world and u.s. confectionery market

World and U.S. Confectionery Market

June 9, 2008

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

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

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


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%

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


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


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


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


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


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


June 9, 2008

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


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


Top Performing Retailers Have Greater Confectionery Section Productivity

Confectionery Sales Per Linear Foot

$15.57

$6.10

$13.91

LowPerformance

ModeratePerformance

TopPerforming

Retailers


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


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”


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


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%


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


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


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


June 9, 2008

world and u.s. confectionery market

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