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United States
Confectionery Market

    January 2008
Welcome to the National Confectioners Association’s web tools for accessing the latest information
about the dynamic confe...
Table of Contents

                                   Data Overview

I. Confectionery Market Overview          VII. The Ch...
Data Sources
There are a number of data sources available on the size of the confectionery market. While each is accurate
...
US Census Bureau MA 311D
      Annual Confectionery Report
•   What is it?
     –    The Census Department annually survey...
Syndicated Retail Data
      A Look at Retail Performance
•   What is Syndicated Data?
     –    It measures retail sales ...
NCA Manufacturer Shipment Reports
•   What are Manufacturer Shipment Reports?
     – They measure domestic confectionery m...
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...
2007-2008 USA Retail Trends
  •2007 Holiday retail sales slowed
     •2.4% growth vs 2.9% in 2006
  •Luxury Retailers cont...
The 2007 U.S. Confectionery Market
           The U.S. Retail Confectionery Category generates
                approximate...
2007 Confectionery Sales
                 Manufacturers $ sales grew 3% in 2007


Category           Retail Sales      Man...
2006 Per Capita Retail Sales
$100               $93.92

 $80

 $60                                               $52.16


...
Chocolate Candy represents approximately
  56% of total confectionery dollar sales.
                                 Confe...
The Confectionery Market is Very Diverse
                                                                                 ...
Top Candy Manufacturer Market Share
                                                                           Nestle
    ...
Continuous Growth of Confectionery
  Total value and pounds of confection sold at retail has increased
                  c...
U.S. Confectionery

The Retail Market
Confectionery Retail Market
Confectionery is one of the most diverse retail categories with products sold in a myriad of o...
Retail Confectionery
                                 Market Share by Trade Channel
                                      ...
2007 Retail Channel Performance
     Based on 52 Week Sales – January - December 2007


 Channel                          ...
Total U.S Snack Food Sales
                            Across Major Channels
                                Snack/
TOTAL ...
Total Chocolate/Non-Chocolate/Gum
           Dollar Share


                              CHOCOLATE
        GUM           ...
Candy and Gum Ranked 3rd
                            Among 2007 Food Categories
                                          ...
Candy and Gum is the
                                      Largest Snack Category
                                        ...
2007 Confectionery Sales

Manufacturers Sales Through December, 2007

                      $          Lbs.
Chocolate Cand...
Confectionery

 Profitability
Confectionery Profitability
Not only is confectionery a large product category at $28.2 billion in retail sales, it is a
h...
Confectionery

Merchandising Opportunities
Maximize sales by offering the
               right product assortment
              Product Offering                   Gr...
Confectionery is highly versatile
            Candy and gum can be displayed in more store
              locations than an...
Increased Item Assortment
Drives Confectionery Sales
       Non-Seasonal Gondola Candy
   Grocery Dollar Sales Per MM ACV ...
Candy/Gum sales grow disproportionately
      with increased shelf space.
 $2,00 $4,00 $6,00


                           ...
Candy and Gum produce the highest consumer
    purchase activity among items commonly
         stocked at checkout counter...
Consumer Shopping Behavior
           Retailers Risk Lost Sales If They Don’t
            Stock Candy Items Consumers Want...
Candy Is The Most Responsive Category
         For Display Treatment
                      % Increase On Display Only


  ...
Candy Is Under-Displayed Relative
   To Response It Generates
                         % Grocery Store Displays

         ...
Candy and Gum Packaging Dollar Shares
                                                                                    ...
U.S. Confectionery

  The Consumer
Consumer Perspective on
    Confectionery Market Structure
•   The various reporting agencies tend to group the market and...
Non Chocolate Market Structure
•   From a Consumer Perspective, the non chocolate market divides into two broad groups, (1...
Chocolate Market Structure
•   The majority of Chocolate products are in the “Chocolate Candy
    Category”, the functiona...
Chocolate Market Structure
                  Consumer Perspective
                                                        ...
Gum Market Structure
       From Consumer Perspective

•   The gum category is dominated by shape considerations – sticks,...
Confectionery

Seasonal Merchandising
What Affects Seasonal Sales?

  •Date/Day of Holiday
  •The Economy
  •Consumer Confidence
  •Shopping Patterns/Habits
  •...
Confectionery Seasonal Sales
                                           (** in millions of dollars)


                    ...
Total Confectionery Seasonal Shares

                                  Valentine's Day
                                   ...
Seasonal Confectionery Trends

                   2007    2006   2005    2004    2003   2002
VALENTINE’S       +6.7%   +0....
Holiday Dates/Days

Holiday                               2007                  2008                                2009  ...
The Reason for the Season
         Top Reasons for purchase of Chocolate
Valentine’s Day             Easter
• Gift        ...
Seasonal Sales Trends
                                          900
                                                      ...
Maximize Christmas Candy By Managing
 the Season to Meet Consumer Needs
           Weeks prior to Christmas

   6       5 ...
Retailers Must Stock the Christmas
        Candy Consumers Want
                      If Desired Christmas Candy Were Unav...
U.S. Confectionery

Chocolate Candy
Total US Chocolate Market

                                                 SEASONAL
                                     ...
Chocolate Candy Channel Breakdown
                                              Mass
                          Drug Stores...
Chocolate Candy
                               Packaging Dollar Shares
                                                   ...
Chocolate Candy
             Everyday Packaging Dollar Shares


  SUGAR FREE DIET          CHOCOLATE BAR <3.5OZ
    CHOCOL...
Total Chocolate Packs Dollar
                    Sales (in Millions) by Outlet Type
Mass           58                    1...
U.S. Confectionery
Non-Chocolate Candy
Total U.S. Non-Chocolate Market


                                                           SEASONAL NON-
               ...
Non-Chocolate Candy Channel Breakdown

                                               Mass
                             Dr...
Non-Chocolate Candy
                             Packaging Dollar Shares
                        DIET CANDY               ...
Non-Chocolate Candy
             Everyday Packaging Dollar Shares
                               DIET CANDY
              ...
Total Non-Chocolate Packs Dollar
           Retail Sales by Outlet Type
                                      1           ...
U.S. Confectionery Gum
Total Gum Market
                                        REGULAR
                                          GUM
           ...
Total Gum Retail Shares
                by Retail Channel
                                Drug Stores
                    ...
Total Gum Retail Dollar Sales by
                                         Retail Channel
                             $1,4...
U.S. Confectionery
      Trends
Trends - What's                    for 2007/2008
 •Dark chocolate sales accelerating - +50% in 2007
 •Chocolate experience...
Trends - What's               for 2007/08

•Sugar Free gum - +13.5% sales
   •Exotic fusion flavors
   •Fortified products...
Key Global Trends Effecting
      Chocolate Bars
Convenience         Low Fat
Indulgent           Low Calorie
Safety       ...
New Candy Product Introductions
                               1481
 1500
          1323
                 1272
           ...
Major Consumer Trends

•   Convenience/Portability
     – Hectic Lifestyles, erosion of traditional eating patterns,
     ...
Food on the Go
Candy and snack products will be package in more
 durable and recloseable packages
  –Blister pack Gums
  –...
Chocolate Demographic Opportunities
       Manufacturers will offer products to reach emerging
                      demog...
U.S. Women Love Chocolate

•   93% of women polled eat chocolate
•   Milk chocolate (67%) preferred over dark chocolate
• ...
Chocolate Moving Beyond the Bar

• Hot trend: Anytime, anywhere packaging

• Snacking can be interrupted thanks to resalab...
Industry Resources
•      Front-End Focus:
http://www.magazine.org/content/Files/FrontEnd%5B1%5D.ppt#450,1,Slide 1

•     ...
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US National Confectioners Association Trends Report

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Transcript of "US National Confectioners Association Trends Report"

  1. 1. United States Confectionery Market January 2008
  2. 2. 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.
  3. 3. Table of Contents Data Overview I. Confectionery Market Overview VII. The Chocolate Market II. The Retail Market VIII. The Non-Chocolate Market III. Confectionery Profitability IX. The Gum Market IV. Merchandising Opportunities X. New Trends V. Consumer Segmentation XI. Industry Resources VI. Seasonal Merchandising
  4. 4. Data Sources There 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.
  5. 5. 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..
  6. 6. 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.
  7. 7. 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.
  8. 8. U.S. Confectionery Market Overview
  9. 9. 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
  10. 10. 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
  11. 11. The 2007 U.S. Confectionery Market The U.S. Retail Confectionery Category generates approximately $29 billion in retail sales % $ 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. Estimated sales in billions NCA Shipment Data and Global Trade Atlas Import/Export Data
  12. 12. 2007 Confectionery Sales Manufacturers $ sales grew 3% in 2007 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% 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
  13. 13. 2006 Per Capita Retail Sales $100 $93.92 $80 $60 $52.16 $40 $29.77 $20 $9.05 $0 Total Chocolate Non Chocolate Gum The average U.S. Consumer spent $94 on confectionery products in 2006 Department of Commerce Data is released in late summer. Please return in August for actual 2007 data. 2006 US Department of Commerce 311D Confectionery Report
  14. 14. Chocolate Candy represents approximately 56% of total confectionery dollar sales. Confectionery Categories Analysis Category Retail Sales Domestic Shipment Imports Import % Exports Export % $ Billions Shipments % Growth $ billions Growth $ billions Growth $ billions Vs. 2005 Vs. 2005 Vs. 2005 Total $29.1 $17.5 +3.0% $2.2 +4.0% $0.9 +13.1% Confections Chocolate $16.3 $10.4 +2.9% $0.8 +5.4% $0.6 +16.6% Non-Chocolate $9.4 $5.0 +3.8% $1.3 +2.6% $0.2 +13.6% Gum $3.2 $2.1 +4.1% $0.1 +7.7% $0.1 -15.3% 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.. NCA estimates based on Source: 2006 US Department of Commerce, Census Bureau 311D, Confectionery Report
  15. 15. The Confectionery Market is Very Diverse Next 6-10 12% Next 11 -30 There are more than 9% 300 domestic confectionery manufacturers Top 5 Private Label 70% 3% All Other 6% Manufacturer Market Share Concentration • 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. 52 Week Sales Ending December 30, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  16. 16. Top Candy Manufacturer Market Share Nestle 6.1% Cadbury-Adams Wrigley 5.6% 12.2% Russell Stover MARS 3.5% 16.9% Tootsie Roll 2.7% Lindt-Ghirardelli 2.4% Farley Sathers Brach's 2.0% Hershey Ferrero 29.0% 1.8% American Licorice 1.0% Just Born 0.9% R.M. Palmer 0.8% Storck 0.8% Private Label All Others Perfetti Van Melle 3.3% 10.2% 0.8% 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 Latest 52 Weeks Ending December 30, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  17. 17. Continuous Growth of Confectionery Total value and pounds of confection sold at retail has increased consistently over the past five years $27.4 $27.9 $28.2 $25.8 $24.0 $24.4 7.3 7.6 7.7 7.0 6.7 7.1 2001 2002 2003 2004 2005 2006 Dollars Sold at Retail, Billions Pounds Sold at Retail, Billions 2006- US Dept of Commerce 311 D Report
  18. 18. U.S. Confectionery The Retail Market
  19. 19. Confectionery Retail Market Confectionery 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.
  20. 20. Retail Confectionery Market Share by Trade Channel Vending Dollar Stores* Bulk 4.2% 2.9% Others 5.4% Warehouse Clubs* 24.9% 7.6% Drug Stores 8.6% Mass X Wal-Mart Supermarkets 4.7% 15.3% Wal-Mart 11.4% Convenience Stores 15.0% *estimates * Others include: department stores, food service and ingredient sales, fundraising, give-aways, independent grocers, mail order/internet, military, specialty/candy stores, theaters and concessions NCA 2007 estimates based on IRI, U.S. Department of Commerce, MSA Vending Data, NCA Shipment Report and other industry sources.
  21. 21. 2007 Retail Channel Performance Based on 52 Week Sales – January - December 2007 Channel 2007 $ Sales 2007 % Growth Supermarkets $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 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 •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
  22. 22. Total U.S Snack Food Sales Across Major Channels Snack/ TOTAL U.S. - F/D/MX Granola Cookies Salty Snacks Candy & Gum Snack/ Cookies Salty Snacks Mass Granola Candy & Gum s ck Granola s kie na Snack/ DRUG Coo lt yS Candy & Gum Sa Snack Bars Granola Bars Snack/ FOOD Granola Cookies Salty Snacks Candy & Gum MISC. SNACKS DRY FRUIT SNACKS SNACK BARS/GRANOLA BARS COOKIES SALTY SNACKS CANDY AND GUM Candy and Gum sell across each major channel, unlike other snacking categories. It is equally important as a volume producer for each channel. Latest 52 Weeks Ending December 30, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  23. 23. Total Chocolate/Non-Chocolate/Gum Dollar Share CHOCOLATE GUM CANDY 10% 57% NON-CHOCOLATE CANDY 33% U.S. Department of Commerce Census Bureau 2006 MA 311D Report
  24. 24. Candy and Gum Ranked 3rd Among 2007 Food Categories $ Billions $0.0 $3.0 $6.0 $9.0 $12.0 $15.0 Carbonated Beverages -1.4% $13.50 Milk +11.2% $12.40 Product Categories Candy& Gum +3.5% $8.50 Salty Snacks +2.6% $7.90 Cereal +0.7% $6.40 Ice Cream -1.2% $4.50 Soup +2.4% $4.10 Cookies -1.9% $4.00 Bottled Juice +3.3% $3.80 Candy and Gum Ranked 3rd among 2005 Food Categories in Food, Drug and Mass Outlets IRI Food, Drug & Mass Excluding Wal-Mart 12/30/2007
  25. 25. Candy and Gum is the Largest Snack Category $ Billions $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 Candy& Gum +3.5% $8.50 Salty Snacks +2.6% $7.90 Product Categories Ice Cream -1.2% $4.50 Cookies -1.9% $4.00 Snack/Granola Bars +11.0% $2.30 Bakery Snacks $1.00 +8.4% Dry Fruit $0.50 -4.0% Misc. Snacks $0.30 +18.1% IRI Food, Drug & Mass Excluding Wal-Mart 12/30/2007
  26. 26. 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
  27. 27. Confectionery Profitability
  28. 28. Confectionery Profitability Not 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.
  29. 29. Confectionery Merchandising Opportunities
  30. 30. Maximize sales by offering the right product assortment Product Offering Grocery Drug Mass Convenience Single Serve X X X X Lay Down Bags X X X Peg Bags X X Y X Seasonal X X X Y Bulk X Y X Novelty Y X Y X Gourmet Candy X X X Y Gift Boxes X X X Change Maker X X X = Major sub-category for channel Y = secondary pack for channel •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
  31. 31. Confectionery is highly versatile Candy and gum can be displayed in more store locations than any other snack category. Grocery Drug Mass Convenience •Cash Registers, check •Cash Registers •Check out lanes •Cash registers on or out aisles •Counter tops •Candy Gondola above counter •Candy Gondola •Display below cash •Store entrance area •Shelf below checkout •End Caps, facing front of registers •Seasonal Displays counter store •Candy Gondola •Seasonal Aisle •End cap displays facing •Free standing displays •End caps facing cash check out counter •Main traffic aisle near cash register lines registers •Coffee bar •Free standing displays •Bulk area in produce •Free standing displays near check out lanes •Near food service area •Secondary areas: near check out counters •In toy sections •Behind counter, near videos, kids play areas, •Shelf space behind cash cigarettes deli, in beer/wine areas •Near video, other areas registers with waiting lines •Vend dispensers outside •Ethnic aisles •In line with Kids Toys store or on gas pumps •Grocery section •Seasonal Displays sections •Seasonal Displays •Pharmacy area •Seasonal Aisle •Pharmacy area •Food service area •Photo counter •Seasonal Displays •Seasonal Aisle Source: DHC Analysis of Retailer Data
  32. 32. Increased Item Assortment Drives Confectionery Sales Non-Seasonal Gondola Candy Grocery Dollar Sales Per MM ACV Index 122 104 82 Less Than 250-350 Items Over 350 250 Items Items Top performing retailers stock more items Source: DHC Analysis of Retailer Data
  33. 33. Candy/Gum sales grow disproportionately with increased shelf space. $2,00 $4,00 $6,00 300 0 250 200 0 Linear Feet 150 100 Dollars Sales 0 50 0 $0 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile Avg. Wkly. $ Sales Avg. Candy Space (linear ft) 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. NCA Survey – Improving the Retail Performance of the Confectionery Category – Deloitte & Touché LLP/Braxton Associates, 2/95
  34. 34. Candy and Gum produce the highest consumer purchase activity among items commonly stocked at checkout counters. Gum/Mint 72% Candy 69% 45% Magazines 33% Soft Drinks 28% Batteries 0% 20% 40% 60% 80% Percent of all shoppers who purchase these commodities at front-ends on a monthly basis. Source: Confectionery Magazine, Feb. 2004, Volume 89, No.2, pg 7
  35. 35. Consumer Shopping Behavior Retailers Risk Lost Sales If They Don’t Stock Candy Items Consumers Want. If you were shopping & could not locate the particular product you wanted to buy, which would you do? Buy Another 27% Flavor/Variety Buy Another 25% Brand Buy Another 12% Size/Pack Buy Another 9% Type Of Snack Buy Nothing Or 16% Don't Know Go To Another 11% Store Consumers have the options of buying nothing or going to another store. Source: DHC Analysis of Retailer Data
  36. 36. Candy Is The Most Responsive Category For Display Treatment % Increase On Display Only Candy 169% Cookies 105% Carb. Beverages 95% Bottled Water 95% Salty Snacks 88% Wine 68% Spices/Seasoning 61% Beer 49% Source: IRI, Food, 2007
  37. 37. Candy Is Under-Displayed Relative To Response It Generates % Grocery Store Displays Salty Snacks 8.0% Cookies 7.0% Carb. Beverages 6.1% Non-Chocolate 5.0% Candy Bottled Water 3.8% Wine 3.5% Spices/Seasonings 3.4% Chocolate Candy 3.4% Beer 2.6% Source: IRI, Food, 2007
  38. 38. Candy and Gum Packaging Dollar Shares GIFT BOX CHOCOLATES CHOCOLATE SNACK SIZE 3% CHOCOLATEBOX=>3.5OZ 7% 22% CHOCOLATE CHRISTMAS 4% CHOCOLATE BAR <3.5OZ CHOCOLATE EASTER 10% 6% CHOCOLATE HALLOWEEN 1% SUGARLESS GUM CHOCOLATE VALENTINE 11% 4% SUGAR FREE CHOCOLATE 1% REGULAR GUM ( 3% BREATH FRESHENER 3% NUT-COCONUT CARAMEL 1% N-C VALENTINE 1% 1% N-C HALLOWEEN NOVELTY N-C HARD SUGAR CANDY 1% LICORICE 3% 3% N-C EASTER CANDY 2% 1% N-C CHEWY N-C CHRISTMAS MINTS 8% 1% 2% Candy and Gum are available in a wide range of packaging options to fit the needs of the consumer and the retailer Latest 52 Weeks Ending December 30, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  39. 39. U.S. Confectionery The Consumer
  40. 40. 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.
  41. 41. 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”
  42. 42. 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.
  43. 43. Chocolate Market Structure Consumer Perspective Chocolate Market Structure Chocolate Functional Candy Chocolate Bite Novelty Healthy Reduced Fortified Bars Size Pieces Snacks Confections Confections Molded Vitamin, Piece Granola, Textured Bars Smooth Bars /Gift Shapes Low Calorie Minerals Grain Bars Soft Nut or Cholesterol Improve Body Chewy/Filled Mini, Fruit Bars Candy/Toy Nut Bars Low fat Function Bars Fun Size Crispy/ Pure Crunchy Chocolate Small Low Carb Bars Bars Pieces
  44. 44. 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.
  45. 45. Confectionery Seasonal Merchandising
  46. 46. What Affects Seasonal Sales? •Date/Day of Holiday •The Economy •Consumer Confidence •Shopping Patterns/Habits •Merchandising Strength/Visibility
  47. 47. Confectionery Seasonal Sales (** in millions of dollars) 2004 2005 2006 2007 2008 Valentine’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 2008 Source: 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
  48. 48. Total Confectionery Seasonal Shares Valentine's Day 16% Easter 30% Christmas 21% Halloween 33% • 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
  49. 49. Seasonal Confectionery Trends 2007 2006 2005 2004 2003 2002 VALENTINE’S +6.7% +0.1% -4.0% -3.0% -7.6% +6.5% EASTER +5.4% +7.0% -7.6% +5.5% +2.2% -2.2% HALLOWEEN +2.6% +2.8% +2.3% +2.4% +0.7% -0.4% CHRISTMAS +2.2% +1.0% +2.4% -3.5% -1.4% -3.0% * IRI FD&M NCA projects a 2.1% increase in 2008
  50. 50. Holiday Dates/Days Holiday 2007 2008 2009 2010 Valentine’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 Indicates positive date for holiday sales Indicates neutral date for holiday sales Indicates negative date for holiday sales
  51. 51. The Reason for the Season Top Reasons for purchase of Chocolate Valentine’s Day Easter • Gift • Easter Basket • Personal Consumption • Candy Dish • Candy Dish • Egg Hunt • Party • Gift • Baking • Baking/Craft Halloween Winter Holidays • Trick or Treat • Candy Dish • Candy Dish • Gift • Party • Personal Consumption • Stocking Stuffer • Party/Baking Source: Attitude and Usage Studies of Holiday Candies, 1999-2003, Hershey Foods
  52. 52. Seasonal Sales Trends 900 Halloween 800 Easter Christmas Candy 4 Week Category Sales ($ millions) 700 Valentine 600 500 Chips and Snacks 400 300 Cookies and Crackers 200 100 0 Jan Dec Confectionery sales respond well when tied to a seasonal event, indicating consumers have increased purchase interest when confections are merchandised with a seasonal theme What if… • 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”. •Data IRI, 12 months ending 12/30/07
  53. 53. Maximize Christmas Candy By Managing the Season to Meet Consumer Needs Weeks prior to Christmas 6 5 4 3 2 1 • 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 Dechert Hampe 2004
  54. 54. Retailers Must Stock the Christmas Candy Consumers Want If Desired Christmas Candy Were Unavailable … 22.4% Buy Another Variety of Brand 25.8% Buy Another Brand 15.7% Buy Another Type of candy 5.9% Buy Non-Seasonal Candy 7.8% Buy Nothing Or Don't Know 22.4% Go To Another Store Retailers risk lost purchases if they don’t carry the proper variety of Christmas Candy Dechert Hampe 2004
  55. 55. U.S. Confectionery Chocolate Candy
  56. 56. Total US Chocolate Market SEASONAL CHOCOLATE EVERYDAY 17% CHOCOLATE 83% – 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, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  57. 57. Chocolate Candy Channel Breakdown Mass Drug Stores 9.1% 17.7% Wal-Mart 21.1% Supermarkets 30.8% Convenience Stores 21.3% 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
  58. 58. Chocolate Candy Packaging Dollar Shares CHOCOLATEBOX/BAG/BAR=>3. CHOCOLATE BAR <3.5OZ 5OZ 17% 39% SUGAR FREE CHOCOLATE 2% CHOCOLATE SNACK SIZE SEASONAL CHOCOLATE 12% VALENTINE CANDY 6% GIFT BOX CHOCOLATES SEASONAL CHOCOLATE 5% HALLOWEEN CANDY 2% SEASONAL CHOCOLATE AO SEASONAL CHOCOLATE SEASONAL CANDY SEASONAL CHOCOLATE EASTER CANDY 0% CHRISTMAS CANDY NOVELTY CHOCOLATE 10% 7% 0% •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 Latest 52 Weeks Ending December 30, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  59. 59. Chocolate Candy Everyday Packaging Dollar Shares SUGAR FREE DIET CHOCOLATE BAR <3.5OZ CHOCOLATE 23.4% 2.6% CHOCOLATE B/B=>3.5OZ 50.7% NOVELTY CHOCOLATE 0.2% CHOCOLATE SNACK SIZE 16.3% GIFT BOX CHOCOLATES 6.8% •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 Latest 52 Weeks Ending December 30, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  60. 60. Total Chocolate Packs Dollar Sales (in Millions) by Outlet Type Mass 58 192 99 303 74 5 Drug 217 384 125 135 74 4 70 Food 540 953 348 169 3 BAR <3.5OZ BOX/BAG/BAR >3.5OZ SNACK SIZE GIFT BOX CHOCOLATES NOVELTY / OTHER SUGAR FREE DIET • 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, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  61. 61. U.S. Confectionery Non-Chocolate Candy
  62. 62. Total U.S. Non-Chocolate Market SEASONAL NON- EVERYDAY CHOCOLATE 11% NON- CHOCOLATE 89% • 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, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  63. 63. Non-Chocolate Candy Channel Breakdown Mass Drug Stores 9.1% 16.2% Wal-Mart 21.1% Supermarkets 25.5% Convenience Stores 29.5% 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
  64. 64. Non-Chocolate Candy Packaging Dollar Shares DIET CANDY HARD SUGAR CANDY LICORICE 3% 10% 8% CARAMEL/TAFFY APPLES 2% NON CHOCOLATE CHEWY 30% BREATH FRESHENER 12% VALENTINE CANDY 3% NON CHOCOLATE CHEWY CANDY 10% EASTER CANDY 5% CHRISTMAS CANDY 4% PLAIN MINTS HALLOWEEN CANDY 6% NOVELTY 4% 10% The key to non-chocolate candy merchandising is having a full selection within each product sub-category and a large selection of seasonal offerings. Latest 52 Weeks Ending December 30, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  65. 65. Non-Chocolate Candy Everyday Packaging Dollar Shares DIET CANDY 4% CARAMEL/TAFFY APPLES HARD SUGAR CANDY 2% 10% LICORICE 8% BREATH FRESHENER 15% SPECIAL NUT/COCONUT 4% NON CHOCOLATE CHEWY PLAIN MINTS 34% 7% NOVELTY 10% The key to non-chocolate candy merchandising is having a full selection within each product sub-category and a large selection of seasonal offerings. Latest 52 Weeks Ending December 30, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  66. 66. Total Non-Chocolate Packs Dollar Retail Sales by Outlet Type 1 9 Mass 52 34 23 86 51 5 8 1 36 Drug 68 83 44 199 61 20 34 70 56 Food 167 37 156 92 364 129 44 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 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 • 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, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX
  67. 67. U.S. Confectionery Gum
  68. 68. Total Gum Market REGULAR GUM 20% SUGARLESS GUM 80% • 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, 2006 Dollar Sales IRI TOTAL U.S. - F/D/MX
  69. 69. Total Gum Retail Shares by Retail Channel Drug Stores Mass 10.4% 6.6% Supermarkets Wal-Mart 22.7% 19.9% Convenience Stores 40.4% 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
  70. 70. Total Gum Retail Dollar Sales by Retail Channel $1,400 $1,200 Retail Sales (in millions) $1,000 $800 $899 $600 $555 $400 $490.8 $200 $253 $340 $174 $142 $67 $119 $0 $30 Food Drug Mass Wal-Mart Convenience REGULAR GUM (NO SUGARLESS) SUGARLESS GUM Latest 52 Weeks Ending December 30, 2007 Dollar Sales IRI TOTAL U.S. - F/D/M/C/W
  71. 71. U.S. Confectionery Trends
  72. 72. Trends - What's for 2007/2008 •Dark chocolate sales accelerating - +50% in 2007 •Chocolate experiences Chocolate tastings Chocolate 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
  73. 73. 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
  74. 74. Key Global Trends Effecting Chocolate Bars Convenience Low Fat Indulgent Low Calorie Safety Better for You Ethnic becoming Food Allergies Mainstream Vegetarian New Consumer Organic Segmentation GMO Free Fortified Function Low Carb
  75. 75. New Candy Product Introductions 1481 1500 1323 1272 1195 1000 500 14 6 0 Non Chocolate Chocolate Gum 2005 2006 Source: Market Research.com, September 2007
  76. 76. Major Consumer Trends • 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
  77. 77. Food on the Go Candy and snack products will be package in more durable and recloseable packages –Blister pack Gums –Tins –Cups of Chocolate Snacks
  78. 78. Chocolate Demographic Opportunities 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
  79. 79. U.S. Women Love Chocolate • 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.
  80. 80. Chocolate Moving Beyond the Bar • 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”
  81. 81. 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
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