners can tap into different flavors (spicy, sour, sweet,) shapes (ropes, worms, circles or chews), multiple layers or flavors as well as varying textures. 

“It’s a question of how high is high in terms of what can be done with gummies,” Gilroy said. “There’s just so much more to offer. With gummies, it’s the experimentation.”

For established confection companies, the treats provide a way to reach new consumers by tapping into the equity of well-established and recognizable brands in the marketplace. It’s a strategy that Mars Wrigley has brought to hard candies in its portfolio, including Life Savers, Skittles and Starburst. 

Gummy growth remains on a “strong trajectory” due largely to the increasing purchasing power of Gen Z consumers, Gilroy noted. The candy provides a way to meet an existing shopper need while attracting long-term users to a brand by getting them to start with the gummy before gravitating to the traditional hard candy. Gen Z shoppers, Gilroy noted, choose a gummy nearly 60% of the time compared to about half for millennials.

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“It’s a question of how high is high in terms of what can be done with gummies. There’s just so much more to offer.”

Mike Gilroy

Vice president of trade development and sponsorship, Mars Wrigley

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Mike Kostyo, a vice president at consulting firm Menu Matters, said gummies have attributes that make them an attractive treat for both adults and young consumers.

Many older individuals, especially millennials, grew up with gummy worms or bears as kids. Now adults, these individuals are feeling nostalgic and turning to treats that remind them of the past. It’s not a coincidence that adult vitamins are often available in gummy form, Kostyo said.

For Gen Z and other younger people, gummies are inviting because they are brightly colored and squishy, providing a food for them to play with and eat.

Still, Kostyo was doubtful gummies would retain their current popularity. While the candies are unlikely to disappear, the candy space tends to innovate quickly with new formats and flavors. Inevitably something different will hit the market that will cause many consumers to move away from gummies.

“It’s a little more faddish than a true trend,” Kostyo predicted. “In five to 10 years, the confectionery side of the industry will have moved on to the next hottest and greatest thing.”

A new life for decade-old brands

Despite a far-from-certain future, candy makers of all sizes are aggressively devoting more resources to gummies and finding success when they do.

For much of its nearly 80-year history, Frankford Candy had the market cornered with seasonal offerings like chocolate bunnies and Santas.

But as Hershey, Mars and Nestlé muscled into the space during the 1990s, the Philadelphia company devoted more attention to gummies to diversify its business. Its foray into the niche began with Krabby Patties in 2003. Frankford expanded further into gummies nearly two decades later through a licensing deal with Kraft Heinz.

Since then, Frankford has developed gummy offerings for many of Kraft Heinz’s most popular brands, including Kraft Macaroni & Cheese, Claussen Pickles and Oscar Mayer hot dogs. Gummies are now the fastest growing part of its business, “far outpacing” its chocolate segment, said Molly Jacobson, director of business development at Frankford. 

“We are spending a lot of time thinking through ways to grow [Krabby Patties and Kraft Heinz] in the gummy category, pushing the limits,” Jacobson said. “Gummies have paralleled chocolate in terms of our focus at Frankford, if not exceeded it, to be honest, in terms of its importance and development.”

A major advantage gummies have for Frankford is that, unlike chocolates, flavor development isn’t as complex. Instead, artwork and packaging play a crucial role in getting the candy to resonate with consumers. It’s a big reason why Frankford can get gummy innovations to market in about 12 months, compared to about double that time for chocolates.

For some brands, gummies play a vital role in boosting sales and maintaining relevancy with consumers inundated by choice.

Gregory Guidotti, chief marketing officer at Ferrara Candy, said more Gen Z consumers today recognize its Nerds brand for its popular Gummy Clusters — a gummy covered in tiny nerds introduced in 2020 — than the two-flavor rectangular boxes their parents enjoyed as children.

Clusters sales are growing at a 40% clip, compared to low-single-digits for conventional nerds. Without the gummies, sales for Nerds would be closer to about $100 million annually compared to the $600 million it generates today, Guidotti noted.

It “broadens the relevance of the business,” Guidotti said. “Clusters changed the profile and trajectory of the whole category.”

Even before Clusters debuted, Ferrara had amassed decades of experience in gummies through smaller brands like Black Forest and Trolli.

But while the Illinois company had the technological know-how, and often made gummy products for other businesses, it didn’t have the brands to meaningfully deepen its own presence in the category.

That changed when Nestlé sold its U.S. confectionary business for $2.8 billion in 2018. Ferrara inherited several brands as part of the transaction. Along with Nerds, Ferrara added SweeTarts to the mix, giving it two prominent products it could use for gummy innovation. 

Guidotti said just because gummies are a hot business, doesn’t mean every brand should play in the category. Only a few of Ferrara’s more than 30 brands have a presence in gummies.

“You have to understand where the consumer is and if your brands can stretch there,” Guidotti added. “The great thing about Ferrara is that we have all these brands, where we can make choices based on that brand’s positioning, based on that brand’s promise in the marketplace, so we don’t need to try to do everything across the portfolio. We can be very choiceful” about what works with gummies.