2006 Confectionery Opportunities Research

Expanding the Dimensions of Confectionery A $10 Billion Opportunity Place Retailer’s Logo Here

A $10 Billion Opportunity For Growth Source: Dechert-Hampe & Co. ,[object Object],$10 Billion Opportunity

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Partnership For Confectionery Growth

NCA Research Conducted ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Confectionery Category Opportunity ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: Dechert-Hampe & Co.

Confectionery Is A Huge & Growing Category Source: US Dept. Commerce ,[object Object],[object Object],Confectionery Retail Sales ($ Billions)

Confectionery Sold In Many Different Outlets Source: IRI,NCA Estimates, 2005 ,[object Object],Confectionery Retail Sales $27.9 Billion

Potential For Improved Performance Projects To A $10 Billion Opportunity Confectionery Sales $ Billions Source: Dechert-Hampe & Co. +35% ,[object Object],A $10 Billion Opportunity

Confectionery Is Among Largest Food Categories In Store $ Billions Source: IRI, Food/Drug/Mass, 2005 ,[object Object]

Confectionery Delivers High Profitability Driven By High Gross Margin ,[object Object],Source: DHC Analysis of Retailer Data % Gross Margin

Confectionery Is Among Most Frequently Purchased Categories In Stores Source: ACNielsen HomeScan ,[object Object],Annual Purchases

Confectionery is Expandable – Not a Zero Sum Game Source: Dechert-Hampe & Co. Fixed Consumption Expandable Consumption Consumption weeks Purchasing Consumption weeks Purchasing ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Consumers Often Have A Special Relationship With Confectionery Source: Dechert-Hampe & Co. ,[object Object],[object Object],[object Object],[object Object],[object Object]

Consumers Today Buy Confectionery Everywhere They Shop ,[object Object]

Top Performing Retailers Sell Confectionery At A Higher Rate ,[object Object],Source: DHC Analysis of Retailer Data Confectionery Sales Index Per $MM ACV

Top Performing Retailers Generate Higher Growth In Confectionery ,[object Object],Confectionery % Sales Growth Source: DHC Analysis of Retailer Data

Top Performing Retailers Have Greater Confectionery Section Productivity Source: DHC Analysis of Retailer Data ,[object Object],Confectionery Sales Per Linear Foot

Confectionery Growth & Performance Solutions Are Consumer Driven Consumer Seasonal Merchandising Occasion-Based Marketing Impulse Merchandising New Product Innovation Shopping Interruption Best Practices in Aisle Management Source: Dechert-Hampe & Co.

New Patterns Of Consumer Shopping Behavior Change the Game ,[object Object],[object Object],[object Object],[object Object],[object Object]

Dairy Deli Meat Bakery Produce Confectionery is Located In Middle Of Most Shopping Trips ,[object Object],[object Object],Confectionery

Locate Confectionery Section Earlier In Shopping Trip ,[object Object],Source: DHC Analysis of Retailer Data Confectionery Location In Store

Key Objective: Bring More Shoppers Down Confectionery Aisle ,[object Object],[object Object],[object Object],[object Object],Source: DHC Shopper Observations

Confectionery Performs Best When Adjacent to Snacks ,[object Object],Source: DHC Analysis of Retailer Data 42% 64% Total Snacks 36% 23% Other 6 0 RTE Cereal 9 3 Bottled Juice/Water 7 9 Baking Needs 4 6 Snack Bars 6 12 Fruit Snacks 12 10 Cookies 8 18 Nuts 12% 18% Salty Snacks Others Top Performing Retailers Adjacent Category

Drive Sales By Allocating More Space To Confectionery Gondola ,[object Object],Source: DHC Analysis of Retailer Data Gondola Candy Section Size In Feet

Confectionery Outperforms Many Other Food Categories In Store ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Provide More Variety to Maximize Sales ,[object Object],[object Object],[object Object],[object Object]

Increased Item Assortment Can Drive Confectionery Sales ,[object Object],Source: DHC Analysis of Retailer Data Non-Seasonal Gondola Candy Grocery Dollar Sales Per MM ACV Index

Retailers Risk Lost Sales If They Don’t Stock Candy Items Consumers Want Source: DHC Consumer Interviews ,[object Object],If you were shopping & could not locate the particular product you wanted to buy, which would you do?

Many Consumers Are Unhappy With Retail Merchandising Of Confectionery ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: Dechert-Hampe & Co.

Presentation of Candy Gondola Is Key to Shopping Behavior ,[object Object],[object Object],[object Object],Source: Dechert-Hampe & Co.

Bring Attention To Candy Section Best Practice

Block Section Into Key Confectionery Segments Source: DHC Analysis of Retailer Data ,[object Object],Best Practice

Double-Face Top Selling Items In Center Of Department Source: DHC Analysis of Retailer Data ,[object Object],[object Object],Best Practice

Merchandise Candy Peg Bags Spanning Across Section Source: DHC Analysis of Retailer Data ,[object Object],[object Object],Best Practice

Make A Statement In Premium Candy Source: DHC Analysis of Retailer Data ,[object Object],[object Object],Best Practice

Create A Section For Dark Chocolate Source: DHC Analysis of Retailer Data ,[object Object],[object Object],Best Practice

Create A Section For Sugar-Free Candy Source: DHC Analysis of Retailer Data ,[object Object],[object Object],Best Practice

Stock An Assortment Of Children’s Candy Source: DHC Analysis of Retailer Data ,[object Object],[object Object],[object Object],Best Practice

Create A Section For Theater Boxes Source: DHC Analysis of Retailer Data ,[object Object],[object Object],[object Object],Best Practice

Create A Licorice Section Source: DHC Analysis of Retailer Data ,[object Object],[object Object],Best Practice

Create A Section For Jelly Beans Source: DHC Analysis of Retailer Data ,[object Object],[object Object],Best Practice

Use Best Practices in Aisle Management To Maximize Confectionery Sales ,[object Object],[object Object],[object Object],[object Object],[object Object],Source: Dechert-Hampe & Co. Best Practice

NON-CHOCOLATE PEG BAGS NON-CHOCOLATE LAYDOWN BAGS KIDS NOVELTIES LICORICE FUN SIZE BAGS BOX CHOC PREM CHOC DARK CHOC CHOCOLATE LAYDOWN BAGS MULTI- PACKS BLOCK CHOC KING SIZE THEATER BOXES JELLY BEANS MINTS GUM SUGAR FREE CHOC PEG BAGS Confectionery Schematic With Segment Blocking Best Practice

Reinvent Confectionery Section To Increase Appeal to Consumers ,[object Object],[object Object],[object Object],[object Object],[object Object],Source: Dechert-Hampe & Co. Best Practice

Dairy Deli Meat Bakery Produce Confectionery Perimeter Displays In-Aisle Display Impulse at Checkout Seasonal & Occasional Candy Sales Are Improved By More Points Of Shopping Interruption Best Practice

Increase Confectionery Display On Perimeter & High Traffic Locations ,[object Object],[object Object],[object Object],[object Object],Source: Dechert-Hampe & Co. Best Practice

Candy Is The Most Responsive Category For Display Treatment Source: IRI, Food, 2005 % Increase On Display Only

Candy Is Under-Displayed Relative To Response It Generates Source: IRI, Food, 2005 % Grocery Store Displays

Top Performing Retailers Provide More Merchandising Support Source: IRI, Food, 2005 ,[object Object],59 52 40 Any Merchandising 14 5 16 5 Low Performers Confectionery Gondola % Volume 17 7 20 8 Medium Performers 18 Price Reduction 7 Feature Only 24 Display Only 10 Feature & Display Top Performers

Make Confectionery Available At Key Shopping Locations What Areas Of The Store Did You Shop Today? Donuts Display Single Serve Frozen Novelties Restrooms Cigarettes Checkout Counter Confectionery King Size Candy Confectionery Sandwich Cooler Fountain Drinks Outdoor Display Outdoor Display Entrance Food Service 43% Source: DHC C-Store Shopper Observations 13% 14% 20% 40% 22% Juices Milk/Dairy Frozen Foods Frozen Ice Cream/ Novelties ATM Machine Potato Chip Rack 2 Liter Carbonated Beverages Nutrition Bars Sweet Goods Snacks Grocery Products Nuts Chips Water Bagged Candy Chips Chips Meat Snacks Salty Snacks Salty Snacks Chips Nuts Hot Dog Grill Chips Chips HBC Batteries/ Film Magazines/ Newspapers Coffee Bar Nutrition Bars Coffee Mugs Muffins Baked Goods Automotive Products Confectionery Baked Goods Drinks Candy Non-Grocery Household Products Pet Food Microwave/ Supply Station Candy/Gum Carbonated/Non Carbonated Drinks Waters Beverage Coolers Best Practice

Research Demonstrates Value Of Additional Candy Locations In Store ,[object Object],Source: DHC Analysis of Retailer Data Candy Store Sales Index By Number Of Permanent Locations

Candy Is The Leading Category For New Product Introductions Source: ProductScan ,[object Object],New SKUs By Category

Nearly A Third Of Candy Sales Are Produced By New Items Source: IRI, FDMX, 2004 ,[object Object],% Category Sales

Product Innovation To Meet Emerging Consumer Needs ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Premium & Dark Chocolate Offer Health & Profits ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Source: IRI, Mintel, 2005

Bring Innovation To Category By Tapping Into Snacking Trends ,[object Object],[object Object],[object Object],[object Object],Best Practice

Seasonal Candy Represents About A Quarter Of All Confectionery Sales Source: NCA, 2005 ,[object Object],[object Object],Seasonal Candy $6.2 Billion

Confectionery Sales Are Heavily Influenced By Traditional Holidays $MM Valentine’s Easter Halloween Christmas 4 Week Period Ending Source: IRI, FDM, 2005

Top Performing Retailers Have A Greater Seasonal Candy Sales Rate ,[object Object],Source: DHC Analysis of Retailer Data Sales Index Per $MM ACV

There Are Top Retailers That Have Greater Sales Rates at Each Season ,[object Object],Source: DHC Analysis of Retailer Data Top Performer % Advantage 27 % % % % 33 41 22 Halloween Valentines Easter Christmas

Most Consumers Buy Seasonal Candy at Traditional Holidays ,[object Object],Holidays/Occasions % Consumers Buying Candy Source: DHC Consumer Interviews

Manage Seasonal Candy To Meet Consumer Needs ,[object Object],[object Object],[object Object],[object Object]

Christmas Candy Is An Important Feature In Holiday Celebrations ,[object Object],Source: DHC Consumer Interviews 86 Stocking Stuffer 71 Decorations 64 Baking 85 Guests/Party 90 Snacking 95 % Gifts Christmas Candy Usage 77% of consumers agree: “ Christmas candy is an important part of the holiday celebration”

Consumers Buy Christmas Candy On Multiple Shopping Occasions Source: DHC Consumer Interviews ,[object Object],37% Make a special trip to buy Christmas Candy 43% Buy Christmas Candy when I see it on display 53% Buy Christmas Candy during regular shopping trips % Agree

Consumers Buy Christmas Candy Over The Entire Season ,[object Object],[object Object],Source: DHC Consumer Interviews 7% 0% None 32% 1% After Christmas 34% 8% Christmas Week 45% 23% 1 Week Before Christmas 32% 47% 2-3 Weeks Before Christmas 9% 21% Before Thanksgiving Additional Purchase 1 st Purchase

Christmas Candy Segments Should Be Merchandised To Meet Seasonal Needs ,[object Object],[object Object],[object Object],[object Object],Weeks prior to Christmas 6 5 4 3 2 1 Best Practice

Retailers Must Stock Christmas Candy Consumers Want Source: DHC Consumer Interviews ,[object Object],If Desired Christmas Candy Were Unavailable …

Stores Dressed For The Holidays Create A Candy Buying Environment

Seasonal Candy Is Highly Dependent Upon Merchandising Support Source: IRI, 2005 ,[object Object],Seasonal Candy % Volume

Top Performing Retailers Do More Feature & Display Of Seasonal Candy Source: IRI, 2005 ,[object Object],24 47 4 9 Low Performers Seasonal Candy % Volume 26 45 5 11 Medium Performers 20 Price Reduction 46 Display 6 Feature 16 Feature & Display Top Performers

Manage Holidays As Seasons Instead of Events ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Other Major Holidays & Seasons Represent Key Opportunity For Candy Growth Source: DHC Consumer Interviews ,[object Object],Holidays/Occasions % Consumers Buying Candy

Grow Confectionery With Additional Holiday Buying Occasions $MM Valentine’s Easter Halloween Christmas 4 Week Period Ending Super Bowl Mother’s Day School’s Out Summer Days Back-To- School Thanks- giving Source: Dechert-Hampe & Co.

Expanded Holiday Buying Occasions Source: Dechert-Hampe & Co. Bowl candy / dessert candy / dinner mints Family Food Holiday Thanksgiving Candy bars Lunchboxes Back to School Hard candy won’t melt Picnics/Ballgames Summer Days Piece candy for treats Kids Home School’s Out Gift candy near cards Every Family Mother’s Day Bowl candy for parties Major Social Event Super Bowl Merchandising Focus Rationale Holiday/Event

Other Potential Candy Buying Occasions Source: DHC Consumer Interviews ,[object Object],Occasions % Consumers Buying Candy

Create New Consumer Buying Occasions For Confectionery ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Best Practice

Leverage Holidays & Events With Cross Category Merchandising ,[object Object],Best Practice

Solutions For Confectionery Growth ,[object Object],[object Object],[object Object],[object Object]

Solutions for Confectionery Growth ,[object Object],[object Object],[object Object],[object Object]

2006 Confectionery Opportunities Research

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2006 Confectionery Opportunities Research