These Lollies Are About to Go Pop

Chupa Chups has been sticking out its brightly colored tongue at convention since 1957, when Enric Bernat, a third-generation candy maker, took over an ailing Spanish confectioner and melted down its 200 products to focus on producing a single line of quality lollipops.

Within five years, Chupa Chups sales reps were servicing 300,000 outlets around Spain with a fleet of Seat-600 minicars and instructing shopkeepers to place the company's porcupine-like displays as close to the cash register as possible -- a break from the traditional policy of keeping candy in glass jars behind counters, far from little fingers.

During the 1990s, Chupa Chups threw itself into global expansion. Now 90% of its sales are outside Spain. When rivals steered clear of manufacturing in Russia, Chupa Chups jumped in headfirst, a gamble that has paid off handsomely (despite a machinery heist on the road to St. Petersburg). Russians now consume around 1 billion Chupa Chups lollipops a year.

Like a hyperactive child who has eaten too much candy, Chupa Chups continues to innovate at a furious pace. Initial flavor blends such as strawberry and cream, chocolate and banana, and chocolate and vanilla were simply a taste of things to come. In some cases, when Chupa Chups enters a new market, a new flavor enters its canon: jasmine and green tea in China, mango and chili pepper in Mexico, orange with extra vitamin C for Russia. The Middle East territories warranted a date-flavored lollipop. In more-developed markets, flavors for adult palates include margarita and piña colada, cappuccino and mocha.

But new taste is only one way that Chupa Chups is innovating. There are also new delivery mechanisms that mark this lollipop as extraordinary: It's being packaged in toys and makeup kits and inside pretend paint cans. The Chupa Chups name is being licensed to makers of clothing, eyewear, shoes, motorcycle helmets, perfume, and toothpaste. The company also now owns two more brands: Smint mini-mints, aimed at adults, and Crazy Planet, novelty candy toys that include a digital watch with a secret gum-filled compartment.

Xavier Bernat, who took the reins from his father in 1998, is eager to make amends for last year's disappointing 2.4% fall in sales -- the first decline in more than a decade, due in part to a Pokémon merchandising deal that turned sour. Chupa Chups also quit an awkward marketing agreement in the United States with Mars Inc., whose more conservative family didn't sit well with a company that once had internal plans to advertise its core product as "oral pleasure."

But those stumbles have done nothing to discourage Chupa Chups from its innovative course. Bernat has a plan to put a sweet taste back in the company's mouth: a network of 5,000 Swatchlike "shops in shops" -- dedicated retail spaces within department stores and kiosks at airports, malls, and theme parks. It's a move that will increase sales turnover, he hopes, by 15% to 20% within the next three years. "We've worked hard to create strong brand awareness," he says. "It's time to convert that to sales."

Sidebar: The Brains in Spain

Chupa Chups is one of several smart companies in Spain enjoying success around the globe. Clothes retailer Zara has hit on a successful formula by combining high fashion with value pricing. The Mango clothes retailer, launched by a Barcelona street trader, has replicated that feat with 575 stores in 68 countries. Catalonia's Freixenet Cava took the lifestyle associated with champagne and grafted it onto sparkling wine, and now has sales approaching 100 million bottles a year. What do these Spanish entrepreneurs have in common?

A good number of these enterprises are driven by compact family structures and paternalistic management, where the major decisions remain in the hands of the owner. They tend to place great emphasis on distribution, with resources devoted to opening outlets quickly, rather than to advertising. They've worked for many years to refine their businesses before launching internationally -- but their ambitions were always global. "They all started out with high goals, defining their market as the world," says Diego Torres, marketing professor at ESADE business school in Barcelona.