Wm. Wrigley Jr. plans to raise prices in the United States by about 10%, on average, the chewing gum maker said on Wednesday, sending its shares higher.
It will be its first significant price increase since 2001, a spokesman said. In 2003, Wrigley raised prices on five-stick packs of its sugared gums such as Big Red and Doublemint.
Wrigley said the increase was due in part to rising costs, but did not specify which costs. Food companies have been hit by higher costs for natural sweeteners like high fructose corn syrup as demand for use of crops in ethanol has sent prices soaring.
"We thought now was the right time to make a move in the U.S.," Chief Financial Officer Reuben Gamoran said during the company's annual shareholder meeting.
Rival Cadbury Schweppes Plc , maker of Trident and Dentyne chewing gums, recently announced it would substantially increase selected gum prices in the U.S. He conceded the price increase could hurt gum sales volumes in the short term.
The price increase also comes as Wrigley tries to improve margins, which have shrunk as the company has added more lower-margin candy products to what has traditionally been a higher-margin chewing gum business. In 2006, Wrigley's gross margin fell to 51.9% from 54.2% in 2005.
Wrigley also faces tougher competition from Cadbury, which has spent money to reinvigorate the chewing gum business it bought in 2003. Cadbury said last week its share of the U.S. chewing gum market rose to 32.7% in January, compared with the 27% the business had when Cadbury bought it.
Cadbury also has launched new products in Britain as it tries to cut into what has been a near monopoly for Wrigley. Wrigley executives said the company has met the competition with new products of its own and that trying to take market share from Wrigley would be a tough and expensive proposition.
"We meet competition head on and aggressively drive our own growth," Chairman Bill Wrigley Jr. said.