ALEXANDRIA, VA (August 24, 1999) -- Collectively, thousands of eyes should have turned to the Wrigley (NYSE: WWY) Web pages over the weekend to read, absorb, and ponder. The next Foolish step is to share. Share your thoughts. Today we share some of ours.

Wrigley is the king of the gum world, but is this an industry worthy of our 20-year investment? Do substantial opportunities for growth exist? I liken a pack of gum to a can of Coca-Cola, except for one crucial factor: you don't need to chew gum daily. You do need to drink liquids every single day. Coca-Cola is a wonderful company, but in praising it we can't ignore the fact that its product serves a daily need. Coke didn't invent thirst; it was just smart enough to serve it.

Gum is a different story. Aside from serving the natural desire of many people to chew, gum is more or less a treat. Although this makes the gum market less substantial, it doesn't make the business less profitable. Check out Wrigley's profitability levels from the Fool Snapshot. Some key figures:

Return on Equity (ROE): 25.9%
Gross Margin: 58.1%
Operating Margin: 21.3%
Profit Margin: 14.8%

For comparison sake, here are the numbers from Intel (Nasdaq: INTC):

ROE: 31.4%
Gross Margin: 57.2%
Operating Margin: 35.2%
Profit Margin: 26.1%

Both are impressive.

Here is Johnson & Johnson (NYSE: JNJ):

ROE: 28.3%
Gross Margin: 68.5%
Operating Margin: 18.8%
Profit Margin: 13.0%

Finally, returning to the food world, Coca-Cola (NYSE: KO) looks like this:

ROE: 37.9%
Gross Margin: 69.9%
Operating Margin: 22.8%
Profit Margin: 16.7%

All of these numbers are world-class. All are world-class companies. These numbers alone paint a small picture. Of the group, Intel has the lowest operating expenses to run its business, on a percentage basis. All sell a great product that can be sold at more than twice the cost of the product itself.

Returning to Wrigley, some other worthwhile figures are:

Long-term Debt: $0.00
Book value: $13.21
Price/Book: 5.6

And how about the recent growth at Wrigley? From the Fool Financials:

              1 Year       3 Year       5 Year    
Sales %         3.54        4.57          7.03    
EPS %          12.13       10.85         11.84     
Dividend %     11.11       10.64         11.63  

Wrigley's one-, three-, and five-year sales growth tops Coca-Cola's recent sales performance, for example, but it still begs the question: With $2 billion in annual gum sales, how quickly can Wrigley's sales grow?

For the past six months, revenue at Wrigley rose only 1% and that was thanks to selected price increases. Wrigley does have pricing power, as Brian noted. However, can it grow volume handsomely enough over 20 years to keep us ahead of the S&P 500? That is a question that an investor faces with almost any giant food company that has matured. In comparison, drug companies are always investing in new drugs. The beautiful thing about the drug industry is that the potential for new (and big) products never wanes.

Wrigley runs a tight ship in order to keep earnings per share (EPS) growing about 11% annually. We've seen what happens when volume slips just slightly, however, in the similarly mature business of Campbell Soup (NYSE: CPB). Share buy-backs, cost reductions, and price upticks aren't always enough to grow EPS double-digits when sales volume lags. (At least gum may be a more mindless, repeat purchase product in comparison to soup. I'd be interested to see studies showing who buys gum and how often.) Finally, as with J&J, buy-outs and acquisitions of younger business lines can add sales growth to a mature company.

In Wrigley, we're betting on the strong management to use its assets well to keep growing at a market-topping pace. It will take shrewd investments and slight but significant tweaks (a price increase here, a cost reduction there) to keep the ship sailing a trim course for the next two decades. In the next two weeks, we hope to land an interview with Wrigley management. The company has typically been quiet and focused on its business rather than the Wall Street noisemakers. However, we're not noisemakers; we're potential investors.

What we ask of you is that you post your thoughts on Wrigley over the next week. Hopefully you've now read about the company at, and have studied all the data at Please post your thoughts on the company's growth potential, valuation, and any other topics that you wish on the Wrigley message board. Next week we'll continue to unwrap the company, foil by foil.

A few weeks ago we asked that any Fool interested in writing a Drip Port column let us know on the message board. This Wednesday and Thursday, it is our pleasure to run columns written by guest Fools from the Drip community. We hope you enjoy them as much as we have.

Fool on!