confectionery market by jim corcoran
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World and U.S. Confectionery Market
June 9, 2008
National Confectioners Logistics Council
About NCA Global Confectionery PerformanceUSA Confectionery PerformanceSeasonal PerformanceTrendsNew NCA Research Findings
National Confectioners Logistics Council
About NCA Global Confectionery PerformanceUSA Confectionery PerformanceSeasonal PerformanceTrendsNew NCA Research Findings
About NCA: Association Profile
675 members total• Manufacturers: 400• Suppliers: 160• Brokers: 115
Promote and protect the U.S. confectionery industry
NCA Goals• Represent confectionery as an enjoyable food
• Significant source of candy category information
• Inhibit and reduce federal, state and international legislative and regulatory requirements
• Recognize new scientific and advancing technologies, meet the candy industry needs for training and education
• Grow the confectionery category
NCA Activities & Programs
•Trade Relations•Public Relations•International Trade Development•ALL CANDY EXPO®
•Government Affairs•Technical & Regulatory
www.candyusa.com
Register as industry member•Resource Guide•New Industry Research Results•IRI data•Manufacturer Shipment Data•Industry Reviews•Seasonal Holiday performance•Export development programs
NCA’s Daily SmartBrief
Register today!
NCA 2008 Priorities•Farm Bill•Nutrition legislation•Advertising restrictions•Responsible cocoa growing •Social Responsibility•Consumer promotion•Trade involvement•ALL CANDY EXPO
May 20-22, 2009The largest confectionery, cookie and snack show in the Americas
National Confectioners Logistics Council
About NCA Global Confectionery PerformanceUSA Confectionery PerformanceSeasonal PerformanceTrendsNew NCA Research Findings
2007-2008 Global Economic Trends•Economy slowing in Western Europe and USA
Retail sales growth downUSA Unemployment ends year at 5%Up from 4.6% in 2006 but low in historical termsHousing market declines affecting job growth
•Eastern Europe, Asia and Africa will grow faster•High oil and energy prices•Fears of global inflation•Fear of global recession•Commodity prices higher•Slower growth
2007 Global Confectionery SalesManufacturers $ sales grew 3% in 2007
Category Retail Sales Manf. Sales % Million Tons %
Total $141 Billion $93 Billion +3.4% 13.8 +2.9%
Chocolate $77 Billion $51 Billion +3.7% 6.9 +3.5%
Non-Choc. $44 Billion $29 Billion +2.3% 5.9 +2.0%
Gum $20 Billion $13 Billion +4.5% 1.0 +3.4%
Euromonitor Estimates
Continuous Growth of ConfectioneryTotal value and tons of confection sold at retail has increased
consistently over the past five years
$ +44%Tons +15%
Billions
2002 2003 2004 2005 2006 2007
13.8
$141.2
13.4
$136.4
13.0
$128.8
12.6
$120.8
12.1
$109.4
12.0
$98.3
Dollars Sold at Retail, Billions Tons Sold at Retail, Millions
Euromonitor
The Second Largest Packaged Food Category
$141.2
$128.1
$82.7
$65.2
$61.5
$57.5
$26.0
$23.4
$7.8
$174.3
$0 $25 $50 $75 $100 $125 $150 $175
Beer
Confectionery
Carbonated Beverage
Sweet and Savory Snacks
Bottled Water
Ice Cream
Biscuits
Wine
Cereal
Snack Bars
Product Categories
$ Billions
+21.0%
+43.6%
+29.9%
+35.8%
+69.4%
+39.0%
+7.1%
+36.6%
+24.9%
+55.5%
Euromonitor
2002 - 2007
Global Region Size $
Asia Pacific
Australasia
Eastern Europe
Latin America
Middle East and Africa
North America
Western Europe
$0
$10,000
$20,000
$30,000
$40,000
$50,000
2002 2003 2004 2005 2006 2007
Millions of U.S. $
Global Region Size Tons
Asia Pacific
Australasia
Eastern Europe
Latin AmericaMiddle East and
Africa
North America
Western Europe
0
1,000
2,000
3,000
4,000
5,000
2002 2003 2004 2005 2006 2007
Tons - 000
Market Tonnage Growth 2002 - 2007
World Asia Pacific Middle Eastand Africa
EasternEurope
LatinAmerica
Australasia WesternEurope
NorthAmerica
15.5%
27.8%26.2% 25.4%
20.7%
14.5%
7.5% 7.3%
0%
6%
11%
17%
22%
28%
Developing Markets are growing at almost twice the world average.
Euromonitor
Tonnage Growth 2002 - 2007
Asia Pacific EasternEurope
WesternEurope
Latin America North America Middle Eastand Africa
Australasia
571.8
404.0
280.0 267.4214.8
138.2
27.10
100
200
300
400
500
600
51% of tonnage growth has come from Asia Pacific and Eastern Europe.
Thousands of Tons
Euromonitor
$12.1
$9.7
$8.4
$7.3
$6.8
$6.3
$6.0
$4.9
$4.6
$2.8
$2.3
$2.3
$2.0
$1.7
$1.6
$1.5
$1.5
$1.5
$29.4
$1.6
$0 $3 $6 $9 $12 $15 $18 $21 $24 $27 $30
USAUnited Kingdom
GermanyRussia
Japan
ChinaBrazil
FranceItaly
MexicoCanada
Australia
Spain
Poland
Turkey
Argentina
Ukraine
Netherlands
Sweden
Switzerland
Cou
ntri
es$ Billions
Top 20 Confectionery Markets
Euromonitor
1,1841,129
1,0651,036
536488
371359
295279
204196189187
180179167
144
181
2,990
0 300 600 900 1,200 1,500 1,800 2,100 2,400 2,700 3,000
USAChina
RussiaGermany
United KingdomBrazil
MexicoFranceJapan
UkraineItaly
SpainIndonesia
PolandAustralia
IndiaNetherlands
ArgentinaCanadaTurkey
Cou
ntrie
s
Tons Billions
Top 20 Confectionery Markets
Euromonitor
Top 20 Per Capita Confectionery Markets
16.614.5
14.013.6
13.512.9
12.612.1
11.811.2
11.09.9
9.19.1
7.96.7
6.46.0
8.7
17.1
0 3 6 9 12 15 18
United KingdomIceland
LuxembourgIreland
LiechtensteinSwitzerland
GermanyDenmark
FinlandNorwaySweden
NetherlandsUSA
AustraliaAustria
BelgiumRussia
New ZealandUkraine
France
CountriesKilograms
Euromonitor
8.9
7.7
5.5
5.5
4.3
4.2
2.9
1.9
1.7
1.4
1.0
1.0
1.0
0.9
0.5
0.5
0.5
0.5
10.1
0.7
0 2 4 6 8 10 12
Cadbury Mars
Nestlé Wrigley
HersheyKraft
FerreroPerfetti Van Melle
Lindt & SprüngliLotte
Storck Arcor
Obiedinenye Leaf
Haribo Meiji
Cloetta FazerOrkla
Ritter Morinaga
Company
Market Share %
Top 20 Confectionery Companies
Euromonitor
Slightly changed since last month!!!!
Top 20 Confectionery CompaniesMarket Share Changes 2002 - 2007
5.1%
1.6%
1.0%
1.0%
1.0%
0.5%
0.5%
0.4%
0.4%
0.2%
0.1%
0.1%
0.0%
0.0%
-0.1%
-0.1%
-0.1%
-0.5%
-0.8%
-0.9%
-3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%
Cadbury
Lindt & SprüngliNestlé
OrklaHaribo
RitterStorckArcor
Cloetta Fazer
MeijiLotte
MorinagaMars
Kraft Hershey
Wrigley
ObiedinenyeLeaf
Perfetti Van Melle
Ferrero
Euromonitor
Top Confectionery Importing Countries
Country 2007 $ Sales 2007 % GrowthUSA $2,006 +3.5%United Kingdom $1,734 +20.6%Germany $1,622 +13.5%France $1,471 +20.4%Netherlands $769 +10.4%Canada $723 +10.2%Belgium $558 +17.5%Russia $541 +42.2%Italy $487 +12.8%Spain $487 +13.5% Austria $460 +14.9%Sweden $438 +13.0%Denmark $351 +24.0%Ireland $365 +19.4%Australia $333 +32.2%Mexico $330 +14.4%Czech Republic $326 +35.1%Poland $321 +31.6%Hong Kong $279 +18.1%Japan $272 +0.7%
January – December 2007
* Global Trade Atlas
2007 USA ExportsJanuary - December 2007
Country 2007 $ Sales 2007 Tons 2007 % GrowthWorld $1,004,788,079 267,734 +14.2%Canada $446,710,332 125,469 +6.7%Mexico $137,901,651 45,461 +16.7%South Korea $49,090,151 11,262 +11.5%Japan $28,724,733 6,512 +7.2%Australia $24,055,499 5,185 +32.7%Philippines $23,264,222 4,896 +16.8%United Kingdom $21,385,698 4,635 -12.2%Hong Kong $19,895,650 4,437 +32.6%Singapore $16,257,498 3,804 +44.5%Colombia $15,280,295 4,217 +57.7%Taiwan $15,078,029 3,808 +49.6%Peru $10,968,139 1,984 +38.8%China $10,692,742 2,528 -5.8%Panama $10,353,915 1,990 +51.3%UAE $10,241,649 2,674 -6.6%
* Global Trade Atlas
National Confectioners Logistics Council
About NCA Global Confectionery PerformanceUSA Confectionery PerformanceSeasonal PerformanceTrendsNew NCA Research Findings
U.S. Confectionery
The Retail Market
Continuous Growth of ConfectioneryTotal value and pounds of confection sold at retail has increased
consistently over the past five years
2001 2002 2003 2004 2005 2006 2007
7.7
$29.1
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
Department of Commerce Data is released in late summer. Please return in August for actual 2007 data.
2006- US Dept of Commerce 311 D Report
Total Chocolate/Non-Chocolate/Gum Dollar Share
U.S. Department of Commerce CensusBureau 2006 MA 311D Report
CHOCOLATE CANDY
56% GUM11%
NON-CHOCOLATE CANDY
33%
Retail Confectionery Market Share by Trade Channel
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%
*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.
2007 Retail Channel PerformanceBased on 52 Week Sales – January - December 2007
Channel 2007 $ Sales 2007 % GrowthSupermarkets $4.6 +2.4%Wal-Mart $3.5 +7.3% Mass X Wal-Mart $1.4 +6.5%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
Are we in a recession?
-10.0-9.0-8.0-7.0-6.0-5.0-4.0-3.0-2.0-1.00.01.02.03.04.05.06.07.08.09.0
10.0
37 44 51 6 13 20 27 34 41 48 4 11 18 25 32 39 46 1 8 15 22 29 36 43 50 5 12 19 26 33 40 47 2 9 16 23 30 37 44 51 5 12 19 26 33 40 48 3
Weeks of Year
Weekly Change4 per. Mov. Avg. (Weekly Change)
Leading ChainsPercent Change in Weekly Sales Per Unit
2002 2003
Source: The NPD Group’s SalesTrac service; Based on actual sales reported from 45 chains
9/11/01
2004 2005 2006
Thanksgiving
2007
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
Candy and Gum Ranked 3rdAmong 2008 Food Categories
$12.90
$8.60
$8.00
$6.40
$4.50
$4.10
$4.00
$3.80
$13.40
$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
-1.1%
+14.9%
+2.4%
+2.7%
+1.4%
-1.2%
-1.9%
+1.1%
+1.9% IRI Food, Drug & MassExcluding Wal-Mart 4/20/2008
Unit SalesBeverage -5.5%Milk -3.4%Candy -3.0%Salty -2.5%Cereal +0.9%Ice Cream -4.2%Soup -3.3%Cookies -4.9%Juice -4.0%
Candy and Gum is the Largest Snack Category
$8.0
$4.5
$4.0
$2.3
$1.0
$0.5
$0.3
$8.6
$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%
+18.7%
+2.4%
+2.7%
+7.7%
-0.7%
-1.9%
+5.1%
IRI Food, Drug & MassExcluding Wal-Mart 4/20/2008
Unit SalesCandy -3.0%Salty -2.5%Ice Cream -4.2%Cookies -4.9%Snack/G +6.4%Bakery -1.4%Dry Fruit -6.3%Misc +12.3%
2007 Confectionery Sales
Manufacturers Sales January - December, 2007
$ Lbs.Confectionery +3.8% Even Chocolate Candy +2.3% -0.9%Non-Chocolate Candy +5.8% +0.5%
NCA Monthly Shipment Reports
Ferrero Session
About NCA Global Confectionery PerformanceUSA Confectionery PerformanceSeasonal PerformanceTrendsNew NCA Research Findings
Confectionery
Seasonal Merchandising
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%
What Affects Seasonal Sales?
•Date/Day of Holiday•The Economy•Consumer Confidence•Shopping Patterns/Habits•Merchandising Strength/Visibility
Holiday Dates/Days
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
Indicates positive date for holiday sales Indicates neutral date for holiday sales Indicates negative date for holiday sales
Confectionery Seasonal Sales(** in millions of dollars)(** in millions of dollars)
2004 2005 2006 2007 2008Valentine’s Day - $1,010 $970 $971 $1,036 $1,035Easter - $1,906 $1,761 $1,884 $1,987 $1,845Halloween - $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
Seasonal Confectionery Trends
2008 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 +2.3% +2.4% +0.7% -0.4%
CHRISTMAS +2.4% -3.5% -1.4% -3.0%* IRI FD&M
+0.1%
+7.0%
+1.0%
+2.8%
+6.7%
+5.4%
+2.6%
+2.2%
-0.2%
+2.4%
+2.3%
-7.1%
National Confectioners Logistics Council
About NCA Global Confectionery PerformanceUSA Confectionery PerformanceSeasonal PerformanceTrendsNew NCA Research Findings
U.S. Confectionery Trends
We are concerned about our weight!
Overweight or Obese
62%
Not Overweight
or Obese38%
Dist. Of Adults (18+years)
Note: Sample is approximately 3,700 adults per year of which 90% provide food and beverage intake, height and weight information
The alarm about our weight condition has been well documented and well reported!
Source: The NPD Group’s Health Track Service
Snacking is a part of our diet!
Snacks 19%
Lunch 27%
Supper 26%
Breakfast 28%
Distribution of Annual Meals
Source: The NPD Group's National Eating Trends® and CREST® Services
… But snacking isn’t becoming more important!
0%
5%
10%
15%
20%
25%
96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07
Percent of All Meals that are Snacks
Source: The NPD Group's National Eating Trends® and CREST® Services
We snack throughout the day!
Morning32%
Afternoon30%
Evening38%
Distribution of In-Home Snack Meals
Source: The NPD Group’s National Eating Trends® service
But there is a shift:
0%
5%
10%
15%
20%
25%
30%
35%
84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07
Percent of In-Home Snack Meals Occurring in the Morning
Source: The NPD Group’s National Eating Trends® service
Morning Snacks
And fewer in the evening …
0%
10%
20%
30%
40%
50%
60%
84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07
Percent of In Home Snack Meals Occurring in the Evening
Source: The NPD Group’s National Eating Trends® service
Evening Snacks
Feeling about Children and Sweets:
52.152.449.4
46.345.545.9
40.636.136.7
33.832.631.129.329.628.228.528.929.429.3
31.631.930.231.1
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07
“Children should not be allowed to eat sweets”Percent of Homemakers Agreeing
Top Snacks Foods Consumed By Children (under 6)
1. Cookies
2. Fruit
3. Milk
4. Juice
5. Candy
6. CSD
7. Ice Cream
8. Crackers
9. Cake
10. Chips
1987
1. Fruit
2. Cookies
3. Milk
4. Crackers
5. Juice
6. Popcorn
7. Candy
8. Ice Cream
9. Chips
10. Fruit Rolls/Bars/Bits
2007
Source: National Eating Trends
Candy Bars
0
5
10
15
20
25
30
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70
Age of Eater
Perc
ent E
atin
g A
t Lea
st O
nce
in T
wo
Wee
ks
2005-20071990-1992
Source: The NPD Group’s National Eating Trends Data
Percent of Age Group Eating Candy Bars in Two Weeks
Chocolate Covered Candy
0
5
10
15
20
25
30
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70
Age of Eater
Perc
ent E
atin
g A
t Lea
st O
nce
in T
wo
Wee
ks
2005-20071990-1992
Source: The NPD Group’s National Eating Trends Data
Percent of Age Group Eating Chocolate Covered Candy in Two Weeks
Non Chocolate Candy
0
5
10
15
20
25
30
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70
Age of Eater
Perc
ent E
atin
g A
t Lea
st O
nce
in T
wo
Wee
ks
2005-20071990-1992
Source: The NPD Group’s National Eating Trends Data
Percent of Age Group Eating Non Chocolate Candy in Two Weeks
Kids are Eating more “Fish”!
0
5
10
15
20
25
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70
Age of Eater
Perc
ent E
atin
g A
t Lea
st O
nce
in T
wo
Wee
ks
2005-20071990-1992
Source: The NPD Group’s National Eating Trends Data
Percent of Age Group Eating in Two Weeks
Goldfish
Trend in Consumers of Organic Products
11.6%
9.8%
13.9%15.0%
11.5% 11.5%
13.9% 14.3%13.4%
15.1%
18.3%
16.5%
20.1%21.4% 21.4%
24.5%
May'03
Aug '03 Nov'03
Feb '04 May'04
Aug '04 Nov'04
Feb '05 May'05
Aug '05 Nov'05
Feb '06 May'06
Aug '06 Nov'06
Feb '07
2004 2005
Trend in Percent of Population Consuming Organic Products
2006 2007
Source: The NPD Group’s National Eating Trends service
2003
But this still is one of the Hot Trends in the US:
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
What’s important:1. New … we like to try new things …but don’t
mistake this for a trend! The top 25 new items in chocolate, non-chocolate and gum generated 10% of total sales in 2007.
2. Taste … this takes generations to change! … but it is changing!
3. Convenience … we have always moved to making our lives easier!... remember, “easier”… not “easy”
4. Value … We’ve never let food costs rise faster than our incomes!
Key Customer Meeting Thirty Key Customers
February 28, 2008
Changes we will see in the next five years:•Continued consolidation•Growth in global business•Blurring of Snacks and Confections •More Customization – packs for individual retailers •More Secondary Merchandising •Speed to Shelf coordination more important •Continued loss of “center store”•Labeling will become more important
Key Customer Meeting Thirty Key Customers
February 28, 2008
Changes we will see in the next five years:•Price Blending – less differential in key sizes•Product Quality – more important to consumers•More Premium – section will grow
•Must have quality product and matching packaging
•Distinction between luxury and premium•Healthier options•Growth in organic confections•More functional products•More portion control options
World and U.S. Confectionery Market
June 9, 2008
National Confectioners Logistics Council
About NCA Global Confectionery PerformanceUSA Confectionery PerformanceSeasonal PerformanceTrendsNew NCA Research Findings
New NCA Research
Dechert-Hampe“Expanding the Dimensions of
Confectionery - a $10 Billion Opportunity!”and
Phil Lempert – the Supermarket Guru“New Consumer Research”
Confectionery is Expandable –Not a Zero Sum Game
Fixed Consumption Expandable Consumption
Source: Dechert-Hampe & Co.
Consumption
Purchasing
PurchasingConsumption
weeksweeks
Consumption at fixed rateSoap, Detergent, Toilet PaperPromotion Loads Pantry
Consumption Driven by PurchaseCandy, Snacks, BeveragesPromotion Builds Consumption
Confectionery Delivers High Profitability Driven By High Gross Margin
% Gross Margin
27%30%
Confectionery Grocery Average
• Confectionery margins are 3-5% points higher
Source: DHC Analysis of Retailer Data
Confectionery Is Among Most Frequently Purchased Categories In Stores
15
12
11
7
31
30
22
16
Coffee
Soup
Cookies
Bottled Juice
Cereal
Confectionery
Milk
Carb. Bev.
Source: ACNielsen HomeScan
• Frequent purchases make it key to retailers
Annual Purchases
Top Performing Retailers Sell Confectionery At A Higher Rate
Confectionery Sales Index Per $MM ACV
76
101
136
LowPerformance
ModeratePerformers
TopPerforming
Retailers
• Top performers have a rate 35% greater than average
Source: DHC Analysis of Retailer Data
Top Performing Retailers Generate Higher Growth In Confectionery
• Some of the top retailers are growing by double digits
Confectionery % Sales Growth
4.1%
1.9%
-2.4%Low
Performance
ModeratePerformance
TopPerforming
Retailers
Source: DHC Analysis of Retailer Data
Top Performing Retailers Have Greater Confectionery Section Productivity
Confectionery Sales Per Linear Foot
$15.57
$6.10
$13.91
LowPerformance
ModeratePerformance
TopPerforming
Retailers
Source: DHC Analysis of Retailer Data
Potential For Improved PerformanceProjects To A $10 Billion Opportunity
$39
$29
CurrentPerformance
PotentialPerformance
Confectionery Sales $ Billions A $10 Billion
OpportunityA $10 Billion Opportunity
+35%
• Potential growth based on top performing retailers
Source: Dechert-Hampe & Co.
Aisle Management
Many Consumers Are Unhappy With Retail Merchandising Of Confectionery
• Consumer interviews reveal some of the shopper frustration at the shelf
– “The candy section is confusing. It’s difficult to find what you want”
– “The products are all clumped up. They run into each other”
– “They need to separate the different kinds of candy better”
– “It’s overwhelming. There’s no organization to help you shop”
Source: Dechert-Hampe & Co.
Supermarket Guru Survey – Customer Satisfaction
5 22 73
5 26 69
8 31 61
9 33 59
10 46 44
11 31 58
11 37 52
12 53 35
18 59 24
23 43 33
24 55 21
24 57 18
27 54 20
33 49 19
0 20 40 60 80 100
Holiday CandyChocolate
Adult CandyGum
Holiday GiftsHard
MintsP Label
GourmetNoveltyNatural
ImportedEthnic
Organic
Excellent Good Fair/Poor
Snacks – Customer Satisfaction
11 37 52
6 30 63
10 32 58
12 38 50
15 44 41
25 49 27
46 40 10
44 47 10
0 20 40 60 80 100
Salty Snacks
Potato Chips
Nuts
Natural
Gourmet
Organic
Ethnic
P Label
Excellent Good Fair/Poor
Supermarket Guru Survey – Customer Satisfaction
What Improvements?
39
33
28
24
20
19
15
13
13
0 10 20 30 40 50
More Variety
Cost Savings
More Gourmet
More Imported
More Fresh
Better Quality
More Health Info
Better Organized
More Ethnic
% of Consumers
New Patterns Of Consumer Shopping Behavior Change the Game
• Consumer shopping patterns changed toward more shorter trips
• Retailers competing with multiple outlets for shopping occasions
• Majority of shopping trips today are convenience oriented
• Shoppers must be drawn into the aisle
• Perimeter displays must compensate for reduced traffic
Where are Consumers Buying?
Why the market share shifts?
• Is there a change in the planned vs. unplanned confectionery purchase?
• Is the consumer more apt to indulge in an impulse purchase away from the supermarket?
• Are supermarkets merchandising impulse purchase items correctly?
Value Channel Trips Have Increased
Source: Nielsen Household Panel.
1011
1013
1415
1515
2518
17
27
7864
WarehouseClubs
Dollar Stores
ConvenienceStores
Drug Stores
MassMerchandisers
Supercenters
Grocery
20052000
Household Shopping FrequencyAnnual Trips
Increasing Ring Is Key For Retailers
Source: Nielsen Household Panel.
$11$12
$10$15
$19$22
$32$35
$38$44
$49$60
$83$87
Dollar Stores
ConvenienceStores
Drug Stores
Grocery
MassMerchandiser
Supercenters
WarehouseClubs
2000 2005
Average $ Basket Ring
Locate Confectionery Section Earlier In Shopping Trip
Confectionery Location In Store
37%60%
45%
30%
18% 10%
All Retailers Top Performers
End of TripMiddle of TripBeginning of Trip
Locate Confectionery near beginning of trip
Source: DHC Analysis of Retailer Data
Confectionery Performs Best Adjacent to Snacks
Adjacent Category
Top Performing Retailers
Others
Salty Snacks 18% 12%Nuts 18 8Cookies 10 12Fruit Snacks 12 6Snack Bars 6 4
Total Snacks 64% 42%Baking Needs 9 7Bottled Juice/Water 3 9RTE Cereal 0 6Other 23% 36%
Source: DHC Analysis of Retailer Data
Drive Sales By Allocating More Space To Confectionery Gondola
32.6
22.229.428.0
44.3
35.0
Grocery Drug Mass
All RetailersTop Performers
Gondola CandySection Size In Feet
Top performing retailers devote more space & generate more Candy sales
Source: DHC Analysis of Retailer Data
Increased Item Assortment Can Drive Confectionery Sales
Non-Seasonal Gondola CandyGrocery Dollar Sales Per MM ACV Index
82
104
122
Less Than250 Items
250-350 Items Over 350Items
Top performing retailers stock more itemsSource: DHC Analysis of Retailer Data
Retailers Risk Lost Sales If They Don’t Stock Candy Items Consumers Want
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?
Walk away
Source: DHC Consumer Interviews
Retailers Must Stock Variety of Christmas CandyIf 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 a variety of Christmas Candy
Source: Consumer Interviews.
Dechert Hampe 2004
New Items, 9.5%
Two Years Old, 9.2%
More Than Two Years Old, 67.8%
One Year Old, 13.5%
A Third Of Candy Sales Are New Items
New products are truly the lifeblood of Confectionery
% Category Sales
Source: IRI, FDMX, 2004
Candy Is The Most Responsive Category For Display Treatment
88%
68%
61%
49%
169%
105%
95%
95%
Beer
Spices/Seasoning
Wine
Salty Snacks
Bottled Water
Carb. Beverages
Cookies
Candy
% Increase On Display Only
Source: IRI, Food, 2005
Research Demonstrates Value Of Additional Candy Locations In Store
Candy Store Sales IndexBy Number Of Permanent Locations
85
101 105
1 or 2 3 4 or More
Source: DHC Analysis of Retailer Data
Top Performing Retailers Provide More Merchandising Support
Confectionery Gondola% Volume
Low Performers
Medium Performers
Top Performers
Feature & Display 5 8 10
Display Only 16 20 24
Feature Only 5 7 7
Price Reduction 14 17 18
Any Merchandising 40 52 59
Source: IRI, Food, 2005
Keys to Maximizing Confectionery Sales
• Customer Commitment• Proper Space
• Location• Size• Organization
• Key Assortments• Increased Merchandising
• Displays and other
• Commitment to Seasons• Commitment to New Items
World and U.S. Confectionery Market
June 9, 2008
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