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May 2009

United States Confectionery Market. May 2009. U.S. Confectionery Market Overview. U.S. and world economies in recession Stock market declines 30%+ Retail sales declining in 2008 Q 3-4 and 2009 Q 1 Unemployment over 8% in May 2009 Up from 4.6% at year-end 2006

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May 2009

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  1. United States Confectionery Market May 2009

  2. U.S. Confectionery Market Overview

  3. U.S. and world economies in recession • Stock market declines 30%+ • Retail sales declining in 2008 Q 3-4 and 2009 Q 1 • Unemployment over 8% in May 2009 • Up from 4.6% at year-end 2006 • Housing market bubble burst • Unstable oil prices • Year ends with historically low interest rates • Difficult to borrow – credit crunch • Consumer spending declines • Commodity prices higher 2008-2009 USA Economic Trends

  4. Shopping trips declined • Spending shift to value channels • Increased coupon usage • Confectionery seen as a recession proof category • Organic sales decline • 2008 Holiday retail sales declined • Other than gasoline purchases retail sales declined 1.5% in December vs 2.4% growth in 2007 2008-2009 USA Retail Trends Credit crunch and lost investments impacting consumer spending

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

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

  7. Corn Sweetener Prices near Historic Highs U.S. $ per pound 2004 2005 2006 2007 2008 2003

  8. Commodities Pricing Milk Corn Syrup Peanuts Walnuts Pistachios Almonds

  9. The 2008 U.S. Confectionery Market The U.S. Retail Confectionery Category generates approximately $28 billion in retail sales % $ Change Retail Sales $28.3 +2.0% Manufacturers Shipments $18.4 +2.0% Domestic Manufacturer Shipments $17.3 +3.1% Imports $2.0 +0.3% Exports $1.2 +20.4% 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. 2009 Confectionery SalesRetail Sales Summary through April 2009 Trade Total Sales % Growth Chocolate % Growth Non-Chocolate % Growth Gum % Growth Measured Confections vs. 2008 Confections vs. 2008 Confections vs. 2008 vs. 2007 FDMx $8.9 billion +3.7% $5.0 billion +3.7% $2.5 billion +2.4% $1.3 billion +6.1% FDMW $12.7 billion +3.2% $7.0 billion +4.1% $3.6 billion +1.3% $2.0 billion +3.4% FDMWC $17.2 billion +3.7% $8.9 billion +4.4% $5.0 billion +2.9% $3.3 billion +3.0% All Others $11.4 billion * $7.3 billion * $3.7 billion * $0.3 billion * Total Sales $28.0 billion +3.7% $16.1billion +4.1% $8.6 billion +2.3% $3.3 billion +4.9% 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. 2008 US Department of Commerce 311D Confectionery Report 2008 IRI Reports through 4/19/2009

  11. 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

  12. Chocolate Candy represents approximately 59% of total confectionery dollar sales. 2008 Confectionery Categories Analysis This analysis shows figures for 2008 shipments and retail sales. NCA estimates based on Source: 2008 US Department of Commerce, Census Bureau 311D, Confectionery Report and NCA Manufacturer Shipment Reports

  13. 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. • 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, 2008 Euromonitor

  14. Confectionery Sales Steady Due to price increases in the confectionery industry in 2008 we saw an increase in dollar sales combined with a decrease in tonnage. 2008- US Dept of Commerce 311 D Report

  15. U.S. Confectionery The Retail Market

  16. 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 2008 estimates based on IRI, U.S. Department of Commerce, MSA Vending Data, NCA Shipment Report and other industry sources.

  17. 2008 Retail Channel Performance Based on 52 Week Sales – Ending April 19, 2009 Channel 2009 $ Sales 2009 % Growth Supermarkets $4.7 +3.3% Wal-Mart $3.7 +2.0% Mass X Wal-Mart $1.4 +1.8% Convenience Stores $4.5 +4.7% Drug Stores $2.8 +5.4% *Warehouse Clubs $2.3 +3.0% *Dollar Stores $.9 +3.1% Vending $1.1 -1.5% *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

  18. Total Chocolate/Non-Chocolate/Gum Dollar Share U.S. Department of Commerce Census Bureau 2008 MA 311D Report

  19. Candy and Gum Ranked 3rdAmong Food Categories- April 2009 IRI Food, Drug & Mass Excluding Wal-Mart 4/19/2009 Candy and Gum Ranked 3rd among 2008 Food Categories in Food, Drug and Mass Outlets

  20. Candy and Gum is the Largest Snack Category IRI Food, Drug & Mass Excluding Wal-Mart 4/19/2009

  21. Confectionery Seasonal Merchandising

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

  23. Confectionery Seasonal Sales (** in millions of dollars) 2005 2006 2007 2008 2009 projections Valentine’s Day - $970 $971 $1,036 $1,024 $928 Easter - $1,761 $1,884 $1,987 $1,846 $1,990 Halloween - $2,088 $2,146 $2,202 $2,209 $2,225* Christmas - $1,375 $1,389 $1,420 $1,376 $1,400* * – projections for 2009 Results and Projection as of May 2009 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

  24. Total Confectionery Seasonal Shares • NCA estimates based on December 28, 2008 IRI Data, NCA Manufacturers Shipment Reports and U.S. Department of Commerce MA311D Report • Syndicated IRI data understates actual seasonal sales. It only includes packages with seasonal graphics, and does not count regular packs sold during the season

  25. Seasonal Confectionery Trends 20092008 2007 2006 2005 2004 VALENTINE’S -9.4% -0.2% +6.7% +0.1% -4.0% -3.0% EASTER +7.9% -7.1% +5.4% +7.0% -7.6% +5.5% HALLOWEEN * +0.1% +2.6% +2.8% +2.3% +2.4% CHRISTMAS * -3.1% +2.2% +1.0% +2.4% -3.5% * IRI FD&M NCA projects a 2.0% increase in 2009

  26. 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

  27. U.S. Confectionery Trends

  28. Trends - for 2008/2009 • Everyday gourmet chocolate sales rose 28% in 2008 • Growth slowed in second half of 2008 • Dark chocolate sales continue to grow but at a slower pace • Dark chocolate sales increased 12% • Core mass brands grew in units and dollars • Emerging trends • Exotic chocolate flavorings: citrus, spice, salt, fruits • High cocoa content chocolates • Gourmet packaging for chocolates • Single origin chocolates • Increased offering of “Everyday Gourmet” chocolate items • Consumers want gourmet product at a value price

  29. Trends - for 2008/09 • Sugar Free gum - +11.0% sales • Exotic fusion flavors • Fortified products • Value products grew significantly • Theater Box candies • Licorice grew 9.4% • Gummies and chewy candy grew 7.6% • Seasonal candy declines • Reflection of difficult economy and unfavorable dates • Seasonal confectionery down 2.9% • More favorable dates in 2009 • Increased sugar-free product offerings • Increase lower calorie products offered

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