January 2008

United States Confectionery Market

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

Trade Total Sales % Growth Chocolate % Growth Non-Chocolate % Growth Gum % Growth

Measured Confections vs. 2006 Confections vs. 2006 Confections vs. 2006 vs. 2006

FDMx $8.5 billion +3.5% $4.9 billion +3.5% $2.4 billion +1.3% $1.2 billion +8.1%

FDMW $12.0 billion +4.6% $6.7 billion +5.0% $3.5 billion +2.3% $1.8 billion +7.5%

FDMWC $16.5 billion +5.0% $8.5 billion +5.3% $4.9 billion +2.4% $3.1 billion +8.8%

All Others $12.6 billion * $7.8 billion * $4.5 billion * $0.2 billion *

Total Sales $29.1 billion $16.3 billion $9.4 billion $3.2 billion

2007 Confectionery SalesRetail Sales Summary

NCA Estimates base on U.S. Dept. Of Commerce MA311D Report and Information Resources, Inc.

2006 US Department of Commerce 311D Confectionery Report

2007 IRI Reports through 12/30/07

Trade Channels:F – SupermarketsD – Drug StoresM – Mass MerchantsW – Wal-MartC – Convenience Stores

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.

Category Retail Sales

$ Billions

Domestic Shipments

$ billions

Shipment % Growth

Vs. 2005

Imports

$ billions

Import % Growth

Vs. 2005

Exports

$ billions

Export % Growth

Vs. 2005

Total

Confections

$29.1 $17.5 +3.0% $2.2 +4.0% $0.9 +13.1%

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%

Confectionery Categories Analysis

NCA estimates based on Source: 2006 US Department of Commerce,Census Bureau 311D, Confectionery Report andNCA Manufacturer Shipment Reports

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 December 30, 2007Dollar Sales IRI TOTAL U.S. - F/D/MX

There are more than 300

domestic confectionery manufacturers

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

Department of Commerce Data is released in late summer. Please return in August for actual 2007 data.

U.S. Confectionery

The Retail Market

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

Total Chocolate/Non-Chocolate/Gum Dollar Share

U.S. Department of Commerce Census Bureau 2006 MA 311D Report

CHOCOLATE CANDY

56% GUM11%

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

Pro

du

ct 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 112/30/2007

Candy and Gum Ranked 3rd among 2007 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

Pro

du

ct 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 112/30/2007

2007 Confectionery Sales

Manufacturers Sales Through October, 2007

$ Lbs.Chocolate Candy +3.5% -0.1%Non-Chocolate Candy +4.4% +1.6%Gum +6.6% +1.4%

NCA Monthly Shipment Reports

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 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 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 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

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 - What's for 2007/2008

•Dark chocolate sales accelerating - +50% in 2007

•Chocolate experiencesChocolate 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