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Great review of the dynamics of the US candy industry
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January 2008
United States Confectionery Market
Welcome to the National Confectioners Association’s web tools for accessing the latest information about the dynamic confectionery market. This site is designed to assist the buying, broker and manufacturing communities with analysis and opportunities for the confectionery category.
The site contains numerous chapters of information. You may click on any chapter from the selections below or you can print out the entire presentation.
The information contained in the site are year-end 2007 results where possible. Some reporting for year end results will be completed at a later date in 2008. Information will be updated on a quarterly basis.
Data Overview
VI. Seasonal Merchandising
XI. Industry ResourcesV. Consumer Segmentation
X. New TrendsIV. Merchandising Opportunities
IX. The Gum MarketIII. Confectionery Profitability
VIII. The Non-Chocolate MarketII. The Retail Market
VII. The Chocolate MarketI. Confectionery Market Overview
Table of Contents
Data SourcesThere are a number of data sources available on the size of the confectionery market. While each is accurate for the market sector measured, it is critical that the extent and limitations of each are understood
• The US Census data, MA 311D, projects total manufacturers shipments of confectionery made in the US, and import/export figures provided by U.S. Customs. The MA311D Report is typically released in August for the previous year’s results.
• Syndicated data, IRI and AC Nielsen, is available from scanners recording consumer purchases in a sampling of grocery, drug, convenience and mass merchandisers providing brand and channel movement data. IRI and Nielsen data are released every four weeks with less than a one month lag time in actual sales results.
• NCA Monthly Shipment Survey data provides trade association market projections based on key confectionery manufacturers. The manufacturer reports are released on a monthly basis approximately six weeks after the close of each month.
• Trade publications use a combination of these inputs to project market data.
This market overview uses data form all of these sources and provides guidelines for understanding the insight each brings to understanding the confectionery market.
US Census Bureau MA 311D Annual Confectionery Report
• What is it? – The Census Department annually surveys US confectionery manufacturer to report all confectionery product
shipments in total dollars and pounds and combines information from U.S. Customs reports for imports and exports thus providing total manufacturers shipment reports.
• What does it mean?– It is the total output of the US confectionery industry. It is the only source that gives total market information.
• What are its uses?– Provides manufacturer shipments in dollars and pounds for total industry and sub-categories.– Provides Per Capita apparent consumption, the total dollars/pounds purchased by everyone in the US– Use Apparent Consumption to better understand total US consumption - it is the sum of manufacturer
shipments plus imports minus exports
• What are its limitations?– It provides no information on company, channel, or brand performance– Historical data tends to get “adjusted” as late reporters and changed information is supplied, short term
trends can change
• What is its relationship to other data sources?– Syndicated data is either scanner data, of convenience, drug, grocery and mass, which tends to be about 40%
of total market, but it provides brand, company, channel and home panel data on consumers.– NCA Survey data is a measure of key manufacturers of varying size and does not include all manufacturers,
however it is a much more current estimate providing current month versus the 1 – 2 year old 311D data..
Syndicated Retail Data A Look at Retail Performance
• What is Syndicated Data?– It measures retail sales for only those items that are scanned when sold– Syndicated data bases measure Food, Drug, Mass Merchandisers that have scanners at checkout– They typically do not include sales in Warehouse Clubs, Convenience Stores, Dollar Stores, Wal-
Mart, Department Stores, Specialty Stores, Candy Stores, Bulk Candy sales or many of the alternative channels
– Generally it is only the larger stores, Food over $2MM, Drug and Mass over $1MM.
• How Representative is it?– It reports sales of $12 Billion in confectionery sales if Food, Drug and Mass and Wal-Mart are
included; $17 billion if Wal-Mart and convenience stores are included; but only $8.5 Billion retail without the two. The most common “Reviews Data” report includes only Food, Drug and Mass excluding Wal-Mart.
– There are private data bases that provide information on Wal-Mart and Convenience Stores– Depending on retail channels included, it represents 35% - 60% of total US retail sales.– It is considered to be more accurate in Food channels than other retail outlets measured– It provides the best detailed insights into the channels where product is scanned
• What good is it?– It is the only source of product movement information that provides share, sales in units and dollars
at the SKU level and can be built to chain, regional, national levels.– It provides a reasonably accurate overview of Confectionery Industry performance between
companies, brands, effects of promotional activity, impact of pricing and unique events like seasonal activates.
NCA Manufacturer Shipment Reports • What are Manufacturer Shipment Reports?
– They measure domestic confectionery manufacturers shipments on a monthly, annual and year-to-date basis.
– The reports collect data from the largest chocolate and non-chocolate candy manufacturers
• How Representative is it?– Manufacturer Shipment Reports track shipments that represent approximately 80% of total
chocolate candy shipments and 60% of non-chocolate candy shipments.– They provide monthly tracking of dollar and tonnage shipments from domestic manufacturers to
wholesalers and retailers– They provide up-to-date reporting of the confectionery manufacturing industry – It does not report seasonal sales, trade channel sales or company data. Rather it is a composite of
the total confectionery industry.– It does not represent import and export shipments as well as the U.S. Department of Commerce
MA311D Report.
• What good is it?– It is the only source of product movement information that provides share, sales in units and dollars
at the SKU level and can be built to chain, regional, national levels.– It provides a reasonably accurate overview of Confectionery Industry performance between
companies, brands, effects of promotional activity, impact of pricing and unique events like seasonal activates.
U.S. Confectionery Market
Overview
2007-2008 USA Economic Trends •Economy slowing•Retail sales growth down•Unemployment ends year at 5%
•Up from 4.6% in 2006 but low in historical terms•Housing market declines affecting job growth•High oil prices•Federal Reserve cutting interest rates•Fears of inflation•Fear of recession•Commodity prices higher
2007-2008 USA Retail Trends •2007 Holiday retail sales slowed
•2.4% growth vs 2.9% in 2006
•Luxury Retailers continue to do well
•Convenience and Drug doing well
•Mass, dollar and supermarket experience slow growth
•Overall retail is growing at a slower pace
High gas pricing negatively affecting all retailers
The 2007 U.S. Confectionery Market
%$ Change
Retail Sales $29.1 +3.5%Manufacturers Shipments $18.9 +3.0%Domestic Manufacturer Shipments $17.5 +2.7%Imports $2.2 +4.0%Exports $0.9 +13.1%
The profit margin is approximately 35% for the confectionery category.
The U.S. Retail Confectionery Category generates approximately $29 billion in retail sales
Estimated sales in billionsNCA Shipment Data and Global Trade Atlas Import/Export Data
Category Retail Sales Manf. Sales % Lb. Sales %
Total $29.1 Billion $18.9 billion +3.0% 7.2 Billion +2.3%
Chocolate $16.3 Billion $10.6 billion +2.9% 3.5 Billion +0.3%
Non-Choc. $9.4 Billion $6.1 billion +3.8% 3.2 Billion +2.5%
Gum $3.2 Billion $2.1 billion +4.1% 0.6 Billion +0.1%
2007 Confectionery SalesManufacturers $ sales grew 3% in 2007
NCA Estimates base on U.S. Dept. Of Commerce MA311D Report and NCA Monthly Shipment Reports
2006 US Department of Commerce 311D Confectionery Report
2007 NCA Monthly Shipment Reports through October 2007
Total Chocolate Non Chocolate Gum
$93.92
$52.16
$29.77
$9.05
$0
$20
$40
$60
$80
$100
The average U.S. Consumer spent $94 on confectionery products in 2006
2006 US Department of Commerce 311D Confectionery Report
2006 Per Capita Retail Sales
Department of Commerce Data is released in late summer. Please return in August for actual 2007 data.
The value of imported confectionery consumed is slightly under 15%, however much of this is from US suppliers producing product overseas and then bringing into the U.S..
Chocolate Candy represents approximately 56% of total confectionery dollar sales.
$3.2
$9.4
$16.3
$29.1
Retail Sales$ Billions
-15.3%$0.1+7.7%$0.1+4.1%$2.1Gum
+13.6%$0.2+2.6%$1.3+3.8%$5.0Non-Chocolate
+16.6%$0.6+5.4%$0.8+2.9%$10.4Chocolate
+13.1%$0.9+4.0%$2.2+3.0%$17.5TotalConfections
Export % GrowthVs. 2005
Exports$ billions
Import % GrowthVs. 2005
Imports$ billions
Shipment % GrowthVs. 2005
Domestic Shipments$ billions
Category
Confectionery Categories Analysis
NCA estimates based onSource: 2006 US Department of Commerce,Census Bureau 311D, Confectionery Report
The Confectionery Market is Very Diverse
Private Label3%
Next 11 -309%
Top 570%
Next 6-1012%
All Other6%
• The confectionery category is much more diverse than other similar sized food categories.
• Most food categories are represented by less than five companies.
• There are 300+ suppliers competing for the remaining 30% of confectionery sales.
• The uniqueness of the confectionery category is that each suppliers makes distinctly different items catering to the diverse tastes and demands of the consumer.
Manufacturer Market Share Concentration
52 Week Sales Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
There are more than300
domestic confectionery manufacturers
Top Candy Manufacturer Market Share
Perfetti Van Melle0.8%
All Others10.2%
Private Label3.3%
Hershey29.0%
MARS16.9%
Wrigley 12.2%
Nestle6.1%
Cadbury-Adams5.6%
Russell Stover3.5%
Tootsie Roll2.7%
Lindt-Ghirardelli2.4%
Farley Sathers Brach's2.0%
Ferrero1.8%
American Licorice1.0% Just Born
0.9%
R.M. Palmer0.8%
Storck0.8%
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
According to IRI, The top three companies, Hershey, Mars and Wrigley have a combined market share of 58%. The next twelve largest candy and gum companies have a 28% share, with all others having a 14% share
Continuous Growth of ConfectioneryTotal value and pounds of confection sold at retail has increased
consistently over the past five years
2006- US Dept of Commerce 311 D Report
2001 2002 2003 2004 2005 2006
7.7
$28.2
7.6
$27.9
7.3
$27.4
7.1
$25.8
6.7
$24.4
7.0
$24.0
Dollars Sold at Retail, Billions Pounds Sold at Retail, Billions
U.S. Confectionery
The Retail Market
Confectionery Retail MarketConfectionery is one of the most diverse retail categories with products sold in a myriad of outlets. While most consumable products have a dominant retail outlet, confectionery products can be sold anywhere.
To be successful with confectionery products, a retailer must strategically determine which consumer need for confectionery products they will fill. This will depend to a large part on your target consumer. However, no matter whom your target is, there are confectionery products that can add to your sales and bottom line figures.
Candy and gum is the largest consumable product category in Drug Stores, Mass Merchandisers, Wholesale Clubs and Dollar Stores and is a top ten product category in Convenience Stores and Supermarkets.
Retail Confectionery
Mass X Wal-Mart4.7%
Others24.9%
Vending4.2%
Dollar Stores*2.9%
Supermarkets15.3%
Convenience Stores15.0%
Wal-Mart11.4%
Drug Stores8.6%
Warehouse Clubs*7.6%
Bulk5.4%
* Others include: department stores, food service and ingredient sales, fundraising, give-aways, independent grocers, mail order/internet, military, specialty/candy stores, theaters and concessions
*estimates
NCA 2007 estimates based on IRI, U.S.Department of Commerce, MSA Vending Data, NCA Shipment Report and other industry sources.
Market Share by Trade Channel
2007 Retail Channel Performance
Channel 2007 $ Sales 2007 % GrowthSupermarkets $4.6 +2.4%Wal-Mart $3.5 +7.3% Mass X Wal-Mart $1.4 +6.5.5%Convenience Stores $4.5 +6.2%Drug Stores $2.6 +3.9%*Warehouse Clubs $2.2 +2.0*Dollar Stores $.8 +0.2%Vending $1.2 +0.7%*Bulk $1.4 -0.5
Based on 52 Week Sales – January - December 2007
•Source: NCA estimates based on input from Information Resources, Inc. NCA/CMA Monthly Shipment Reports and U.S. Department of Commerce. •Sales Figures in billions
The confectionery retail market has grown across all trade channels but convenience stores, club stores, dollar stores and chain drug stores have outpaced the overall retail market.
* Indicates NCA estimate
Candy and Gum sell across each major channel, unlike other snacking categories. It is equally important as a volume producer for each channel.
FOOD
DRUG
Mass
TOTAL U.S. - F/D/MX
MISC. SNACKS DRY FRUIT SNACKS SNACK BARS/GRANOLA BARS COOKIES SALTY SNACKS CANDY AND GUM
Total U.S Snack Food Sales Across Major Channels
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
Candy & Gum
Candy & Gum
Candy & GumSalty Snacks
Salty Snacks
Salty Snacks
Cookies
Cookies
Cookies
Snack BarsGranola Bars
Snack/Granola
Snack/Granola
Snack/Granola
Snac
k/G
rano
la
Candy & GumSalty Snacks
Cookies
Total Chocolate/Non-Chocolate/Gum Dollar Share
U.S. Department of Commerce CensusBureau 2006 MA 311D Report
CHOCOLATE CANDY
57% GUM10%
NON-CHOCOLATE CANDY
33%
Candy and Gum Ranked 3rdAmong 2007 Food Categories
$12.40
$8.50
$7.90
$6.40
$4.50
$4.10
$4.00
$3.80
$13.50
$0.0 $3.0 $6.0 $9.0 $12.0 $15.0
Carbonated Beverages
Milk
Candy& Gum
Salty Snacks
Cereal
Ice Cream
Soup
Cookies
Bottled Juice
Prod
uct C
ateg
orie
s
$ Billions
-1.4%
+11.2%
+3.5%+2.6%
+0.7%
-1.2%
-1.9%
+2.4%
+3.3%
IRI Food, Drug & MassExcluding Wal-Mart 12/30/2007
Candy and Gum Ranked 3rd among 2005 Food Categories in Food, Drug and Mass Outlets
Candy and Gum is the Largest Snack Category
$7.90
$4.50
$4.00
$2.30
$1.00
$0.50
$0.30
$8.50
$0.0 $2.0 $4.0 $6.0 $8.0 $10.0
Candy& Gum
Salty Snacks
Ice Cream
Cookies
Snack/Granola Bars
Bakery Snacks
Dry Fruit
Misc. Snacks
Prod
uct C
ateg
orie
s
$ Billions
-4.0%
+18.1%
+3.5%
+2.6%
+11.0%
-1.2%
-1.9%
+8.4%
IRI Food, Drug & MassExcluding Wal-Mart 12/30/2007
2007 Confectionery Sales
Manufacturers Sales Through December, 2007
$ Lbs.Chocolate Candy +2.3% -0.9%Non-Chocolate Candy +5.8% +0.5%
NCA Monthly Shipment Reports
Manufacturers Science Associates estimates for NCA – 12/31/2008
Confectionery
Profitability
Confectionery ProfitabilityNot only is confectionery a large product category at $28.2 billion in retail sales, it is a high profit category. Margins average more than 35% for the category. Candy is also an expandable category due to the impulse nature of consumer purchases.
Well planned and executed merchandising results in increased sales and profits both everyday and for the major confectionery seasons. Candy responds extremely well to merchandising with displays being more important than price reductions enabling retailers to generate full profit margins from displays.
The profit margin is approximately 35% for the confectionery category.
Confectionery
Merchandising Opportunities
XXChange Maker
XXXGift Boxes
YXXXGourmet Candy
XYXYNovelty
XYXBulk
YXXXSeasonal
XYXXPeg Bags
XXXLay Down Bags
XXXXSingle Serve
ConvenienceMassDrugGroceryProduct Offering
X = Major sub-category for channel Y = secondary pack for channel
Maximize sales by offering the right product assortment
•Consumers purchase different pack types based on the retail outlet
• The proper assortment of confectionery will create the maximum opportunity for sales and profits
Source: DHC Analysis of Retailer Data
Confectionery is highly versatile
•Cash registers on or above counter•Shelf below checkout counter•End cap displays facing check out counter•Coffee bar•Near food service area•Behind counter, near cigarettes•Vend dispensers outside store or on gas pumps•Seasonal Displays
•Check out lanes•Candy Gondola•Store entrance area•Seasonal Displays•Seasonal Aisle•Main traffic aisle•Free standing displays near check out lanes•In toy sections•Near video, other areas with waiting lines•Grocery section•Pharmacy area•Food service area
•Cash Registers •Counter tops•Display below cash registers•Candy Gondola•End caps facing cash registers•Free standing displays near check out counters•Shelf space behind cash registers•In line with Kids Toys sections•Pharmacy area•Photo counter•Seasonal Displays•Seasonal Aisle
•Cash Registers, check out aisles•Candy Gondola•End Caps, facing front of store•Free standing displays near cash register lines•Bulk area in produce•Secondary areas: videos, kids play areas, deli, in beer/wine areas•Ethnic aisles•Seasonal Displays•Seasonal Aisle
ConvenienceMassDrugGrocery
Candy and gum can be displayed in more store locations than any other snack category.
Source: DHC Analysis of Retailer Data
Increased Item Assortment Drives Confectionery Sales
Top performing retailers stock more itemsSource: DHC Analysis of Retailer Data
Non-Seasonal Gondola CandyGrocery Dollar Sales Per MM ACV Index
82
104
122
Less Than250 Items
250-350 Items Over 350Items
Store audits indicate that as display space increases, the amount of candy sales increases, strongly suggesting the more display space devoted to candy the greater the retail sales.
$0
$2
,00
0$
4,0
00
$6
,00
0
1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
Dol
lars
Sal
es
0
50
100
150
200
250
300
Line
ar F
eet
Avg. Wkly. $ Sales Avg. Candy Space (linear ft)
NCA Survey – Improving the Retail Performance of the Confectionery
Category – Deloitte & Touché LLP/Braxton Associates, 2/95
Candy/Gum sales grow disproportionately with increased shelf space.
Candy and Gum produce the highest consumer purchase activity among items commonly
stocked at checkout counters.
28%
33%
45%
69%
72%
0% 20% 40% 60% 80%
Batteries
Soft Drinks
Magazines
Candy
Gum/Mint
Source: Confectionery Magazine, Feb. 2004, Volume 89, No.2, pg 7
Percent of all shoppers who purchase these commodities at front-ends on a monthly basis.
Consumer Shopping Behavior
Consumers have the options of buying nothing or going to another store.
12%
9%
16%
11%
27%
25%
Go To AnotherStore
Buy Nothing OrDon't Know
Buy AnotherType Of Snack
Buy AnotherSize/Pack
Buy AnotherBrand
Buy AnotherFlavor/Variety
If you were shopping & could not locate the particular product you wanted to buy, which would you do?
Retailers Risk Lost Sales If They Don’t Stock Candy Items Consumers Want.
Source: DHC Analysis of Retailer Data
Candy Is The Most Responsive Category For Display Treatment
Source: IRI, Food, 2007
88%
68%
61%
49%
169%
105%
95%
95%
Beer
Spices/Seasoning
Wine
Salty Snacks
Bottled Water
Carb. Beverages
Cookies
Candy
% Increase On Display Only
Candy Is Under-Displayed Relative To Response It Generates
Source: IRI, Food, 2007
3.5%
3.4%
3.4%
2.6%
8.0%
7.0%
6.1%
5.0%
3.8%
Beer
Chocolate Candy
Spices/Seasonings
Wine
Bottled Water
Non-ChocolateCandy
Carb. Beverages
Cookies
Salty Snacks
% Grocery Store Displays
Candy and Gum are available in a wide range of packaging optionsto fit the needs of the consumer and the retailer
Candy and Gum Packaging Dollar Shares
N-C EASTER CANDY1%
N-C HALLOWEEN1%
N-C VALENTINE 1%
REGULAR GUM (3%
NUT-COCONUT 1%
SUGARLESS GUM11%
CHOCOLATEBOX=>3.5OZ22%
HARD SUGAR CANDY3%LICORICE
2%
N-C CHEWY 8%
NOVELTY N-C 3%
MINTS2%
CHOCOLATE BAR <3.5OZ10%
N-C CHRISTMAS 1%
SUGAR FREE CHOCOLATE 1%
BREATH FRESHENER3%
CARAMEL1%
CHOCOLATE VALENTINE 4%
CHOCOLATE HALLOWEEN 1%
CHOCOLATE EASTER6%
CHOCOLATE SNACK SIZE7%
GIFT BOX CHOCOLATES3%
CHOCOLATE CHRISTMAS 4%
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
U.S. Confectionery
The Consumer
Consumer Perspective on Confectionery Market Structure
• The various reporting agencies tend to group the market and categorize it in terms of manufacturing processes and package sizes. This is convenient for tracking and relating manufacturing to retail sales.
• Consumers see the market from the perspective of the reasons for purchase. These tend to be taste, texture, and package size. There is also a substantial difference between everyday candy and seasonal candy in terms of purchase motivation.
• The following charts lay out one, of several possible consumer segmentation approaches. From a market perspective, it is key to have products in each segment, since candy tends to compete more within segments than between segments.
• In general, these consumer segments do not match up well to syndicated data segments.
Non Chocolate Market Structure• From a Consumer Perspective, the non chocolate market divides into two broad groups, (1)
those eaten for good taste and fun and (2) those which offer a benefit. It is further segmented by those who are purchasing for immediate consumption and those who are purchasing for later/delayed consumption.
• In non chocolate categories the reasons for purchase range from wanting a particular taste or texture, what activities they will be doing next, if the candy is for decoration, and what brands are habitually purchased.
• In the functional sub segment the primary driver is the need that is being sought to be fulfilled. Is the consumer dieting, wanting fresh breath, looking to eat or avoid a particular food group, seeking a health benefit
• Unlike many categories in the store, non chocolate candy requires a wide variety of candies, generally brands in each sub-segment to meet the demands of the various consumers shopping the category.
• Additionally, there is a level above this structure which is “everyday candies” and “seasonal candies”
Chocolate Market Structure• The majority of Chocolate products are in the “Chocolate Candy
Category”, the functional area has just started expanding over the last decade.
• Chocolate category is fairly straightforward, there are (1) solid molded chocolate bars both plain and filled with nuts, grains, fruits, caramels, etc. (2) enrobed bars with a thin layer of chocolate and a lot of filling, and(3) pieces – both solid and filled.
• The subset of “piece” has the same structure as the subset of “Bars”
• Consumers tend to see chocolate brands on two levels, physical attributes and brand personalities.
• Brands tend to compete within their segments, not between segments. It is necessary to have a representative cross section of brands within each segment to properly compete.
Chocolate Market StructureConsumer Perspective
Chocolate Market
Structure
ChocolateCandy
FunctionalChocolate
Bars Bite Size Pieces
Novelty
Textured Bars Smooth Bars
Nut or Fruit Bars
Crispy/Crunchy
Bars
/Gift Piece
Mini, Fun Size
SmallPieces
Molded Shapes
Candy/Toy
Healthy Snacks
Reduced Confections
Granola, Grain Bars
Nut Bars
Low Calorie
CholesterolLow fat
Soft Chewy/Filled
Bars
Pure Chocolate
Bars
FortifiedConfections
Vitamin, Minerals
Improve Body Function
Low Carb
Gum Market Structure From Consumer Perspective
• The gum category is dominated by shape considerations – sticks, chunks, and panned pellets, and by flavors – fruity, various mints and strong mints.
• Fortified gums have made recent market entry where the gum is a carrier for additional, functional or healthy ingredients.
• The novelty gum tends to be “kids gums” with bubble gum, shaped gum, and gum in candy toys.
• Recent high growth has occurred in the strong mint flavored gum products.
Confectionery
Seasonal Merchandising
What Affects Seasonal Sales?
•Date/Day of Holiday•The Economy•Consumer Confidence•Shopping Patterns/Habits•Merchandising Strength/Visibility
2004 2005 2006 2007 2008Valentine’s Day - $1,010 $970 $971 $1,036 $1,075*Easter - $1,906 $1,761 $1,884 $1,987 $1,865*Halloween - $2,041 $2,088 $2,146 $2,202 $2,265*Christmas - $1,342 $1,375 $1,389 $1,420 $1,430*
Results and Projection as of January 2008Source: Sales figures are compiled by National Confectioners Association based on input from Information Resources, Inc. NCA/CMA Monthly Shipment Reports and U.S. Department of Commerce
Confectionery Seasonal Sales(** in millions of dollars)(** in millions of dollars)
• Syndicated IRI data understates actual seasonal sales. It only includes packages with seasonal graphics, and does not count regular packs sold during the season
– Halloween is severely impacted, none of the “big bags” that are popular are counted as Halloween sales.
• Actual seasonal sales are 50% to 100% higher than reported in IRI data tables
NCA estimates based on December 30, 2007 IRI Data, NCA Manufacturers Shipment Reports and U.S. Department of Commerce MA311D Report
Total Confectionery Seasonal Shares
Christmas21%
Valentine's Day16%
Halloween33%
Easter30%
Seasonal Confectionery Trends
2007 2006 2005 2004 2003 2002
VALENTINE’S -4.0% -3.0% -7.6% +6.5%
EASTER -7.6% +5.5% +2.2% -2.2%
HALLOWEEN +2.4% +0.7% -0.4%
CHRISTMAS -3.5% -1.4% -3.0%
* IRI FD&M
+0.1%
+7.0%
+2.3%
+2.4%+1.0%
+2.8%
+6.7%
+5.4%
+2.6%
NCA projects a 2.1% increase in 2008
+2.2%
Holiday 2007 2008 2009 2010Valentine’s Wednesday Thursday Saturday Sunday
Easter 4/8 3/23 4/12 4/4
Halloween Wednesday Friday Saturday Sunday
Christmas Tuesday Thursday Friday Saturday
Thanksgiving 11/22 11/27 11/26 11/25
Shopping Days 33 28 29 30
Holiday Dates/Days
Indicates positive date for holiday sales Indicates neutral date for holiday sales Indicates negative date for holiday sales
The Reason for the SeasonTop Reasons for purchase of Chocolate
Valentine’s Day• Gift• Personal Consumption• Candy Dish• Party• Baking
Easter• Easter Basket• Candy Dish• Egg Hunt• Gift• Baking/Craft
Halloween• Trick or Treat• Candy Dish• Party
Winter Holidays• Candy Dish• Gift• Personal Consumption• Stocking Stuffer• Party/Baking
Source: Attitude and Usage Studies of Holiday
Candies, 1999-2003, Hershey Foods
Confectionery sales respond well when tied to a seasonal event, indicating consumers have increased purchase interest when confections are merchandised with a seasonal theme
0
100
200
300
400
500
600
700
800
900
Jan Dec
4 W
eek
Cat
egor
y Sa
les
($ m
illion
s)
Candy
Chips and Snacks
Cookies and Crackers
• In the summer months tie candy to potential seasons like Memorial Day, 4th of July, Labor Day and “Back to School”. Candy should sell at higher levels than other snack categories when tied to seasonal promotion themes based on major seasonal sales performance.
• In January tie confectionery to the 5th largest seasonal event, “the Super Bowl”.
Easter
Valentine
HalloweenChristmas
What if…
•Data IRI, 12 months ending 12/30/07
Seasonal Sales Trends
Maximize Christmas Candy By Managing the Season to Meet Consumer Needs
• Decorating and snacking candy should be available early
• Gifts are concentrated in the 3 weeks before Christmas
• Stocking stuffers in the weeks just prior to the Holiday
• Continue to display snacking candy after Christmas
Weeks prior to Christmas
6 5 4 3 2 1
Dechert Hampe 2004
Retailers Must Stock the Christmas Candy Consumers Want
If Desired Christmas Candy Were Unavailable …
22.4%
7.8%
5.9%
15.7%
25.8%
22.4%
Go To Another Store
Buy Nothing Or Don't Know
Buy Non-Seasonal Candy
Buy Another Type of candy
Buy Another Brand
Buy Another Variety of Brand
Retailers risk lost purchases if they don’t carry the proper variety of Christmas Candy
Dechert Hampe 2004
U.S. Confectionery
Chocolate Candy
EVERYDAY CHOCOLATE
83%
SEASONAL CHOCOLATE
17%
Total US Chocolate Market
– The largest segment is Everyday Chocolate, these are bars, bags,boxes, pieces that are carried and sold year round.
• Total Chocolate growth has been 1.6% indicating a level demand– Seasonal items are carried only during the seasonal sales periods and
carry specific seasonal markings• Easter Chocolate declined about 9%• Halloween Chocolate increased by 4.5%
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
Chocolate Candy Channel Breakdown
Wal-Mart21.1%
Mass 9.1%
Convenience Stores21.3%
Drug Stores17.7%
Supermarkets30.8%
Data is percentages from IRI scan data, and does not reflect the impact of smaller, less than $1 million outlets nor clubs, dollar stores, candy shops and other miscellaneous outlets.
IRI, 12/30/2007
Chocolate CandyPackaging Dollar Shares
CHOCOLATEBOX/BAG/BAR=>3.5OZ39%
CHOCOLATE BAR <3.5OZ17%
SEASONAL CHOCOLATE HALLOWEEN CANDY
2%
SUGAR FREE CHOCOLATE 2%
SEASONAL CHOCOLATE VALENTINE CANDY
6%
SEASONAL CHOCOLATE EASTER CANDY
10%
SEASONAL CHOCOLATE CHRISTMAS CANDY
7%
SEASONAL CHOCOLATE AO SEASONAL CANDY
0%
CHOCOLATE SNACK SIZE12%
GIFT BOX CHOCOLATES5%
NOVELTY CHOCOLATE 0%
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
•Chocolate candy in particular is available in multiple serving sizes and packaging options•The majority of snack size chocolate candy are sold as Halloween product
Chocolate CandyEveryday Packaging Dollar Shares
NOVELTY CHOCOLATE 0.2%
GIFT BOX CHOCOLATES6.8%
CHOCOLATE SNACK SIZE16.3%
SUGAR FREE DIET CHOCOLATE
2.6%
CHOCOLATE BAR <3.5OZ23.4%
CHOCOLATE B/B=>3.5OZ50.7%
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
•Chocolate candy in particular is available in multiple serving sizes and packaging options•The majority of snack size chocolate candy are sold as Halloween product
540 953 34870
3169
217 384 125 1354
74
58 192 99 303
5
74
Food
Drug
Mass
BAR <3.5OZ BOX/BAG/BAR >3.5OZ SNACK SIZE GIFT BOX CHOCOLATES NOVELTY / OTHER SUGAR FREE DIET
Total Chocolate Packs Dollar Sales (in Millions) by Outlet Type
• The highest dollar sales are in the “greater than 3.5 oz” range. These usually are bags in the 4 oz, 8oz, 16oz or larger and multi pack bars.
– Food remains the best selling outlet for these items, followed by Mass.• Food Stores also dominate the “less than 3.5 oz. pack sales” and the “snack size” sales..
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
U.S. Confectionery Non-Chocolate Candy
SEASONAL NON- CHOCOLATE
11%EVERYDAY
NON-CHOCOLATE
89%
Total U.S. Non-Chocolate Market
• Everyday Non Chocolate dominates with 89% of sales• These items include all individual packages, bags, boxes, dispensers, novelty items
that are not labeled or shaped with seasonal themes.• Non-chocolate sales have declined -3.8 %, while Diet Candy increased 16%.
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
Non-Chocolate Candy Channel Breakdown
Wal-Mart21.1%
Mass 9.1%
Convenience Stores29.5%
Drug Stores16.2%
Supermarkets25.5%
Data is percentages from IRI scan data, and does not reflect the impact of smaller, less than $1 million outlets nor clubs, dollar stores, candy shops and other miscellaneous outlets.
IRI, 12/30/2007
The key to non-chocolate candy merchandising is having a full selection within each product sub-category and a large selection of seasonal offerings.
Non-Chocolate CandyPackaging Dollar Shares
LICORICE 8%
HARD SUGAR CANDY10%
DIET CANDY3%
NON CHOCOLATE CHEWY 30%
NOVELTY10%
PLAIN MINTS6%
NON CHOCOLATE CHEWY CANDY
10%
CHRISTMAS CANDY4%
EASTER CANDY5%
HALLOWEEN CANDY4%
BREATH FRESHENER12%
VALENTINE CANDY3%
CARAMEL/TAFFY APPLES2%
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
The key to non-chocolate candy merchandising is having a full selection within each product sub-category and a large selection of seasonal offerings.
Non-Chocolate CandyEveryday Packaging Dollar Shares
LICORICE 8%
HARD SUGAR CANDY10%
DIET CANDY4%
NON CHOCOLATE CHEWY 34%
NOVELTY10%
PLAIN MINTS7%
SPECIAL NUT/COCONUT4%
BREATH FRESHENER15%
CARAMEL/TAFFY APPLES2%
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
167
68
52
156
83
34
92
44
23
364
199
86
129
61
51
56
1
1
37
34
8
70
36
9
5
20
44
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Food
Drug
Mass
Dollar Sales ( in millions)
BREATH FRESHENER CARAMEL/TAFFY APPLES/KITS/DIPS DIET HARD SUGAR PKG & ROLL LICORICE BOX/BAG >3.5OZ CHEWY
NOVELTY PLAIN MINTS PLU - ALL BRANDS CANDY
Total Non-Chocolate Packs DollarRetail Sales by Outlet Type
• Chewy Candy, items like fruit chews, gummi, taffy, caramel, jelly beans, has the highest sales.• Food Stores lead in sales in all other categories with the minor exception of Diet.
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX
U.S. Confectionery Gum
REGULAR GUM 20%
SUGARLESS GUM80%
Total Gum Market
• Sugar free gum is more than 80% of the total Gum Market. Gums that contain sugar as a key ingredient comprise the rest of the market.
• The total growth of 8.1%, with excellent growth in Sugar Free gum of 13.5% and decline of Regular gum of -9.8%
Latest 52 Weeks Ending February 19, 2006Dollar Sales IRI TOTAL U.S. - F/D/MX
Convenience Stores have the largest portion of gum sales, 40.4% of total sales.
$Million – F/D/M w/ Wal Mart and Convenience IRI Dec 30,2007
Total Gum Retail Shares by Retail Channel
Wal-Mart19.9%
Mass 6.6%
Convenience Stores40.4%
Drug Stores10.4%
Supermarkets22.7%
$340
$899
$119$142 $67 $30
$490.8
$555
$253$174
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Food Drug Mass Wal-Mart Convenience
Ret
ail S
ales
(in
mill
ions
)
REGULAR GUM (NO SUGARLESS) SUGARLESS GUM
Total Gum Retail Dollar Sales by Retail Channel
Latest 52 Weeks Ending December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/M/C/W
U.S. Confectionery Trends
Trends - What's for 2007/2008
•Dark chocolate sales accelerating - +50% in 2007•Chocolate experiences
Chocolate tastingsChocolate and wine pairings
•Exotic chocolate flavorings: citrus, spice, salt, fruits•High cocoa content chocolates•Gourmet chocolate bars•Gourmet packaging for chocolates•Single origin chocolates•Urban names for upscale chocolates
Trends - What's for 2007/08
•Sugar Free gum - +13.5% sales•Exotic fusion flavors•Fortified products
•Theater Box candies •Event merchandising – theaters, birthday, game nights•Single-serve seasonal items•New seasonal offerings
ConvenienceIndulgentSafetyEthnic becoming MainstreamNew Consumer SegmentationFortifiedFunction Low Carb
Low FatLow CalorieBetter for YouFood AllergiesVegetarianOrganicGMO Free
Key Global Trends Effecting Chocolate Bars
1323
1195
14
1272
1481
6
0
500
1000
1500
Non Chocolate Chocolate Gum
2005 2006
New Candy Product Introductions
Source: Market Research.com, September 2007
• Convenience/Portability– Hectic Lifestyles, erosion of traditional eating patterns, mobile eating is mobile purchasing – people eat where they are
• Functional/Fortified– Positive in additions, Fortified chocolate bars, chocolate with
minerals/vitamins
• Better for You– Weight loss, low carb, low fat, sugar free, processes vs. whole
• Organic– Positive in absence, do not want to have bad things in their food
Major Consumer Trends
Candy and snack products will be package in more durable and recloseable packages–Blister pack Gums–Tins–Cups of Chocolate Snacks
Food on the Go
Manufacturers will offer products to reach emerging demographic groups.
• Aging -– No fat, low fat, vitamin fortified, sugarless– Flavor a must
• Hispanic and minorities– Intense fruit flavor, tropical fruits, brands from “home”– Spanish labeling
• No growth in Children’s brands– Nostalgic items to appeal to adults to remind of youth
Chocolate Demographic Opportunities
• 93% of women polled eat chocolate• Milk chocolate (67%) preferred over dark chocolate• 69% report that they rarely feel guilty about eating chocolate• 65% eat chocolate candy or chocolate desserts at least weekly• 86% agree that chocolate fits in a healthy life style• 52% say eating chocolate makes them happy.
U.S. Women Love Chocolate
• Hot trend: Anytime, anywhere packaging
• Snacking can be interrupted thanks to resalable packaging
• Consumer has full control over portion size, no longer “all or nothing”
Chocolate Moving Beyond the Bar
Industry Resources• Front-End Focus:http://www.magazine.org/content/Files/FrontEnd%5B1%5D.ppt#450,1,Slide 1
• NCA Industry Performance: Retail Sales Data:http://www.ecandy.com/Content.aspx?MenuID=128&BreadCrumb=Industry%20Performance:%20Retail%20Sales%20Data
• The Heart-Health Benefits of Chocolate Unveiled:http://www.clevelandclinic.org/heartcenter/pub/guide/prevention/nutrition/chocolate.htm
• Dark Chocolate Is Healthy Chocolate http://my.webmd.com/content/article/73/81921.htm
• Premium Chocolate:http://www.retailmerchandising.net/candy/archives/1200/1200pc.asp
• Dark and Decadent Hits the Big Time :http://www.candyindustry.com/content.php?s=CI/2005/07&p=6