These are stories Report on Business is following Wednesday, Feb. 4, 2015.
The ripple effect
Behind the decision by Mars Inc. to shut down its Toronto Wrigley plant lies a basic fact: We’re chewing less gum in North America.
It’s interesting, if often sad, to study the ripple effects of changes in our habits and tastes, but that’s why the factory is closing next year after more than a half-century in operation, at a cost of 383 jobs.
Most of the gum produced in Toronto is for the U.S. market, and that’s where the Canadian jobs will move.
Mars, a candy giant, has other plants in Canada that aren’t affected.
Two big players, Wrigley and Cadbury, basically account for Canada’s gum industry, which has seen its sales suffer both here and in the United States.
“Factors like enhanced availability of coffee drinks, energy drinks, and more choices in snacks in adjacent areas and those including digital apps, mobile games, and music downloads in relatively distant areas are all competing for consumers, particularly teens and students, the main target consumer group,” Euromonitor International, a global research firm, said in its latest report on Canada.
In the United States, according to the group, there’s still a hangover from the recession and financial crisis.
“Starting in 2010, just following the conclusion of the recession, gum sales began to decline and have yet to find growth since that year,” Euromonitor said in a more recent report on the American market.
“Some of this trend stems from the post-recession mindset of consumers in which gum is viewed as a strictly unnecessary expense,” it added.
“Moreover, consumers who would typically use gum as a breath freshener are increasingly turning to power mints due to the increasing efficacy of this product as well as the fact that mints can be swallowed and do not require to be spat out later.”
Candy companies have tried to boost the market, but have been unsuccessful.
There’s also the issue of parents watching out for their kids, Euromonitor said in a forecast out to 2019.
“Much of this decline will continue to come from bubble gum and sugarized gum, which parents increasingly see as detrimental to their children’s health,” it noted.
“Furthermore, sugar-free gum, which was previously able to help mitigate sales declines in bubble and sugarized gum, is likely to continue facing deep declines due to ongoing consumer apathy.”
Euromonitor expects gum sales to fall in Canada at an annual pace of 1 per cent over the next five years, to $480-million and 15,000 tonnes in 2019.
(For trivia buffs, sales by flavour rank like this: Mint, fruit, spearmint, peppermint and Cinnamon. In the United States, it looks like this: Mint, spearmint, peppermint, berry, citrus, mixed fruits, wintergreen and cinnamon.)
Chewing gum, by the way, has a fascinating history.
Our prehistoric ancestors, according to the International Chewing Gum Association, chewed tree resin.
Gum as a commercial enterprise came in 1848, and in the late 1800s found their way into vending machines.
Bubble gum first appeared in 1906, and cards began appearing in packages in the 1930s.
The industry boomed between 1940 and 1960, with sugar-free versions introduced in the 1950s.
Oil, dollar tumble
Oil prices are sinking again after a U.S. inventory report, and the Canadian dollar is following suit.
Welcome back to a few days ago.
The four-day oil rally stalled today, even before the U.S. Energy Information Administration reported that crude stockpiles have jumped to a record of more than 413 million barrels, up by 6.3 million and well above the estimates for something just above 3.7 million.
Helped along by a poor manufacturing reading, the Canadian dollar tumbled after a two-day rally, sinking back below 80 cents U.S.
The loonie touched a low so far today of 79.54 cents U.S.
The Ivey manufacturing reading, by the way, was “horribly weak,” said chief currency strategist Camilla Sutton of Bank of Nova Scotia.
- Follow our Inside the Market blog (for subscribers)
- Oil rally hits abrupt end as U.S. inventories jump to record high
Staples, Office Depot in deal
Two of America’s big office supply companies are joining forces.
Staples Inc. today struck a $6.3-billion (U.S.) cash-and-stock deal for rival Office Depot Inc., which they say values the stock of the later at $11.
Under the deal, which Staples chief executive officer Ron Sargent called a “transformational acquisition,” Office Depot shareholders would get $7.25 cash and 0.2188 of a Staples share.
“We expect to recognize at least $1 billion of synergies as we aggressively reduce global expenses and optimize our retail footprint,” Mr. Sargent said in a statement.
Not to be left out
China’s central bank has joined a global rush to ease policy, cutting the required reserve ratio for commercial banks one-half of a percentage point.
Some observers see today’s cut by the People’s Bank of China as a shot in a global currency war, but others rule that out, linking it more to a broader economic move.
And, hey, everyone else is doing it, so why not Beijing?
“Today’s required reserve ratio cut is primarily a signal that the People’s Bank is maintaining the more accommodative stance adopted in November rather than a response to capital outflows or ‘currency wars,’” said Mark Williams, the chief Asia economist at Capital Economics.
“The next policy steps will depend in part on how China’s equity markets respond to the move.”
- David Parkinson: Global rate-cutting frenzy could freeze U.S. economic recovery
- Will the Bank of Canada slash interest rates to the bone?
- China cuts bank reserves to help boost flagging economy
Petrobras CEO out
The widening bribery scandal at Brazil’s parastatal energy giant Petrobras has claimed its highest profile victim yet, with the resignation of chief executive Maria das Gracas Foster, The Globe and Mail's Stephanie Nolen reports from Rio de Janeiro.
Ms. Foster and five executive directors have now resigned from Petrobras, the company said today, adding it will meet Friday to select new members of its executive board.
Brazilian police are investigating a fraud estimated to be worth billions of dollars, in which senior managers at companies such as Odebrecht allegedly paid off Petrobras directors in order to obtain contracts with the company. Police say 232 companies are on their list for investigation, and 86 people have so far been charged.
The scandal predates Ms. Foster’s time at the helm of Petrobras but she has been widely criticized for failing to handle the scandal transparently or provide a new sense of leadership.
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