Wrigleys Success Formula

People have enjoyed chewing gum-like substances for a long time. From the Native Americans of New England, the early colonists learned to chew the gum-like resin that formed on spruce trees when the bark was cut. Lumps of spruce gum were sold in the eastern United States during the early 1800s, making it the first commercial chewing gum in the United States. Modern chewing gum began in the late 1860s when chicle was brought to this country and tried as a chewing gum ingredient. Chicle comes from the latex of the sapodilla tree, which grows in the tropical rain forests of Central America. It made possible a smooth, springy, satisfying chew and holds flavors longer and better. By the start of the twentieth century, modern chewing gum was well on its way to popularity.

This is when William Wrigley, Jr., came to Chicago from Philadelphia. His father sold Wrigley's Scouring Soap. As an extra incentive to merchants, Wrigley offered premiums. One of these premiums was baking powder. When baking powder proved to be more popular than soap, Wrigley switched to the baking powder business. In 1892, Wrigley got the idea of offering two packages of chewing gum with each can of baking powder. Once again the premium—chewing gum—seemed more promising than the product it was supposed to promote. Wrigley began marketing that chewing gum under his own name. His first two brands were Lotta and Vassar. Juicy Fruit and Spearmint came in 1893

Getting a foothold in the chewing gum business was not easy. Wrigley built a loyal following as he stuck to a basic principle: "Even in a little thing like a stick of gum, quality is important." Wrigley was also a pioneer in the use of advertising to promote the sale of branded merchandise. He saw that consumer acceptance of Wrigley's gum could be built faster by telling people about the product through newspaper and magazine ads, outdoor posters, and other forms of advertising.

For more than 100 years, quality products and relentless brand-name advertising has been Wrigley's success formula. It's a formula that works.

See: Home page information for Wrigley's can be found on the Internet (http://www.wrigley.com).

return on assets (ROA)

Net income divided by the book value of total assets

The accounting return on assets (ROA), defined as net income divided by total assets, is also a useful indicator of the business profit rate. Like ROE, ROA captures the effects of managerial operating decisions; unlike ROE, ROA is unaffected by the amount of leverage. Therefore, although ROA is a useful alternative indicator of the basic profitability of a business, it fails to account for the effects of financial leverage decisions on firm performance. As such, ROE has some advantages over ROA as a fundamental measure of business profits. Irrespective of whether ROE, ROA, or some other measure of business profits is employed, consistency requires that comparisons be made using a common basis.

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