Candy, Nut, and Confectionery Stores

Industry Snapshot

There were approximately 8,575 establishments in the candy, nut, and confectionery industry, according to a 2009 D&B Marketing Solutions report. Over 90 percent of firms had nine or less employees. This largest segment of the industry accounted for nearly 70 percent of revenues, reflecting the highly fragmented nature of the industry. Whether they were individual stores serving a local community or chains and franchises spread across larger areas, candy, nut, and confectionery stores faced stiff competition from convenience stores and other establishments that include retail sale of candy, nuts, popcorn, and other confections. According to the National Confectionary's Association, Wal-Mart, supermarkets, drugstores, and convenience stores account for nearly 60 percent of all candy sales. The candy, nut, and confectionery industry's $1 billion in revenues makes up just a fragment of the over $28 billion confectionary industry.

The two primary subcategories within the sector are candy, nut, and confectionery stores, which accounted for 32 percent of industry revenues, and candy, which accounted for 41 percent of revenues. Nuts (12 percent of revenues); confectionery (9 percent); popcorn, including caramel corn (4 percent); and confectionery produced for direct sale on the premises (2 percent) round out the sector.

Specific economic trends directly impacted the industry in the late years of the first decade of the 2000s. The overall economic slowdown, increased unemployment, rising gas prices, and reduction in consumer spending&especially for nonessentials&affected the candy and confectionary industry negatively. In addition, raw material prices increased significantly. Cocoa prices began to rise rapidly in the middle of 2006 and hit record highs in 2008, reaching above $3,000 per pound, compared with around $1,500 per pound in 2005. Corn sweetener prices also reached near record highs in 2008, to above $9 per pound, compared to approximately $2.25 per pound for most of 2005. According to the National Confectioners Association, overall confectionary sales fell by 4 percent in 2008 to 6.9 billion pounds.

Fannie May Confections Inc. was founded in Chicago in 1920 and included the Fannie May and Fanny Farmer brands. Before being purchased in spring of 2004 by Alpine Confections of Alpine, Utah, Fannie May Confections Inc. closed its Chicago manufacturing plant and all 228 Fannie Farmer stores, including 112 in the Chicago area. In 2006, Fannie May was purchased from Alpine Confections by 1-800-FLOWERS.com for $96.6 million in cash. The transaction gave 1-800-FLOWERS.com the rights to the Fannie May, Harry London, and Fanny Farmer brands, Fannie May's operating plant in Canton, Ohio, and 52 Fannie May retail outlets in the Chicago area. In its 2008 annual report, 1-800-FLOWERS.com reported good growth for the Fannie May sector, based primarily on e-commerce sales.

Founded in 1981 in Durango, Colorado, Rocky Mountain Chocolate Factory manufactures confections, and in 2009 operated 7 company-owned stores and 327 franchise stores in 38 states, Canada, and the United Arab Emirates. Rocky Mountain also operates Lucy's Chocolate Factory, which manufactures chocolates for drug store and grocery channels. Although Rocky Mountain fared better than Fannie May during the mid-years of the first decade of the 2000s, the company felt the effects of the recessive economy and rising raw good prices. Revenues totaled $28.5 million in fiscal 2009, down from $31.9 million and $31.6 million in 2008 and 2007, respectively.

Other industry leaders include Godiva Chocolatier Inc., of New York, and Stuckey's Corp., of Silver Spring, Maryland. Founded in 1966 as an importer and distributor of Godiva chocolates from Belgium and purchased by Campbell Soup Co. in the 1970s, Godiva operates more than 200 specialty boutiques in major U.S. cities and more than 1,000 additional outlets in department and specialty stores. Godiva reported 2007 revenues of $400 million. In 2008, �lker Bisk�vi Sanayi A.S., a food company based in Istanbul, Turkey, purchased Godiva from Campbells's Soup for $850 million. Stuckey's, best known for its pecan logs and other candies, owns and franchises about 175 stores in 20 states. Catering to tourists, Stuckey's operates stores along interstate highways throughout the United States, as well as Stuckey's Express outlets located inside convenience stores and travel centers on well-traveled routes. The company's 2007 estimated revenues were $3.9 million.

According to the National Confectioners Association (NCA), dark chocolate sales rose rapidly in the middle years of the first decade of the 2000s, following positive health reports. Dark chocolate with high cocoa content is rich in epicatechin, an active member of a group of compounds called plant flavonoids that keep cholesterol from gathering in blood vessels. Sales of dark chocolate increased by nearly 30 percent between 2003 ($1.26 billion) and 2005 ($1.62 billion). Although growth slowed during the late years of the first decade, dark chocolate continued its upward trend, with year-on-year sales increasing by 12 percent between 2007 and 2008. Other trends included growing demand for exotic chocolate flavorings such as citrus-, spice-, and fruit-flavored chocolates; gourmet packaged chocolates; chocolates with high cocoa content; and single-packaged chocolates.

Confectionery products in all trade classes, according to the NCA, totaled $28 billion in 2008, a 2.2 percent increase from 2007. Chocolate candy retail sales grew 2.3 percent, to $15.9 billion, and non-chocolate candy sales grew just 0.1 percent, to $8.6 billion. Gum retail sales increased by 4.9 percent to $2.5 billion. Confectionary sales are especially sweet for retailers around holidays; however, the weak economy resulted in stagnant to lower year-on-year sales for several important holidays, including Valentine's Day, which resulted in an overall holiday sales decline of nearly 3 percent. Nonetheless, the overall confectionary industry remained healthy as many people satisfied their sweet tooth, using chocolate in particular as a "comfort food" during uncertain times.