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January 2008

United States Confectionery Market. January 2008. U.S. Confectionery Market Overview. 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

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January 2008

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  1. United States Confectionery Market January 2008

  2. U.S. Confectionery Market Overview

  3. 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 Economic Trends

  4. 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 2007-2008 USA Retail Trends High gas pricing negatively affecting all retailers

  5. The 2007 U.S. Confectionery Market The U.S. Retail Confectionery Category generates approximately $29 billion in retail sales % $ 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. Estimated sales in billions NCA Shipment Data and Global Trade Atlas Import/Export Data

  6. 2007 Confectionery SalesManufacturers $ sales grew 3% in 2007 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% 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

  7. 2007 Confectionery SalesRetail Sales Summary 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 Trade Channels: F – Supermarkets D – Drug Stores M – Mass Merchants W – Wal-Mart C – Convenience Stores 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

  8. 2006 Per Capita Retail Sales The average U.S. Consumer spent $94 on confectionery products in 2006 Department of Commerce Data is released in late summer. Please return in August for actual 2007 data. 2006 US Department of Commerce 311D Confectionery Report

  9. Chocolate Candy represents approximately 56% of total confectionery dollar sales. Confectionery Categories Analysis 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. NCA estimates based on Source: 2006 US Department of Commerce, Census Bureau 311D, Confectionery Report and NCA Manufacturer Shipment Reports

  10. The Confectionery Market is Very Diverse There are more than 300 domestic confectionery manufacturers • 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, 2007 Dollar Sales IRI TOTAL U.S. - F/D/MX

  11. Continuous Growth of Confectionery Total value and pounds of confection sold at retail has increased consistently over the past five years 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

  12. U.S. Confectionery The Retail Market

  13. Retail Confectionery Market Share by Trade Channel *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.

  14. 2007 Retail Channel Performance Based on 52 Week Sales – January - December 2007 Channel 2007 $ Sales 2007 % Growth Supermarkets $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 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

  15. Total Chocolate/Non-Chocolate/Gum Dollar Share U.S. Department of Commerce Census Bureau 2006 MA 311D Report

  16. Candy and Gum Ranked 3rdAmong 2007 Food Categories Candy and Gum Ranked 3rd among 2007 Food Categories in Food, Drug and Mass Outlets IRI Food, Drug & Mass Excluding Wal-Mart 112/30/2007

  17. Candy and Gum is the Largest Snack Category IRI Food, Drug & Mass Excluding Wal-Mart 112/30/2007

  18. 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

  19. Confectionery Seasonal Merchandising

  20. Date/Day of Holiday • The Economy • Consumer Confidence • Shopping Patterns/Habits • Merchandising Strength/Visibility What Affects Seasonal Sales?

  21. Confectionery Seasonal Sales (** in millions of dollars) 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 2008 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

  22. Total Confectionery Seasonal Shares • 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

  23. Seasonal Confectionery Trends 2007 2006 200520042003 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 +6.7% +0.1% +5.4% +7.0% +2.3% +2.6% +2.8% +2.4% +2.2% +1.0% NCA projects a 2.1% increase in 2008

  24. Holiday Dates/Days Holiday 2007 2008 2009 2010 Valentine’s Wednesday Thursday Saturday Sunday Easter4/8 3/23 4/12 4/4 HalloweenWednesday Friday Saturday Sunday ChristmasTuesday Thursday Friday Saturday Thanksgiving 11/22 11/27 11/26 11/25 Shopping Days 33 28 29 30 Indicates negative date for holiday sales Indicates positive date for holiday sales Indicates neutral date for holiday sales

  25. U.S. Confectionery Trends

  26. Trends - What's for 2007/2008 Hot • Dark chocolate sales accelerating - +50% in 2007 • Chocolate experiences • Chocolate tastings • Chocolate 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

  27. Trends - What's for 2007/08 Hot • 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

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