Mars is facing inflationary pressures in Australia

Confectionery giant Mars is facing ‘unprecedented’ inflationary pressures but as times get tough consumers want to know you are doing the right thing which has led it to Uttar Pradesh, India.

A mint farmer in Uttar Pradesh, India, as part of a new initiative from global confectionery and food giant Mars.

The local boss of global confectionery and food giant Mars Wrigley says the manufacturer is facing the most challenging economic environment in decades, marked by unprecedented hikes in costs, from cocoa to energy, and other inflationary pressures now running through its business.

Andrew Leakey, general manager of Mars Wrigley Australia, also confirmed statements made in a submission this year to the senate inquiry into the supermarkets that Australia is one of the highest-cost nations among Mars’ global network of factories as wages, energy and labour all eat away at profits.

This has forced Mars Wrigley to absorb much of the cost increases, currently running at 10-12 per cent above last year, but he said the family-owned confectionery, gum, food and pet foods maker remained committed to manufacturing in Australia.

“Australia is (a high cost to manufacture) and that’s because of our standard of living … manufacturing in this part of the world comes at a higher cost,” he said.

“And that’s OK because it does maintain our global quality and during times like Covid when we were cut off from the rest of the world it meant we could supply.

Mars sees Australia as a high cost region to manufacture but is committed to the region.

“Inflationary pressures are being felt by Australians and we haven’t been immune to that as an organisation and we are seeing that put pressures on local manufacturing costs,” Mr Leakey said as he also revealed the success of a new sustainable mint-farming initiative in India that is helping drag 1800 villages out of poverty.

“It is one of the most challenging economic environments that we have seen in decades and I have to say we should be pretty proud as an industry because we are demonstrating a remarkable vitality in how we are managing those costs on a local and international scale,” he said.

Mr Leakey said some of the local cost pressures facing Mars, whose popular brands include Mars, M&M’s, Milky Way, Snickers, Maltesers, Eclipse and Juicy Fruit, were “unprecedented”.

“We have seen big pressures on our import costs, materials, packaging, transportation, you name it,” he said. “Labour and energy, they are unprecedented.

“So we’re having to do unprecedented things inside our organisation to absorb as much of that as we can.

“And we have seen those costs, on average, about 10 per cent to 12 per cent higher than they were previously. Cocoa is one of our tough ones, we’ve seen cocoa go up by more than 100 per cent in the last 12 months.”

The US-headquartered Mars this year said its six manufacturing sites in Australia were among the most ­expensive to run in its global network of more than 130 factories in almost 70 countries.

In May the local boss of one of the world’s largest supermarket suppliers, Cadbury owner Mondelez, said it had become “undeniably expensive” to manufacture in Australia, and the crisis could result in food manufacturers shutting down and shifting overseas.

Mr Leakey said Mars Wrigley would continue to invest and operate in Australia, having recently invested more than $120m in its Victorian facility in Ballarat and as much as $20m at a factory in Asquith, NSW, and was committed to long-term manufacturing in Australia.

“I think that long-term commitment becomes important in the ability to absorb any of those costs,” he said. “Everybody is intrinsically focused on what are the costs we can manage? We have to manage that through productivity and our supply programs … to help us with inflation and we continue to invest.

“And we obviously have a longer-term plan to say, what does that look like in the future once things settle down?”

A mint farmer in India as part of a new initiative from Mars.

Turning to consumer behaviour amid cost-of-living pressures, Mr Leakey said his portfolio of chocolates, sweets and gums remained an “affordable treat” that was finding a place in people’s budgets.

“I think surprisingly we are not seeing things shift, consumer behaviour is pretty consistent and they will manage their budgets, and treats and snacks have been a little bit recession proof, moments of happiness. To reward themselves but also at the right cost.”

Consumers are also increasingly focused on sustainability and sourcing, with Mr Leakey heavily involved in establishing a global program by Mars called Fresh Futures to help fund community development initiatives for mint farmers and their communities in Uttar Pradesh, India.

Uttar Pradesh is in the heart of India’s mint-growing region and accounts for about 75 per cent of the world’s fresh mint, a key ingredient in Eclipse Mints, owned by Mars.

The initiatives include the training of 24,000 mint farmers on how to respond to changing weather patterns, improve soil health, reduce water usage and improve crop resistance against disease.

“Our Fresh Futures program is working to actively confront and address the issues within the mint-farming communities, from sustainable farming practices through to education, empowerment and bolstering income and financial literacy to not only directly support mint farmers, but enable the broader mint farming community to thrive.”

Mint farmers in India.

This month, Mars launched Fresh Futures across its Eclipse Mints brand, with a special QR code on the tin leading consumers to information about the community programs and the impact Fresh Futures is having on the ground in India.

“As times tighten up people get much more connected to brands that are doing the right thing, the modern consumer wants to know about your manufacturing practices, want to know about your purchasing, sourcing products and doing that in the right way. And if you do, then I’m more connected to your product than anything else,” Mr Leakey said.

“For me, it’s a very humbling moment to see the program come to life in Australia; knowing first-hand the impact and difference it is making in the lives of many in Uttar Pradesh.”