Everyone listens to Warren Buffett. The world’s richest man is often hailed as one of the greatest stock pickers in history. So why is Buffett buying a stake in Wrigley, the maker of Juicy Fruit and Doublemint gum (the latter of which I’m chewing to get in the mood as I write)? It’s not like the candy business is the place to be in this age of paranoia over obesity, sugar and long-term health.
But I’ll tell you what has impressed me about Wrigley in recent years. First is the level of innovation coming out of the company. Every time I turn around there’s yet another flavor or new form of packaging for its products. Even my kids (who, of course, only chew sugar-free stuff like Extra and Orbit) notice it.
Second is the international reach of the Wrigley brands. Whenever I travel, I’m struck by how often Wrigley products are on offer at even the smallest roadside stands. Like Coca-Cola, being the dominant player in its category gives Wrigley an advantage in expanding into new markets. Gum, like soft drinks, is a category where brand recognition is a huge factor in purchasing. As people in emerging economies become more affluent, they typically become more interested in buying little treats for themselves and their children. That’s a hedge against whatever forces may dampen consumption at home.
Wrigley has a daunting competitor in Cadbury (which has been nibbling away at market share with innovations of its own in products like Trident). But the product war has served to make the whole gum category more appealing, in my view.
Yes, Wrigley makes more than just gum (just as Mars, its new parent, makes more than chocolate bars). But Wrigley has wisely made a strong push in recent years to pay more attention to the product that made it famous. The result is a company with a stronger focus, better product line and invigorated sales — the kind of thing Buffett likes to see.
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