the nca fosters industry growth by advancing and promoting the interests of the confectionery...

The NCA fosters industry growth by advancing and promoting the interests of the confectionery industry and its consumers.

Christmas Report

2010


Contents

• Executive Summary • Christmas Season and Candy• Christmas Candy Sales Results• Christmas Candy Support• Opportunities• 2010 Key Takeaways


Executive Summary - Results

Candy Category is big, growing, and critical towinning Holiday shoppers for retailers

• Christmas confectionery sales grew at a 4.3% rate. Drug stores sales grew by 6.7%, supermarket sales grew 4.4% and Mass merchant sales grew 0.8%.

• Christmas seasonal candy used for gifts, stocking stuffers and Holiday parties contribute 54 percent of candy sales in November and December

• Chocolate seasonal candy sales grew 5.4% while non-chocolate seasonal confections declines by -7.0%.

• Continuing a trend that has developed over the past 5 years, seasonal Christmas confections grew at a 3.9% pace during the month of December. Sales on Christmas confections also grew in November and Seasonal Christmas Chocolate grew in October by +3% pointing to Retailers capitalizing on early season sales.

• Aggressive pricing kicked off strong December sales performance

Key Takeaways• Mass and Drug staked

claim in 2010, and won the season

– Promoted broad range price points for all shoppers – drove price image to win the season

– More Feature Advertising across brands lifted category for all

– Non-branded Seasonal Thematic ads branded retailer as Holiday solution


Executive Summary - OpportunityRetail support was mixed

• While % of Merchandised Volume increased for Christmas Seasonal Chocolate and Non-chocolate candy, incremental volume declined

• While Candy ads increased in Drug, +10%, and Mass, +39%, they declined in Grocery (8%)

• F & D support lagged 2009 levels and Prominent feature ad placement declined in 2010 for candy

• Drug and Mass did a better job than Grocery of promoted a variety of different price points to address all types of shoppers.

• Halloween candy drove November sales raising the question: “Did leftover Halloween candy impede on Christmas candy incremental sales?

• Christmas Seasonal items per store trending down pointing to opportunity for innovation

Key Insights

• Recommend more F&D supporting a broad range of price point, particularly at the lower range to drive incremental sales focusing on December where efficiencies run higher

• Effectively managing retail execution the entire Halloween AND Christmas Holiday period is critical ‘right’ product being on floor, minimizing risk and maximizing incremental volume throughout the season


Contents



Consumers Entered Holiday Season Concerned About the Economy, But Ultimately Spent

Initial reports on Consumer Confidence were conservative for December

…with 3 in 10 Americans expected “more” layoffs over next six months

Source: BIGresearch®

U.S. retail sales rose the week before Christmas, putting Holiday sales on track to hit the high end of estimates.

Retail sales rose 4.8 percent for the week ended December 25 compared with the year-earlier period.

Optimism about the economy has grown…and consumer spending suggested the economy perked up in the 4th quarter and appears to be entering the New Year with some momentum.

Source: International Council of Shopping Centers and Goldman Sachs


Consumers Took Advantage of Holiday Deals and Spent More On-line Than Ever

• Approximately two third of American shopped on Black Friday weekend, spending an average of $365.34 on gifts and other discounted merchandise, up $22.03 from last year. Source: National Retail Federation

• Online sales for November and December rose 13% from 2009. There was a +17% year-over-year surge Christmas week*. Source: comScore

– On Cyber Monday* shoppers spent $1.03 billion, the first ever billion dollar internet sales day on record. That was followed by $911 million on Tuesday, $868 million on Wednesday and $850 million on Thursday. Source: comScore

– 88.2% of retailers had special promotions on Cyber Monday this year, up from 72.2% in 9009. Source: National Retail Federation

– Approximately seven million shoppers were reported to use their mobile device to shop for gifts or research products and promotions, up from the estimated four million in 2009. Source: National Retail Federation

Christmas Week* = Week Ending December 26Cyber Monday* = The Monday after Black Friday, November 29, 2010


Food & Candy Sales Trended Positively For Christmas Holiday

• Dec Grocery Store sales were down (.5%) from Nov and up 2.7% from Dec 2009…Oct thru Dec Grocery Store sales were up 2.7% from the previous year. U.S. Census Bureau 1/14/2011 *Adjusted for seasonal variation

• Sugar & Sweets Expenditure was up +2.2% for Dec 2010 vs. Dec 2009; +3.8% for Oct-Dec 2010 vs Yago. Bureau of Labor Statistics

• By mid- December, 20% of consumers say they purchased food or candy as gifts. National Retail Federation

• Baking homemade Christmas cookies (81.6%) topped the list of December activities. BIGresearch.com


Candy & Gum Continues To Be a Key Category To Retailers In Terms Of Size and Growth!

©2010 Symphony IRI Group

Candy & Gum •Racks up over $9 Billion in sales annually in FDMx alone

•Is the 5th largest food category.

•Is growing faster than the top 4 at +3.8% vs. a year ago.

+3.8%

(3.0%)

+2,7+0.8% +1.5%


Candy Sales During Christmas Season Represents 19% Of Annual Sales


20%11%8% 19%

Close to 40% of annual Candy $ sales occur during the eight weeks that make up the Halloween and Christmas seasons


Contents



Christmas 2010 Sales Summary

• According to IRI, overall Christmas confectionery sales grew at a 4.3% rate. Drug stores sales grew by 6.7%, supermarket sales grew 4.4% and Mass merchant sales grew 0.8%.


• Continuing a trend that has developed over the past five years, seasonal Christmas confections grew at a 3.9% pace during the month of December. Sales on Christmas confections also grew in November and Seasonal Christmas Chocolate grew in October by +3% pointing to Retailers capitalizing on early season sales.

$ Percent Change vs. Year Ago (Food, Drug & Mass excluding Wal-Mart)Distribution Channel FD&M Food Drug MassCandy Category % Change % Change % Change % ChangeTotal Seasonal Candy 4.3% 4.4% 6.7% 0.8%Chocolate Candy 5.4% 5.1% 7.5% 2.8%Non-Chocolate Candy -3.9% -1.8% -0.1% -9.4%


Chocolate Contributed 64% Of Candy Sales In FDMx For Christmas…and Growing.


+4.1%

+1.1%


Christmas Chocolate Dominate November and December Candy Sales


• Christmas seasonal chocolate used for gifts, stocking stuffers and Holiday parties contribute 54 percent of candy sales in November and December

• Seasonal Non-Chocolate accounts for 6%


Christmas Confectionery Sales Grew At +4.3% Vs. 2009 Led By Drug Sales Which Grew By 6.7%


• Drug led total category and in all segments

• Food sales grew 4.4% and Mass merchant sales grew 0.8%.


TTL Christmas Candy

Chocolate Christmas Candy

Box/Bag/Bar > 3.5oz

Seasonal Christmas Choc

Gift Boxes

Seas. Christmas N-C


Food Drug & Mass Channels Vie For Seasonal Christmas Candy Sales

Drug Channel accounts for 60% of Gift Box sales


Two Leading Brands Drove November/ December Christmas Chocolate Sales


…While Other Candy Brands Contributed More Than Half Non-Chocolate Christmas Candy Sales


Contents



Merchandising Lifts Strong, But Down From 2009


• Merchandising drives lifts of 150% to 250% for seasonal Christmas Candy.

• But, these lifts declined from a year ago.

CHOC GIFT CHRISTMAS CHRISTMASBOX/BAG/BAR BOX SEASONAL SEASONAL > 3.5OZ CHOC NON-CHOC

(6%)(13%)

(24%)

(15%)


Base Sales Show Solid Growth…But Merchandising Was Less Impactful Than 2009


• % Volume sold on Merch increased for Christmas Seasonal Chocolate and Non-chocolate candy

• But, incremental volume declined pointing to merchandising having less impact on incremental consumption

% Vol, Any Merch Chg Yago

Incr Vol % Chg YAgo

Base Vol % Chg YAgo


Vast Majority Of Sales Come On Promotion With Display Having Largest Contribution



Aggressive Pricing Kicked Off Strong December Sales Performance

Price reductions in early November

may be premature and drive limited

incremental

Pulling back on merch Christmas week may have left incremental

sales on the table


Seasonal Christmas Chocolate Had the Strongest Promotion Efficiency*


With Exception of Seasonal Chocolates, Roughly 45% of November Merchandising Investments May Have Unnecessarily Subsidized Volume…

.

Merchandising Efficiency For ALL Segments Climbed Beginning of December

Seasonal Chocolates Merchandising was Very Efficient Season-Long

November Merchandising Subsidized Nearly Half of Volume

Proving Less Than Efficient

*Promotion Efficiency = % of Promoted Volume That is Incremental


2010 Gift Box Merchandising Lagged Behind 2009 Levels, Eclipsing 50% ACV F&D Only Once In Dec


In 2009, Gift Boxes had 4 of 8 weeks above 50% ACV pointing to a significant pull back in 2010


Feature &Display Levels For Seasonal Christmas Chocolates Trailed 2009


In 2009, Seasonal Christmas Chocolate stayed above 40% beginning Thanksgiving week…in 2010 F&D levels dipped in mid-December.


Seasonal Christmas Non-choc Merchandising Levels Matched 2009 Only Twice During Season


…and had only one week above 40% ACV, compared to three weeks in 2009


Despite Promoting a Week Later, 2010 Candy @ Drug & Mass Ads Increased…Thanksgiving Thru New Year’s

• Grocery candy promotions actually decreased (8%).

• Drug continued to promote candy the most +10% vs. 2009

• Mass saw the largest increase over the prior year, +39%.

© 2010 Market Track. Private and Confidential


29 © 2010 Market Track. Private and Confidential

Holiday Snack Ads Grew and Candy’s Share Of Snack Ads Grew In Proportion To Other Snacks

Ad Blocks by Product Group

45 46 47 48 49 50 51 52 53

20082009

2010

2,569 2,5502,508

2,003 1,9551,768 1,729

1,5561,310

73 %

27 %63 %

37 %

63 %

37 %

51 %

49 %

55 %

45 %

54 %

46 %

55 %

45 %

66 %

34 %

84 %

2,748 2,6322,527

2,110 2,1091,937

1,8001,795 1,765

77 %

23 %

67 %

33 %

67 %

33 %

57 %

43 % 60 %

40 %

56 %

44 %

58 %

42 %

64 %

36 %82 %

2,8002,7752,514

2,0321,962 1,940 1,838 1,834

1,197

85 %

69 %

31 %

67 %

33 %

50 %

50 %

57 %

43 %

56 %

44 %

54 %

46 %

59 %

41 %

75 %

25 %

Color byCandy v Snack

All Other SnacksCandy

WE Nov 7, 2010

WE Nov 14, 2010

WE Nov 21, 2010

WE Nov 28, 2010

WE Dec 5, 2010

WE Dec 12, 2010

WE Dec 19, 2010

WE Dec 26, 2010

WE Jan 2, 2011


Prominent Feature Ad Placement Declined In 2010 For Candy

Newspaper Wrap/ROP Ad placement all but disappeared, while some front page share shifted to other pages.

Although there was an increase in features, overall quality has declined over the past three years.

© 2010 Market Track. Private and Confidential




45 46 47 48 49 50 51 52 53

Drug

Grocery

Mass

22 %

52 %

17 %

19 %

53 %

21 %

11 %

46 %

34 %

17 %

51 %

20 %

20 %

51 %

18 %

13 %

58 %

20 %

19 %

53 %

21 %

12 %

61 %

17 %

29 %

15 %

54 %

17 %

38 %

36 %

16 %

13 %

35 %

37 %

16 %

44 %

29 %

15 %

10 %

37 %

37 %

15 %

15 %

39 %

30 %

59 %

26 %

48 %

36 %

11 %

41 %

43 %

48 %

43 %

63 %

34 %

61 %

23 %

53 %

29 %

28 %

57 %

21 %

41 %

28 %

16 %

36 %

31 %

18 %

54 %

22 %

31 %

63 %

Color byCandy Price Bin

x ≤ 1.001.00 < x ≤ 2.502.50 < x ≤ 5.005.00 < x ≤ 10.0010.00 < x ≤ 15.0015.00 < x ≤ 20.0020.00 < x

Drug Addressed all shopper segments with The Lowest Overall Price Perception, As Well As Largest Share Of Candy

Under $1.00For Much of the Season, Drug and Mass ‘owned’ the lower and middle tier seasonal price points ($2.50-$5.00 and lower) and promoted a variety of

different price points to address all types of shoppers

For Much of the Season, Drug and Mass ‘owned’ the lower and middle tier seasonal price points ($2.50-$5.00 and lower) and promoted a variety of

different price points to address all types of shoppers

WE Nov 7, 2010

WE Nov 14, 2010

WE Nov 21, 2010

WE Nov 28, 2010

WE Dec 5, 2010

WE Dec 12, 2010

WE Dec 19, 2010

WE Dec 26, 2010

WE Jan 2, 2011

Price Perception by Trade Class

Grocery started the season with a low price perception, but focused on

Higher Price point items after week

12/12

Grocery started the season with a low price perception, but focused on

Higher Price point items after week

12/12

The NCA fosters industry growth by advancing and promoting the interests of the confectionery industry and its consumers.32© 2010 Market Track. Private and Confidential


45 46 47 48 49 50 51 52 53 45 46 47 48 49 50 51 52 53 45 46 47 48 49 50 51 52 53

2008 2009 2010

Drug

Grocery

Mass

36 %

64 %

28 %

72 %

31 %

69 %

27 %

73 %

24 %

76 %

32 %

68 %

26 %

74 %

40 %

60 %

64 %

36 %

40 %

60 %

29 %

71 %

35 %

65 %

31 %

69 %

31 %

69 %

32 %

68 %

29 %

71 %

40 %

60 %

47 %

53 %

44 %

56 %

41 %

59 %

41 %

59 %

28 %

72 %

30 %

70 %

27 %

73 %

31 %

69 %

37 %

63 %

44 %

56 %

88 % 83 %

17 %

82 %

18 %

75 %

25 %

71 %

29 %

70 %

30 %

72 %

28 %

84 %

16 %91 % 89 % 85 %

15 %

81 %

19 %

79 %

21 %

74 %

26 %

73 %

27 %

70 %

30 %

82 %

18 %91 % 86 %

14 %

83 %

17 %

79 %

21 %

75 %

25 %

78 %

22 %

79 %

21 %

68 %

32 %

80 %

20 %

85 %

15 %

80 %

20 %

60 %

40 %

55 %

45 %

51 %

49 %

65 %

35 %

56 %

44 %

53 %

47 %

65 %

35 %

81 %

19 %90 %

69 %

31 %

57 %

43 %

51 %

49 %

52 %

48 %

52 %

48 %

55 %

45 %

60 %

40 %

75 %

25 %

68 %

32 %

62 %

38 %

54 %

46 %

52 %

48 %

52 %

48 %

49 %

51 %

55 %

45 %

81 %

19 %

Color byCandy v Snack

All Other SnacksCandy

Confectionery and Snacks Share of Holiday Snacking by Trade Channel

All trade classes delayed Candy promotions by one week and increased Candy’s share of Category.Drug and Mass gave the most share to Candy consistently weeks 48-51, while Grocery delivered only 1/5th to 1/3rd of the holiday snacking features to confectionery.

All trade classes delayed Candy promotions by one week and increased Candy’s share of Category.Drug and Mass gave the most share to Candy consistently weeks 48-51, while Grocery delivered only 1/5th to 1/3rd of the holiday snacking features to confectionery.


Drug & Grocery showed increases in promotions that did not specify a manufacturer (“Other”); Grocery delivered less ads overall

Ad Blocks by Manufacturer

Her

shey

Mas

terF

oods

Oth

er

Russ

ell S

tove

r/Pa

ngbu

rn

Nes

tle

Lind

t/G

hira

rdel

li

Wrig

ley

Ferr

ero

Toot

sie

Roll

Priv

ate

Labe

l

Lead

er/G

ray

Farle

y/Sa

ther

s Ca

ndy

Co

RM P

alm

er

Kraft

Cadb

ury

Adam

s

DeM

ets

Cand

y Co

2009D

rug

20102009

Grocery

20102009

Mass

2010859 740

596 696

254 331 255 272 293 224 152 128 168 89 64 72 72 91 74 72 70 40 50 21 39 60 35 84 34 47 41 24 32 23 26 19 14 20 19 12 17 13 23 12 11 19 10 9 6 15 10 2 3 12 11 5 11 10 5 1 5 3 6 6 1 1 1 1

1,206

687827 795

361 382 320 310 285 239 232 150 179 149 94 102 101 92 76 60 34 45 86 19 64 66 71 23 45 34 35 18 29 16 14 23 25 15 15 17 6 10 5 10 24 3 5 9 8 8 9 6 9 8 8 8 7 7 3 1 1 1 1

623337

207 117239 145 124 141 78 147 27 72 21 26 51 35 48 19 22 22 24 10 51 13 1 1 6 3 4 1 6 7 1 22 6 1 6 10 23 6 3 14 10 3 1 1 2 5 6 3 3 8 7 8 1 3 6 7 2 4 3 4 5 1 5 1 3 2 2 1 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

531299

112 147 253 172 122 142 86 102 32 53 14 30 39 28 21 10 18 1 26 44 5 27 9 4 3 1 1 26 1 7 8 21 36 2 1 6 1 9 9 2 10 8 4 3 2 1 3 3 1 3 2 3 3 2 2 2 1 1 1 1 1

206 149 83 32 62 63 51 8 17 29 25 1 4 14 18 7 5 11 2 8 2 2 1 1 1 1 6 2 1

290 199 25136 64 65 66 17 38 16 38 13 5 20 8 10 6 14 2 2 1 1 1 5 4 1 1 7 1

Color byChannel

DrugGroceryMass


• Overall Drug and Mass added Ad support for most manufactures while Grocery reduced for mostOverall Drug and Mass added Ad support for most manufactures while Grocery reduced for most

• Both Drug and Grocery channels promoted more ‘Other’ manufacturer, indicating a shift to less product-or Both Drug and Grocery channels promoted more ‘Other’ manufacturer, indicating a shift to less product-or manufacturer-specific advertisements and towards manufacturer-specific advertisements and towards seasonal themed adsseasonal themed ads

17,627,400,000


Examples of ‘Other Manufacturer’

34© 2010 Market Track. Private and Confidential

Walgreens, Los Angeles 11/07/2010

Other Manufacturer refers to ads in which a specific manufacturer is not called out, and in some cases, an uncommonly advertised manufacturer, such as in the examples below.Other Manufacturer refers to ads in which a specific manufacturer is not called out, and in some cases, an uncommonly advertised manufacturer, such as in the examples below.

Walmart, Atlanta12/26/2010

Rite Aid, San Diego12/24/2010

Kmart, Baltimore12/19/2010

Target, Buffalo12/19/2010

Walgreens, Kansas City12/12/2010

In this ad, Ashbury and Merci are both considered “Other Manufacturer”

In this ad, Ashbury and Merci are both considered “Other Manufacturer”


Contents

• Executive Summary • Christmas Season and Candy• Christmas Candy Sales Results• Christmas Candy Support• Opportunities• 2010 Summary


Although December Is Dominant Candy Month For Christmas, November Sales Growing


+14.0%

+5.8%

+7.8%

+7.9%

(3.5%)+2.7%

+2.0%

(7.3%)

+3.9%

+10.8%

(0.7%)

(18.9%)


Snack Size And Box/ Bag/ Bar Drove Chocolate Sales Growth In November/ December


• Halloween candy drove November sales growth raising the question: “Did leftover Halloween candy impede on Christmas candy incremental sales?

TTL Choc

Box/Bag/Bar > 3.5oz

Seasonal Christmas Choc

Gift Boxes

Box/Bag/Bar < 3.5oz

Snack Size

Seasonal Halloween Choc


Seasonal Christmas Non-chocolate Declined Vs. 2009


• Lower merchandising in both months (25%-50% ACV)* for overall Non-Choc drove declines in across all segments except Chewy & Hard/Roll Candies

• Yet, as with Chocolate, Halloween candy drove November sales growth

• Early Christmas seasonal trends were especially impacted by Halloween gains

TTL Non-Choc

Seas. Christmas Non-Choc

Chewy Candy

Novelty Candy

Hard Sugar/PKG & Roll Cndy

Seas. Halloween Non-Choc


Christmas Seasonal Items Per Store Trending Down Pointing To Opportunity For Innovation


Contents



Key Takeaways

• Category is big, highly relevant, and critical to winning Holiday shoppers for season

• Mass and Drug staked claim in 2010, and won the season

– Promoted broad range price points for all shoppers – drove price image to win the season

– More Feature Advertising across brands lifted category for all – Non-branded Seasonal Thematic ads branded retailer as Holiday solution

• Opportunity for improvements in Grocery– A higher share of Feature and Displays for Candy supporting consumer holiday

snacking behavior is warranted– Broader range of price points, particularly at the lower range for price impact– Improved Execution, especially in December where efficiencies run higher– Improve Halloween execution as residual inventories adversely impacted

merchandising efficiencies with November promotional discounts– Effectively managing plans and retail execution the entire Halloween AND

Christmas Holiday period is critical to maximize incremental opportunities during highest seasonal volume periods

– Ensuring ‘right’ product mix is merchandised on the floor will minimize risk and maximize incremental volume throughout the season

the nca fosters industry growth by advancing and promoting the interests of the confectionery...

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