Candy’s Challenges Cataloged

The candy category has a lot going for it, according to Lehman Brothers packaged foods analyst Andrew Lazar, a keynote speaker at last month’s National Confectioners Association’s State of the Industry Conference in Orlando, Fla. Please check out our annual “State of the Industry” report, beginning on page 42, for a summary of key advantages/opportunities. Lazar’s perspective on challenges facing the candy category might be condensed using the following four words — costs, consumers, customers and competition.  
Costs. “Following years of benign input costs … costs of inputs [ingredients, energy, packaging] are going up.” Price increases for finished confectionery products averaged about 2 percent last year, Lazar said, adding that additional increases will be required this year.
Consumers.  They’re schizophrenic and demanding. “The consumer who will spend $4 on a latte is the same consumer who will stand in a long line at Costco to save on a pack of paper towels,” said Lazar.
“Today’s consumer is more variety-seeking than ever before, which puts more pressure on manufacturers to deliver that variety,” he continued. “Consumers’ needs are rapidly changing and expectations are even higher. This means that better, faster innovation and more creative ways to reach the consumer [are needed].”
Customers. Traditional grocery retailers are challenged. “The real [candy vendor] winners are going to be the ones who help the traditional retailers succeed. You’ve got some great regional players like H-E-B, Wegman’s and Publix who get it, but a lot of larger, publicly traded companies do not.”   In-store execution is critical, Lazar emphasized. “It’s about continuing to provide creative solutions to retailers; that’s where you’re going to win.”
Competition. “Every one of you is competing with Procter & Gamble and Pepsico … because they all want that retail space,” he said, addressing candy manufacturers. “And they’re good at getting it.”
He added that candy companies are “no longer operating only against other confectionery players. The competitive set is the broader snacking market, and broader consumer staples arena, not just for consumers’ share of mind/stomach, but for investor dollars.”
Medwar Receives Service Award
A veteran of Mars Inc., now a member of the Ferrara Pan Candy Co. team, Rich Medwar was presented with NCA’s Distinguished Service Award at the State of the Industry Conference. NCA Chairman Jim Conlan saluted Medwar, describing him as “a leader,” “a visionary,” and “champion of this industry.”
Good Global Growth Opportunities
Candy is well positioned for penetrating emerging markets, according to Lehman Brothers packaged foods analyst Andrew Lazar. It’s relatively easy to distribute, and you don’t need a well-developed retail infrastructure to support it. Here’s a look at how global confectionery sales break out as well as growth trends.
Region % of Global Sales % Change (2004 vs. 2003)
Western Europe
39% +15%
North America
24% +3%
Asia Pacific
15% +8%
Eastern Europe
8% +9%
Latin America
8% +12%
Africa and Middle East
3% +9%
2% +26%