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February 2010

United States Confectionery Market. February 2010. U.S. Confectionery Market Overview. Recession ending??? GDP grew 6% in 4 th Quarter 2009 Stock market – DJ – 10,500 …and growing Retail sales surprise in 3 rd and 4 th quarter 2009 Interest rates remain low Consumer spending ????.

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February 2010

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  1. United States Confectionery Market February 2010

  2. U.S. Confectionery Market Overview

  3. 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 ???? 2010 USA Economic Trends • 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

  4. 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 2010 USA Retail Trends

  5. Cocoa Prices at Historic Highs Cocoa price per ton 2004 2005 2006 2007 2008 2009 2003

  6. Sugar Prices near Historic Highs Refined beet sugar f.o.b. Midwest U.S. Cents per pound 2003 2004 2005 2006 2007 2008 2009

  7. Corn Sweetener Prices near Historic Highs Corn Sweetener Prices have stabilized but are high by historical standards. U.S. $ per pound 2004 2005 2006 2007 2008 2009 2003

  8. 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

  9. The 2009 U.S. Confectionery Market The U.S. Retail Confectionery Category generates approximately $29 billion in retail sales % $ 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. Estimated sales in billions NCA Shipment Data and Global Trade Atlas Import/Export Data

  10. Chocolate Candy represents approximately 58% of total confectionery dollar sales. 2009 Confectionery Categories Analysis This analysis shows figures for 2009 shipments and retail sales. NCA estimates based on Source: 2008 US Department of Commerce, Census Bureau 311D, Confectionery Report and NCA Manufacturer Shipment Reports, IRI Data

  11. Confectionery Sales Steady Due 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

  12. 2008 Per Capita Retail Sales The average U.S. Consumer spent $93 on confectionery products in 2008 2008 US Department of Commerce 311D Confectionery Report

  13. U.S. Confectionery The Retail Market

  14. Candy and Gum Ranked 4thAmong Food Categories- December 2009 IRI Food, Drug & Mass Excluding Wal-Mart 12/27/2009 Candy and Gum Ranked 4th among 2009 Food Categories in Food, Drug and Mass Outlets

  15. Candy and Gum is the 2nd Largest Snack Category IRI Food, Drug & Mass Excluding Wal-Mart 12/27/2009

  16. 2009 Retail Channel Performance Based on 52 Week Sales – Ending December 27, 2009 Channel 2009 $ Sales 2009 % Growth Supermarkets $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% 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 • 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

  17. Confectionery Seasonal Merchandising

  18. Date/Day of Holiday • The Economy • Consumer Confidence • Merchandising Strength/Visibility What Affects Seasonal Sales?

  19. Confectionery Seasonal Sales (** in millions of dollars) 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 Seasonal confectionery sales grew 1.2% in 2009 Results and Projection as of February 2010 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

  20. Seasonal Confectionery Trends 201020092008 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.

  21. Holiday Dates/Days Holiday 2009 2010 2011 2012 2013 Valentine’s Sat. Sunday Monday Tuesday Thursday Easter4/12 4/4 4/24 4/8 3/31 HalloweenSat. Sunday Monday Wed. Thursday ChristmasFriday Sat. Sunday Tuesday Wed Thanksgiving 11/26 11/25 11/24 11/22 11/28 Shopping Days 29 30 31 33 27 Indicates negative date for holiday sales Indicates positive date for holiday sales Indicates neutral date for holiday sales

  22. U.S. Confectionery Trends

  23. 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

  24. 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%

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