Archive for May, 2007

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selling candy in developing markets

Tuesday 8 May, 2007

Hershey tries to gain global ground

By Marc Levy
Associated Press
Published May 1, 2007

Wrigley, Cadbury, Mars and Nestle: It’s hard to mistake the dominant presence of Western candies, gum and chocolates over Asian, and even traditional Chinese herbal candies, on display at the 7-Eleven store in downtown Beijing.

“Sales of Western candies and chocolates are much better,” store manager Wang Peng said. “Dove and Nestle are the most popular here.”

Most people in China prefer fruit as a dessert. But tastes are changing — driven partly by the desire of young people to adopt some Western customs — so many corner stores in bigger cities such as Beijing and Shanghai now carry chocolate bars.

mm comment: I can’t think of anything more culture-bound than dessert. I lived in Europe for a couple of years & got a little frustrated with my inability to find restaurants or even bakeries that offered good old fashioned chocolate chip cookies.
Now America’s leading candymaker, The Hershey Co., is seeking to join its top competitors on more candy shelves in places like India and China as it makes a bid to expand its global presence. In India, it already sells Hershey’s chocolate syrup. In China, it also sells the syrup and a few of its chocolate products but barely registers any market share.

Hershey has the largest stake in the world’s largest candy market, the United States. But the fastest growth in the $137 billion global confectionery market is occurring in nations where people don’t eat as much chocolate as Europeans or Americans. Confectionery sales are projected to grow more than 5 percent annually in the next five years in India and more than 6 percent in China, with growth in chocolate sales alone in China approaching 10 percent annually over that period.

For Pennsylvania-based Hershey, that means looking for ways to cater to different tastes, such as offering its Reese’s cups with almonds and hazelnut. It also means playing catch-up: With a head start of a decade or more, Hershey’s top competitors have accumulated solid market shares while learning important lessons in distribution and pricing.
mm comment: Hershey is adapting their products, which is good. But it seems like they’re starting late & that their competitors have a head start on them, so it might be time-consuming & more expensive to catch-up & overtake them.

Hershey is promising to quickly capitalize on cheaper labor and materials by making products in China and India for the first time. But because the company will be unable to trade on its iconic status, analysts say it shouldn’t expect to reap much profit from its expansion any time soon.

Major competitors — Wm. Wrigley Jr. Co., Nestle SA, Mars Inc. and Cadbury Schweppes PLC — have been heavily involved in the developing world since the 1990s, if not for decades longer.

London-based Cadbury Schweppes is the world’s largest candy company by retail market share, according to Euromonitor International Inc. After nearly six decades of selling chocolate in India, it has five factories there and is India’s leading candymaker.

America’s second-biggest candy company, McLean, Va.-based Mars, rushed into Eastern Europe when the Iron Curtain fell. Amid the economic chaos in the former Soviet Union, the Snickers bar became one of Russia’s top brands, according to Euromonitor.

mm comment: I spent 7 months in Poland in the mid-90’s & was happy to find Snickers, etc. They gave me an occasional taste of home.

Chicago-based Wrigley has nearly one-tenth of the confectionery market in China, Euromonitor data show.

Swiss food giant Nestle began distributing its candy in India in 1991 and built its first plant there in 1995. To cut its labor costs and secure established distribution routes, Hershey has struck joint ventures with two companies — Godrej Industries Ltd. in India and South Korea’s Lotte Confectionery Co., which has a factory in Shanghai.

In countries like China and India, retail distribution routes run like spider webs among tiny family-run groceries and street vendors where most people buy their food. The giant retail chains and merchandise warehouses that are Hershey’s biggest customers in the United States are just starting to establish footholds.

Late to the competition, Hershey’s chairman and chief executive, Richard H. Lenny, defended the company’s timing.

“India’s and China’s markets for chocolate are just beginning to show explosive growth,” Lenny told The Associated Press after the company’s April 17 annual shareholder meeting. “We view now as the time.”

mm comment: I’m disappointed no 1 has brought up the social responsibility aspects of selling more sugar. Alongside tooth decay, empty calories will not help the people of developing economies grow up healthfully.

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social responsibility vs. drug profits

Friday 4 May, 2007

Abbott, activists tangle
Drug giant’s chief defends response to Thailand patent break

By Bruce Japsen
Published April 28, 2007

Despite a flurry of international criticism, Abbott Laboratories will not back away from its controversial decision to withhold drug applications in Thailand, Chief Executive Miles White told AIDS activists at the company’s annual shareholder meeting Friday.

White lashed out at the activists for being misinformed about Abbott’s situation as he reiterated the North Chicago-based company’s determination to protect its intellectual property. His comments were his strongest since the medical products giant became embroiled in a dispute with Thai officials over pricing of the AIDS drug Kaletra and Thailand’s efforts to make generic copies of the medicine that effectively would break Abbott’s patent protection.

Thailand earlier this year said that it could not afford the price Abbott charges for Kaletra, and planned to use a provision of international trade law that would have allowed it to skirt Kaletra’s patent protection and choose other companies to copy the drug. That move represented a significant challenge to Abbott’s patent protections.

Abbott countered by announcing that it would not register any newly developed drugs in Thailand, depriving that country of a new form of Kaletra that — in contrast to the current form — does not require refrigeration.

AIDS activists have condemned Abbott’s action as “blackmail,” suggesting that withholding the Kaletra that does not require refrigeration is putting patients’ health at risk. Given Thailand’s hot climate and underdeveloped health-care infrastructure, many people do not have access to Abbott’s AIDS drugs, the activists charge.

“I think we’ve done a lot more than you give us credit for,” White said in response to AIDS activists as he addressed more than 1,400 people at the company’s sprawling Lake County headquarters.

White suggested that Thailand’s government is aiming to ignore patent protections on all kinds of drugs by issuing compulsory licenses under international law. “I do think there is a hidden agenda. I think the agenda is to set the precedent with compulsory licensing to compulsory license numerous drugs,” he said.

Activist groups had publicized plans to speak at Abbott’s annual meeting while also protesting and picketing Thursday and Friday at company facilities around the world. More than 100 people also protested at Tribune Tower, headquarters of Tribune Co. White is a board member of Tribune Co., which publishes the Chicago Tribune.

At the annual meeting, however, stockholders applauded White, and at times shouted down the handful of activists who lined up to protest Abbott’s actions in Thailand.

Among the protesters was Jon Ungphakorn, a former member of Thailand’s senate and a longtime AIDS activist who accused Abbott of holding drugs “for ransom,” and making “hostages” of patients in Thailand. “Abbott is certainly no ‘Promise for Life’ in Thailand,” Ungphakorn said, a reference to the company’s slogan.

White claimed some activists not at the shareholder meeting had even visited his house last Halloween. “Some of the colleagues that came with you that Trick or Treated at my house and harassed my neighbors and so forth … that’s not advocacy. Doing what we did is advocacy. Because we did it with our own money.”

Last year the company, White said, spent more than $300 million on humanitarian relief, patient assistance programs and AIDS-related programs that helped “millions.”

He also said that submitting the tablet form of Kaletra for approval in Thailand would not make sense from a business standpoint.

“Why would we submit” the new drug for approval, White asked, if Thailand plans to make generic forms of patented Abbott drugs anyway?

In response to Thai officials who had concerns about Kaletra’s price, Abbott cut the price to $1,700 a year from $2,200 last fall. Thai officials, however, issued a compulsory license for Kaletra and certain other companies’ drugs in January, prompting Abbott’s decision to not launch new medicines in that country.

Earlier this month Abbott lowered the price of Kaletra to $1,000 a year in Thailand and more than 40 other developing countries.

MM comment: This is a tremendously difficult issue for which there are no easy answers. In my mind it boils down to costs, & what is the value to the company & government to make a deal to make the drug available to its citizens. Cost for these kinds of drugs are difficult to determine because so much R&D is invested, it’s almost like fixed overhead. For a government to ask that these drugs be provided @ cost is a specious request because determining a real cost is so difficult to do. Alternatively, to continue to wrangle only hurts patients, so there are vested interests in both sides to reach a compromise. For the government to unilaterally make a move won’t wash. For the company to cave in sets a bad precedent as well. This has been & will continue to be argued. Your comments are welcomed.