- Smashmallow closed a minority investment funding round with investor Alliance Consumer to release a new line of low-sugar gummies, NOSH reported. Financial details of the transaction were not disclosed.
- The gummies will not include any sugar alcohols or stevia. Instead, they will feature organic cane sugar and the sugars that naturally occur in prebiotic tapioca fiber.
- The gummies will arrive on retailer shelves in early 2020 and will come in two flavors: variety fruit and sour. Made with organic ingredients and shaped like hot air balloons, each 2-ounce pouch will retail for $2.99 to $3.29.
Smashmallow, which until this point has focused on marshmallows and related items, has never been shy about saying it had bigger ambitions. In a 2018 interview with Confectionery News, company founder Jon Sebastiani said that the company was never formed to compete in the marshmallow market, but to take a bite out of the $36 billion confectionery space. It didn’t take long.
The company's first foray out of just marshmallows was its Smashcrispy rice crispy treat, released in November 2017, a year after the company debuted. Still marshmallow-centric, the two products ballooned the brand to a reported $30 million run rate at the end of last year with a nationwide presence in 10,000 stores.
Part of this explosive growth is thanks to the reorientation of an old favorite. With whimsical packaging and gourmet flavors, Smashmallow broke into the snacking space as a lower-calorie option for those craving a sweet treat. Its flavors, ranging from Strawberries & Cream to Cinnamon Churro, appeal to both kids and adults.
Smashmallow's approach to better-for-you indulgence fits in with today's consumer trends. As people want healthier snacks, confectionery companies are diversifying their holdings and looking at sugar reduction. Hershey purchased SkinnyPop owner Amplify Snack Brands for $1.6 billion in 2017. It also acquired Sebastiani’s former company, jerky brand Krave. Hershey's not the only company making these acquisitions. Candy giant Mars Wrigley took a minority stake in healthy snacking company Kind.
Despite the public outcry over sugar’s impact on health, candy sales are still edging higher. Chocolate candy sales rose 0.7% to $14.2 billion in the 52-weeks ended April 21, according to IRI. However, other kinds of candy are doing better, with sales increases during the same period of 2.4% for gum and 2.1% for non-chocolate confections.
As for gummy candy, IRI found that 46% of adults had consumed it within the last six months. Of course, a portion of that consumption can be attributed to the increase in CBD and marijuana-infused gummy creations, but a large segment of the population is interested in conventional gummy candy. This demographic likely has some overlap with Smashmallow’s original target consumers because of its low-sugar approach, but the new line of candy will help the brand sweet talk more customers into trying its products.
By promoting its low-sugar profile, Smashmallow is continuing to treat sweets as a snack time option. Its choice of forgoing the typical sugar alcohols is a shrewd move in a climate where natural options like honey, agave and monk fruit are gaining traction as healthier alternatives to refined sugar. Nor is the brand alone in this approach. A Kerry survey noted that new product launches featuring "low/no/reduced sugar" label claims jumped 45% in 2017 compared to five years prior.
Using these more expensive sweeteners may raise the price of Smashmallow's gummies. At the same time, Smashmallow has always priced itself higher than competitors in its space, which has so far fed into the brand’s allure and helped it carve out space in the market.
This expansion will expose the startup to a new list of competitors, one of which takes a similar approach and markets its products as a luxury alternative to the masses: Ferrero. Adding gummies to Smashmallow's portfolio will likely not rattle the cages of the bigger players in the space, but if the Smashmallow continues on this trajectory and decides to add more confections to its portfolio, competition will be more fierce.