Chupa Chups S.A. Business Information, Profile, and History

Company Perspectives:

Chupa Chups, as a Spanish company with an international outlook, operates in a frontier-free global market. Its effectiveness is based on the go-getting character of its staff combined with a deep-rooted commercial attitude inherited from the Catalan, Spanish and pan-European cultures. Its aim is to stand out as the leader in all the product lines in which it participates. To do this it centers its efforts on new markets where the areas of marketing and commercial and industrial know-how are key competitive angles.

History of Chupa Chups S.A.

Spain's Chupa Chups S.A. (pronounced 'shoopa shoop,' it comes from the Spanish verb 'chupar,' to lick) is the world's leading manufacturer and distributor of lollipops. The company's famed logo--designed by Salvador Dali&mdashorns the company extensive line of lollipops, featuring more than 50 different flavors and flavor combinations and sold in a variety of packaging, from traditional lollipops, to motorized lollipops and tubes, cans and other specially designed packaging, such as the Mobile Pop shaped like a cellular phone and featuring a functional calculator, or the Chupa + Surprise, introduced in 2000, which bundles snap-together toys with the company's lollipops. In the 1990s, Chupa Chups, which takes credit for providing the well-known prop for famous 1970s television detective Kojak, branched out from its long-held lollipop specialty to introduce products directed at new markets. The company's Crazy Planet subsidiary creates a line of value-added candy, lollipop, and toy products, geared particularly to the children's and adolescent markets, including Crazy Zoo, which features a toy inside a chocolate egg, and the Gum Watch, a wristwatch chewing gum dispenser. Chupa Chups has also launched its first line of products targeting the adult market, the Smint range of flavored breath mints. Chupa Chups sells its products in more than 160 countries, with production facilities in Spain, France, Russia, Mexico, and China. Some 93 percent of its sales, which reached Pta 73 billion (US$445 million) in 1999, are generated outside of Spain. A privately held company, Chupa Chups is led by founder, President, and CEO Xavier Bernat.

Sticking to Success

The predecessor company to Chupa Chups S.A. was founded in 1946 as Granja Asturias S.A. Originally specializing in apple-based sweets, the small Asturias-based company nearly folded in the early 1950s. That was when Enrique Bernat--the grandson of a Barcelona candymaker--joined the company and set to work transforming the artisan operation into a production giant capable of manufacturing and distributing its products across the world. By the late 1950s, Bernat had succeeding in turning the company around--and received 50 percent of the company for his efforts in 1958. Bernat decided to buy out the rest of the company, and then transform it entirely.

During the decade, Bernat had begun investigating a new product idea. Recognizing the majority of Spain's candies were being consumed by children, Bernat sought to create a product specifically for this market. Most candies at the time were traditional sugar-based drops--which tended to produce a sticky mess in children's hands. Bernat's idea was simple: he began inserting sticks into the candies--originally a piece of metal&mdashø function as a handle, or, as Bernat himself said, 'like eating a sweet on a fork.' Bernat eventually named his candy the Chups, after the Spanish verb 'chupar,' or 'to lick.'

The candy quickly became all the rage among Asturias's children, and its success encouraged Bernat to take a drastic step. After gaining full control of the company, Bernat decided to eliminate the company's range of some 200 different candies to concentrate solely on its lollipop. The first Chups were launched in 1958, available in seven flavors, and selling for one peseta apiece--considered expensive for the time.

Expensive or not, the Chups took off across the country. Bernat had quickly industrialized the company's production, enabling the company to meet the rising demand for the lollipops. Already by the end of the 1950s the company was delivering up to 200,000 lollipops per day, using its own fleet of trucks. Meanwhile, the company continued to refine its sole product, replacing the metal sticks with wooden sticks, which were in turn replaced with plastic in the early 1960s. An important refinement came in 1961, when the company changed the lollipop's name to the more musical-sounding Chupa Chups, and it was under this name that the lollipop was to achieve international domination.

The success of the Chupa Chups brand led Bernat to change the company's name to that of its flagship line in 1964. Rising sales, and preparations to take the company international, encouraged Bernat to open a second factory, in Sant Esteve de Sesrovires, outside of Barcelona, in 1967. That factory helped support the company's launch of its first subsidiary, in Perpignan, France, in that same year.

A major moment in the Chupa Chups brand history came in 1969 when the company adopted a new logo. For this, Bernat turned to friend--and world-renowned surrealist painter--Salvador Dali, who quickly devised the company's daisy-shaped logo and bright colors. The association of Dali's name with the still small Chupa Chups company gave it a great deal of international attention, enabling the company to penetrate new markets. In that same year, the company built its first foreign production facility, in Bayonne, France. The company's sales still remained predominantly Spanish, however; in 1970, just ten percent of the company's lollipops were sold outside of Spain.

Ten years later, the company had entirely transformed itself and its sales--by 1980, some 90 percent of all sales were made outside of Spain. The company could also celebrate the sale of its ten billionth lollipop sold. Supporting the booming growth in the company's sales was its rollout in Japan in 1977. The 1970s had also given the company an enormous boost in publicity when its lollipops were adopted by actor Telly Savalas as a prop for his character Kojak. Worldwide television audiences watched Kojak's ever-present Chupa Chups every week. The company was to continue to benefit from such public relations coups, as a means to compete against the mammoth advertising budgets of its large-scale competitors, such as Nestlé, Hershey, Cadbury, Haribo, and others.

Meanwhile, the company maintained a small but steady advertising strategy, begun during the 1960s, beginning with radio, then adding television, but also carefully targeting the children's listening and viewing audience. At the same time, the company continued introducing new flavors--often created to appeal to the tastes of specific national markets. Chupa Chups also led the industry in the creation of 'value-added' candies, such as the world's first 'motorized' lollipop, lollipops that painted the tongue and other technical and marketing innovations.

In 1980, Chupa Chups moved to boost its presence in the U.S. market, setting up its Chupa Chups USA subsidiary. This was the start of a string of foreign forays as the company opened distribution subsidiaries in a number of countries during the decade, including Germany and the United Kingdom. At the end of the 1980s, Chupa Chups entered a new, and potentially vast market, when it created its Russian subsidiary, Zao Neva Chupa Chups. This subsidiary promptly included its own production facility, opened in St. Petersburg, which began production in 1991.

Soaring into the New Century

The St. Petersburg facility gave Chupa Chups the opportunity for yet another marketing coup. In 1995 the company sent a number of lollipops made in St. Petersburg into space, to the Mir space station. During live broadcasts, a worldwide audience watched the Russian cosmonauts enjoying their Chupa Chups. Closer to home, the mid-1990s had already marked two new expansion moves for the company. In 1994, Chupa Chups opened a new production facility in Villamayor, Spain, and created a new subsidiary, Shanghai Chupa Chups Food Co. Ltd., bringing its production and distribution reach to the vast Chinese market.

Central to the company's expansion had been its willingness to form partnership agreements with local companies--even with its competition&mdash-abling Chupa Chups to enter a country without requiring heavy investments in setting up a distribution network. As such, the company sealed a distribution agreement in the United States with the wholesaling firm Maclean, later acquired by Wal-Mart. In the Italian market, the company's lollipops were being distributed by Haribo; and in Australia, Cadbury agreed to handle the company's distribution.

After decades of single product focus, Chupa Chups began to look for ways to diversify its product range. In the early 1990s, the company moved into chocolate production, producing chocolate eggs for the Italian market. It also bought up France's Bêtises de Cambrai, a regional maker of specialty hard candies, in 1992. Chupa Chups success in its attempt to turn this product into an international brand remained limited, however. In the mid-1990s, the company had better luck with a new product, the Smint breath mint, the first of the company's products to be targeted at an entirely new market&mdashults.

By then Enrique Bernat had stepped down from the company's leadership, turning over the president and CEO's chair to son Xavier Bernat. The younger Bernat quickly proved his father's student, arranging the Mir space station publicity coup, but also continuing both the company's international expansion and its eagerness to diversify its product range. In 1996, Chupa Chups entered the Mexican market, building a new production facility there to provide not only for the North American market but for the South American market as well. This market was soon to be served by its own Chupa Chups subsidiary, when Chupa Chups do Brasil Ltda. was formed in 1998. Construction began on a production facility in that country, with a production launch scheduled for 2001.

By then, Chupa Chups--celebrating its 40 billionth lollipop--was receiving a boost from somewhat unexpected places. The late 1990s saw the emergence of a new trend--that of the lollipop as a fashion accessory, and the Chupa Chups was quickly adopted as the candy of choice by such international celebrities as Madonna, Michael Jackson, Uma Thurman, George Clooney, as well as supermodels and others. The suddenly fashionable lollipop quickly expanded far beyond its traditional children's market.

As the end of the century neared, Chupa Chups also continued to reinforce its international distribution activities, opening sales offices in Japan, Korea, and Canada. The new subsidiaries gave the company more direct access to those markets and support for its rollout of its Smint products in those regions.

Chupa Chups was also preparing a diversification drive for the new century, launching a new brand and subsidiary, Crazy Planet. This subsidiary enabled the company to launch a new range of non-lollipop confectionery products. Meanwhile, after reaching a German distribution partnership agreement with Van Melle, Chupa Chups continued to roll out new value-added products built around its global brand name. Among the products launched at the end of the century and the start of the new century were a range of so-called 'cocktail' Chupa Chups, featuring alcohol-free cocktail inspired flavors such as Pina Colada; a line of Chupa + Surprise, adding a line of snap-together toys to its lollipop package; and the Mobile Pop--designed to resemble a portable phone, complete with belt-clip, the product came complete with a calculator and, of course, a compartment for storing Chupa Chups lollipops. Such innovative product offerings were expected to keep Chupa Chups at the top of the lollipop world into the 21st century.

Principal Subsidiaries: Chupa Chups USA Corp.; Chupa Chups France S.A.; Chupa Chups Diversificacion S.A.; Chupa Chups GmbH (Germany); Chupa Chups UK Ltd; ZAO Neva Chupa Chups (Russia); Shanghai Chupa Chups Food Co. Ltd. (China); Chupa Chups Invest Mexico S.A. de C.V.; Chupa Chups Do Brasil Ltda.; Chupa Chups Japan KK; Chupa Chups Canada Inc.; Crazy Planet S.A.

Principal Competitors: Brach's Confections, Inc.; Herman Goelitz, Inc.; Hershey Foods Corporation; Grupo Industrial Bimbo, S.A. de C.V.; Mars, Inc.; Nabisco Holdings Corp.; Nestlé S.A.; Tootsie Roll Industries, Inc.; UIS Inc.; Wm. Wrigley Jr. Company.

Chronology

• Key Dates:

• 1946: Company starts as Granja Asturias S.A.
• 1954: Enrique Bernat joins company, begins development of the lollipop.
• 1958: Bernat acquires full control of company, launches Chups brand lollipop.
• 1961: Lollipop name is changed to Chupa Chups.
• 1964: Company's name is changed to Chupa Chups.
• 1967: Chupa Chups forms French subsidiary, opens second production plant in Spain.
• 1969: Salvador Dali designs logo; French production facility is constructed.
• 1977: Chupa Chups enters the Japanese market.
• 1980: Company creates Chupa Chups USA subsidiary.
• 1982: Chupa Chups launches German subsidiary.
• 1983: Company creates U.K. subsidiary.
• 1989: Chupa Chups enters Russian market.
• 1991: Company establishes St. Petersburg production facility.
• 1992: Chupa Chups unveils Smint line of breath mints for adult market.
• 1994: Company creates Chinese subsidiary and production plant.
• 1996: Company opens Mexican subsidiary and production plant.
• 1998: Brazilian subsidiary is launched.
• 1999: Chupa Chups establishes Japanese, Canadian, and Korean sales offices.
• 2000: Crazy Planet subsidiary is formed to develop and market non-lollipop products.