February 2010 United States Confectionery Market

U.S. Confectionery Market Overview

2010 USA Economic Trends Recession ending??? GDP grew 6% in 4 th Quarter 2009 Stock market – DJ – 10,500 …and growing Retail sales surprise in 3 rd and 4 th quarter 2009 Interest rates remain low Consumer spending ???? Issues to watch! Unemployment still at 10% Housing market still down Oil prices rising again Still difficult to borrow Commodity prices head even higher Savings rate up – spending down

2010 USA Retail Trends Uptick in third and fourth quarter sales Shopping trips declined Big spending shift to value channels Increased coupon usage Confectionery seen as a recession resistant category Organic sales decline What’s going to happen with Holiday retail sales? 2009 – 3.6% growth (SpendingPulse projection) declined 2.3% % growth

Cocoa Prices at Historic Highs Cocoa price per ton 2009

Sugar Prices near Historic Highs U.S. Cents per pound Refined beet sugar f.o.b. Midwest

Corn Sweetener Prices near Historic Highs U.S. $ per pound Corn Sweetener Prices have stabilized but are high by historical standards.

Commodities Pricing Milk – significantly lower in 2009 Peanuts – lower than 2008 but increasing Walnuts – prices jumped at end of 2009 Pistachios – Iranian crop shortages drive prices higher Almonds

The 2009 U.S. Confectionery Market % $Change Retail Sales (NCA projection) $ % Manufacturers Shipments (NCA projection) $ % Domestic Manufacturer Shipments$ % Imports $ % Exports $ % The retail profit margin is approximately 35% for the confectionery category. The U.S. Retail Confectionery Category generates approximately $29 billion in retail sales Estimated sales in billions NCA Shipment Data and Global Trade Atlas Import/Export Data

This analysis shows figures for 2009 shipments and retail sales. Chocolate Candy represents approximately 58% of total confectionery dollar sales. CategoryRetail Sales $ Billions Domestic Shipments $ billions Shipment % Growth Vs Imports $ billions Import % Growth Vs Exports $ billions Export % Growth Vs Total Confections $29.3$ %$ %$ % Chocolate$16.9$ %$ %$ % Non-Chocolate$9.3$ %$ %$0.3Even Gum$3.0$ %$ %$ % 2009 Confectionery Categories Analysis NCA estimates based on Source: 2008 US Department of Commerce, Census Bureau 311D, Confectionery Report and NCA Manufacturer Shipment Reports, IRI Data

Confectionery Sales Steady Due to price increases in the confectionery industry in 2009 the industry saw an increase in dollar sales combined with a decrease in tonnage US Dept of Commerce 311 D Report and NCA Manufacturers Shipments

The average U.S. Consumer spent $93 on confectionery products in US Department of Commerce 311D Confectionery Report 2008 Per Capita Retail Sales

U.S. Confectionery The Retail Market

Candy and Gum Ranked 4th Among Food Categories- December 2009 IRI Food, Drug & Mass Excluding Wal-Mart 12/27/2009 Candy and Gum Ranked 4th among 2009 Food Categories in Food, Drug and Mass Outlets

Candy and Gum is the 2 nd Largest Snack Category IRI Food, Drug & Mass Excluding Wal-Mart 12/27/2009

2009 Retail Channel Performance Channel2009 $ Sales2009 % Growth Supermarkets$ % Wal-Mart$ % Mass X Wal-Mart$ % Convenience Stores$ % Drug Stores$ % *Warehouse Clubs$ % *Dollar Stores$ % Vending$ % *Bulk$ % Based on 52 Week Sales – Ending December 27, 2009 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 The confectionery retail market grew across all trade channels but supermarkets, dollar stores, and warehouse clubs outpaced the overall retail market in * Indicates NCA estimate

Confectionery Seasonal Merchandising

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

projections * Valentine’s Day - $971$1,036$1,024$928$935* Easter - $1,884$1,987$1,846$1,990$1,970* Halloween - $2,146$2,202$2,209$2,207$2,225* Christmas - $1,389$1,420$1,376$1,401$1,420* * – projections for 2010 Results and Projection as of February 2010 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 Confectionery Seasonal Sales (** in millions of dollars) Seasonal confectionery sales grew 1.2% in 2009

Seasonal Confectionery Trends VALENTINE’S +0.7%*-9.4%-0.2%+6.7% +0.1% -4.0% EASTER -1.0%*+7.9%-7.1%+5.4% +7.0% -7.6% HALLOWEEN +0.8%*Even+0.1%+2.6% +2.8% +2.3% CHRISTMAS+1.4%*+1.8%-3.1%+2.2% +1.0% +2.4% * IRI FD&M NCA projects a 0.4% increase in 2010 for total seasonal sales.

Holiday Valentine’s Sat. Sunday Monday Tuesday Thursday Easter 4/12 4/4 4/24 4/83/31 Halloween Sat. Sunday Monday Wed.Thursday Christmas Friday Sat. Sunday Tuesday Wed Thanksgiving 11/26 11/25 11/24 11/2211/28 Shopping Days Holiday Dates/Days Indicates positive date for holiday salesIndicates neutral date for holiday sales Indicates negative date for holiday sales

U.S. Confectionery Trends

Trends - for 2009/2010 Core mass brands grew in units and dollars Consumers moved to value channels and value brands Seasonal sales rebound with improving economy Dark chocolate sales continue to grow but at a slower pace Dark chocolate sales increased 9% in 2009 Everyday gourmet chocolate flat in 2009 Consumers want gourmet product at a value price Emerging trends in 2010 More private label chocolates Upscale private label/gourmet packaging Mass brands introducing more dark chocolate items Exotic chocolate flavorings: citrus, spice, salt, fruits High cocoa content chocolates Gourmet packaging for chocolates

Trends - for 2009/2010 Value products grew significantly  Nut/Coconut Candy grew 12.1%  Gummies and chewy candy grew 11.6%  Licorice grew 4.7%  Theater Box candies grew 6%  King sized candies up significantly Sugar Free gum % sales  Exotic fusion flavors  Fortified products Seasonal candy increased in in 2009  Reflection of difficult economy  More favorable dates in 2009  Seasonal confectionery will grow 2.0%