february 2010 united states confectionery market

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February 2010 United States Confectionery Market

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February 2010

United States Confectionery Market

U.S. Confectionery Market

Overview

2010 USA Economic Trends •Recession ending??? GDP grew 6% in 4th Quarter 2009

•Stock market – DJ – 10,500 …and growing

•Retail sales surprise in 3rd and 4th quarter 2009

•Interest rates remain low

•Consumer spending ????

Issues to watch!

•Unemployment still at 10%

•Housing market still down

•Oil prices rising again

•Still difficult to borrow

•Commodity prices head even higher

•Savings rate up – spending down

2010 USA Retail Trends

•Uptick in third and fourth quarter sales

•Shopping trips declined

•Big spending shift to value channels

•Increased coupon usage

•Confectionery seen as a recession resistant category

•Organic sales decline

•What’s going to happen with Holiday retail sales? •2009 – 3.6% growth (SpendingPulse projection)

•2008 - declined 2.3%

•2007 - 2.4% growth

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

2003 20052004 20072006 2008

Cocoa Prices at Historic HighsCocoa price per ton

2009

0

5

10

15

20

25

30

35

40

45

50

Sugar Prices near Historic HighsU.S. Cents per pound Refined beet sugar f.o.b. Midwest

2003 20052004 20072006 2008 2009

$10

$15

$20

$25

$30

Corn Sweetener Prices near Historic Highs

U.S. $ per pound

2003 20052004 20072006 2008 2009

Corn Sweetener Prices have stabilized but are high by historical standards.

Commodities Pricing

Milk – significantly lower in 2009

Peanuts – lower than 2008 but increasing

Walnuts – prices jumped at end of 2009

Pistachios – Iranian crop shortages drive prices higher

Almonds

The 2009 U.S. Confectionery Market

% $ Change

Retail Sales (NCA projection) $29.3 +3.6%

Manufacturers Shipments (NCA projection) $18.7 +3.4%

Domestic Manufacturer Shipments $17.9 +3.4%

Imports $2.0 +0.9%

Exports $1.2 -1.3%

The retail 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

This analysis shows figures for 2009 shipments and retail sales.

Chocolate Candy represents approximately 58% of total confectionery dollar sales.

Category Retail Sales

$ Billions

Domestic Shipments

$ billions

Shipment % Growth

Vs. 2008

Imports

$ billions

Import % Growth

Vs. 2008

Exports

$ billions

Export % Growth

Vs. 2008

Total

Confections

$29.3 $17.9 +3.4% $2.0 +0.9% $1.2 -1.3%

Chocolate $16.9 $10.8 +3.4% $0.8 +11.2% $0.7 -2.8%

Non-Chocolate $9.3 $5.2 +5.4% $1.1 -3.6% $0.3 Even

Gum $3.0 $1.9 +1.5% $0.2 -18.8% $0.1 +10.0%

2009 Confectionery Categories Analysis

NCA estimates based on Source: 2008 US Department of Commerce,Census Bureau 311D, Confectionery Report andNCA Manufacturer Shipment Reports, IRI Data

Confectionery Sales SteadyDue to price increases in the confectionery industry in 2009 the industry saw an

increase in dollar sales combined with a decrease in tonnage.

2009- US Dept of Commerce 311 D Report and

NCA Manufacturers Shipments

2003 2004 2005 2006 2007 2008 2009

7.1

$29.3

7.2

$28.2

7.4

$27.4

7.7

$28.2

7.6

$27.9

7.3

$27.4

7.1

$25.8

Dollars Sold at Retail, Billions Pounds Sold at Retail, Billions

Total Chocolate Non Chocolate Gum

$92.91

$52.46

$28.34

$9.54

$0

$20

$40

$60

$80

$100

The average U.S. Consumer spent $93 on confectionery products in 2008

2008 US Department of Commerce 311D Confectionery Report

2008 Per Capita Retail Sales

U.S. Confectionery

The Retail Market

Candy and Gum Ranked 4thAmong Food Categories- December 2009

$10.80

$9.20

$9.10

$6.60

$4.50

$4.20

$4.10

$3.80

$13.80

$0.0 $3.0 $6.0 $9.0 $12.0 $15.0

Carbonated Beverages

Milk

Salty Snacks

Candy& Gum

Cereal

Ice Cream

Soup

Cookies

Bottled Juice

Pro

duct

Cat

egor

ies

$ Billions

+2.6%

-15.3%

+7.8%

+4.1%

+1.2%

-0.3%

+1.1%

-1.4%

-1.2%

IRI Food, Drug & MassExcluding Wal-Mart 12/27/2009

Candy and Gum Ranked 4th among 2009 Food Categories in Food, Drug and Mass Outlets

Candy and Gum is the 2nd Largest Snack Category

$9.10

$4.50

$4.10

$2.40

$1.10

$0.50

$0.40

$9.20

$0.0 $2.0 $4.0 $6.0 $8.0 $10.0

Salty Snacks

Candy& Gum

Ice Cream

Cookies

Snack/Granola Bars

Bakery Snacks

Dry Fruit

Misc. Snacks

Pro

duct

Cat

egor

ies

$ Billions

+5.8%

+7.6%

+7.8%

+4.1%

+3.0%

-0.3%

+1.1%

+6.1% IRI Food, Drug & MassExcluding Wal-Mart 12/27/2009

2009 Retail Channel Performance

Channel 2009 $ Sales 2009 % GrowthSupermarkets $4.9 +5.7%Wal-Mart $4.0 +3.4% Mass X Wal-Mart $1.4 +2.2%Convenience Stores $4.6 +3.0%Drug Stores $2.8 +3.0%*Warehouse Clubs $2.5 +4.7%*Dollar Stores $1.2 +6.1%Vending $1.1 -1.9%*Bulk $1.2 +2.1%

Based on 52 Week Sales – Ending December 27, 2009

•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 grew across all trade channels but supermarkets, dollar stores, and warehouse clubs outpaced the overall retail market in 2009.

* Indicates NCA estimate

Confectionery

Seasonal Merchandising

What Affects Seasonal Sales?

•Date/Day of Holiday

•The Economy

•Consumer Confidence

•Merchandising Strength/Visibility

2006 2007 2008 2009 2010 projections *

Valentine’s Day - $971 $1,036 $1,024 $928 $935*

Easter - $1,884 $1,987 $1,846 $1,990 $1,970*

Halloween - $2,146 $2,202 $2,209 $2,207 $2,225*

Christmas - $1,389 $1,420 $1,376 $1,401 $1,420** – projections for 2010

Results and Projection as of February 2010Source: 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)

Seasonal confectionerysales grew

1.2% in 2009

Seasonal Confectionery Trends

2010 2009 2008 2007 2006 2005

VALENTINE’S +0.7%* -9.4% -0.2% +6.7% +0.1% -4.0%

EASTER -1.0%* +7.9% -7.1% +5.4% +7.0% -7.6%

HALLOWEEN +0.8%* Even +0.1% +2.6% +2.8% +2.3%

CHRISTMAS +1.4%* +1.8% -3.1% +2.2% +1.0% +2.4%

* IRI FD&M

NCA projects a 0.4% increase in 2010 for total seasonal sales.

Holiday 2009 2010 2011 2012 2013

Valentine’s Sat. Sunday Monday Tuesday Thursday

Easter 4/12 4/4 4/24 4/8 3/31

Halloween Sat. Sunday Monday Wed. Thursday

Christmas Friday Sat. Sunday Tuesday Wed

Thanksgiving 11/26 11/25 11/24 11/22 11/28

Shopping Days 29 30 31 33 27

Holiday Dates/Days

Indicates positive date for holiday sales Indicates neutral date for holiday sales Indicates negative date for holiday sales

U.S. Confectionery Trends

Trends - for 2009/2010•Core mass brands grew in units and dollars

•Consumers moved to value channels and value brands

•Seasonal sales rebound with improving economy•Dark chocolate sales continue to grow but at a slower pace

•Dark chocolate sales increased 9% in 2009

•Everyday gourmet chocolate flat in 2009 •Consumers want gourmet product at a value price

•Emerging trends in 2010•More private label chocolates

•Upscale private label/gourmet packaging

•Mass brands introducing more dark chocolate items

•Exotic chocolate flavorings: citrus, spice, salt, fruits

•High cocoa content chocolates

•Gourmet packaging for chocolates

Trends - for 2009/2010•Value products grew significantly

Nut/Coconut Candy grew 12.1% Gummies and chewy candy grew 11.6%

Licorice grew 4.7% Theater Box candies grew 6% King sized candies up significantly

•Sugar Free gum - +7.3% sales Exotic fusion flavors Fortified products

•Seasonal candy increased in in 2009 Reflection of difficult economy More favorable dates in 2009 Seasonal confectionery will grow 2.0%