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Confectionery:The Global Market Perspective

Euromonitor InternationalBrian Morgan, Senior Research Analyst

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Outline

Key Market Figures

A brief introduction to market sizes and shares during the 1998-2007 period.

Global Market Trends

Trends highlights grouped by theme: Health, Organic, Premiumisation, Segmentation andInnovation.

Market Opportunities

A glimpse into hot opportunities identified by Euromonitor in the Confectionery market.

Market ProspectsA brief introduction to market performance forecasted by Euromonitor during the 2007-2012 period.

Forecasts and a Word of Advice

Euromonitor advises on strategies to be undertaken in order to maximise growth potential.

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Global Value - Confectionery

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

ValueUS

$million

Global retail sales of confectionery totalled US$20 billion in 2007.

Up 4% on 2006

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Confectionery retail volume sales Growth by region

0.00

1.00

2.00

3.00

4.00

5.00

6.00

Western

Europe

Eastern

Europe

North

America

Latin

America

Asia Pacific Australasia Africa and

Middle East

1998-07 CAGR % 2006/07 (%) Growth

Economic growth drives growth of premium categories of Chocolate and Gum in AsiaPacific/Eastern Europe

Premium Chocolate - driving force in growth in North America

Maturing consumer demand/private label expansion constrain value growth in Western Europe.

Eastern Europe, Asia Pacific and Africa and Middle East lead sales growth

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Global Chocolate confectionery retail sales Growth byregion

Eastern Europe, Latin America and Asia Pacific show strongest growth

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

WesternEurope

EasternEurope

NorthAmerica

LatinAmerica

Asia Pacific Australasia Africa andMiddle East

PercentageGrowthRate

1998-07 CAGR % 2006/07 (%) Growth

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Global sugar confectionery retail value sales Growth bycategory

Toffees, caramels and nougat, Pastilles, gums, jellies and chews and Lollipops

growing strongly

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Mints Boiled sweets Pastilles,

gums, jellies

and chews

Toffees,

caramels and

nougat

Medicated

confectionery

Lollipops Liquorice Other sugar

confectionery

PercentageG

rowthRate

1998-07 CAGR % 2006/07 (%) Growth

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Global Gum retail value sales Growth by category

Sugar-free and Functional Gum lead growth

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

Sugarised gum Sugar-free gum Functional gum Bubble gum

Percentage

GrowthRate

1998-07 CAGR % 2006/07 (%) Growth

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HealthOrganic

Premiumisation

Innovation

Segmentation

CONFECTIONERYMARKET TRENDS

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Global Market Trends: Health

Anti-oxidant properties

New research on chocolates antioxidant and heart-healthy properties has had

a positive impact on consumer perception

Manufacturers tap into the health trend by introducing semi-OTC flavonol-enriched lines

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Withdrawal symptoms relief

Chupa Chups Relax SpainLaunched early 2006 in the wake of Spains publicsmoking ban

Features herbal ingredients intended to calm consumers suffering from smokerwithdrawal symptoms

Packaging reminiscent of cigarette packet
http://www.solostocks.com/ampliarFoto.cfm?foto=http://imagenes.solostocks.com/zoom/7/8/2/zoom_1315287.jpg&desc=chupa%20chups%20mini%20relax

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Energy boost

Sport Beans by Jelly Belly Candy Co US Launched early 2007.

Formulated with carbohydrates, electrolytes and vitamins C and E.

Marketed towards athletes, weekend warriors and sports enthusiasts of all types.

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Global Market Trends: Premiumisation

Premiumisation trend in Western Europe and North America increasesdifferentiation from private label

Mainstream manufacturers focusing on the introduction of premium high-cocoa (>70%) dark chocolate lines, offering richer flavours and higherflavonol content

Sourcing chocolate by cocoa bean origin - targeting the connoisseurconsumer

Retailers such as Tesco in UK, El Corte Ingles in Spain and Carrefour inFrance are set to expand shelf space and offerings for high cocoa darkchocolate.

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Global Market Trends: Organic

Branded Organic Chocolate is positioned as a premium product.

Global retail sales for Organic Chocolate Confectionery reached US$401million in 2006, up 17% up on 2005.

Strong demand for organic chocolate Mergers & Acquisitions

Cadbury Schweppes acquired Green & Blacks in May 2005.

Hershey took over leading US organic manufacturer Dagoba OrganicChocolate Co in November 2006.

Sugar confectionery: Organic lines remain relatively unexplored; but are ofincreasing interest within the industry

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Global Market Trends: Segmentation

Halal Sugar confectionery is gaining popularity in countries with growingMuslim communities, particularly the UK, Spain and Germany.

In early 2007, Mederer Ssswarenvertriebs GmbHs extended its Halal jelly

range through the addition of two new fruit flavours: Valensina Orange Pur andCitrus Pur.

Ummah Foods (March 2007) introduces caramel and orange Halal countlinesthrough the Wm Morrison Supermarket network in UK.

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Innovation

Developed markets:

Developing markets:

Semi-OTC properties

Experimenting with sensations

Natural Ingredients and hybrid products

Convenience through packaging

Oral health

New flavors and fillings

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Semi-OTC Properties

Global Market Trends: Innovation in Developed Markets

Slimming properties Energy boost

Combination of liquid and solidflavours Odour sensations
http://candyaddict.com/blog/candy_pictures/blackblack_gum.gif

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Global Market Trends: Innovation in Developed Markets

Natural ingredientsHybrid products

Convenience through

Larger formats Slimmer formats

Introduction of

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Global Market Trends: Innovation in Developing Markets

Unique Flavours, Fillings and Oral health

Fruit Juice fillings

Yoghurt flavours

Oral care and breath refreshingproperties

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Key Learnings From Success

ORBIT WRIGLEYJR, WILLIAMRUSSIAN MARKET

Wrigleys global sales have benefited from a proactive approach to

emerging markets, not only tapping into the current growth of the gumcategory but also actively driving up demand.

The Russian market is a valid example of this. Retail sugar-free gumsales in this country grew by 15% in local value during 2006. Thegrowth was stimulated by increasing health-consciousness amongRussian consumers and the increasing purchase-power of middle classRussians in urban areas.

Wrigley took full advantage of this trend, and invested heavily during 2006in expanding its distribution network while advertising the health benefitsof sugar-free gum. Furthermore, it expanded its sugar-free gum range byintroducing juicy watermelon, cinnamon and strawberry flavours. As aresult, Wrigleys sugar-free gum sales grew by 17% in local value in 2006.

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The Future of Confectionery

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Confectionery - Retail volume growth at world level

Confectionery forecast to grow at an average rate of 2.3% in retail volume

12500

13000

13500

14000

14500

15000

15500

16000

2007 2008 2009 2010 2011 2012

RetailVolume'000tons

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Global forecast retail volume by sector

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Chocolate confectionery Sugar confectionery Gum

RetailVolu

me'000tons

2007 2010 2012

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Chocolate confectionery retail volume sales Growth by category

Tablets, Bagged Selflines/softlines and Boxed assortments expected to seestrong market performance from 2007 to 2012

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Tablet

s

Countline

s

Bagge

dselflin

es/so

ftlines

Bo

xeda

ssortm

ents

Se

asonalchocolate

Ch

ocolate

with

toys

Alfajor

es

Othe

rchocolate

confe

ctionery

PercentageGrowthR

ate

2007-12 CAGR % 2006/07 (%) Growth

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Sugar confectionery - Retail volume growth by category

Pastilles, gums, jellies and chews, Mints and Toffees, caramels and nougat

expected to see strong market performance from 2007 to 2012

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

Mints

Boiled

sweets

Pastille

s,gums

,jellie

sand

chew

s

Toffees

,caramel

sand

nougat

Medic

atedc

onfectio

nery

Lollip

ops

Liquorice

Othe

rsugarc

onfectio

nery


s

2007-12 CAGR % 2006/07 (%) Growth

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Gum retail forecast volume growth by category

Sugar-free gum and Functional gum expected to see the strongest marketperformance from 2007 to 2012

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

Sugarised gum Sugar-free gum Functional gum Bubble gum


2007-12 CAGR % 2006/07 (%) Growth

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semi-OTCproperties in

chocolateconfectionery

Emergingmarkets for

sugarconfectionery

Expansion intofast growingimpulse foodcategories

Convenience &environmentalawareness: GumPackaging

Distribution

Differentiation

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Semi-OTC properties

Development of semi-OTC products remains relatively unexplored in chocolate tablets andboxed assortments.

Addition of chocolate in Ice cream, Snack bars and Breakfast cereals

This trend offers the opportunity for global chocolate manufacturers to expand into fast growingimpulse food categories, while tapping into their brands well-established reputations.

Economic Growth in Developing Markets

Sustained economic growth in developing markets provides international manufacturers with agolden opportunity to step up investment on premium, sugar-free, functional novelties

Environment concerns

Increasing concerns over environmental issues and CO2 emissions will play an increasing rolein consumer purchasing decisions, particularly in developed markets

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Distribution

The introduction of vending machines in fast food restaurants and near independent food

stores Investment in expanding the number of these outlets might prove successful in other

developing countries such as Morocco and Egypt.


Differentiation by

Gender: Chocolate Confectionery

Ethnic groups: Gum lines

Packaging:

Larger formats adaptable to spaces

Convenience for low energy consumption

Getting across the message: Chupa Chups
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A Word of AdviceDeveloped Markets

Sluggish growth in Bubble Gum - Innovation is key

Gum and Snack bars - Potential for synergies

Continued desire among consumers for healthierproducts

Potential for growth in emerging categories

Positioningcapture consumers attention

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A Word of AdviceDeveloping Markets

Domestic and International players - An alliance for growth

Education - The way forward in Functional gum

should draw inspiration from other successful developments in impulse food

products

Developing hybrid sugar confectionery lines

Gum and Sugar confectionery combinations

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THANK YOU!

Brian Morgan

[email protected]

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