Candy and Other Confectionery Products

SIC 2064

Companies in this industry

Industry report:

This category includes establishments primarily engaged in manufacturing candy, including chocolate candy, other confections, and related products, including chocolate-covered candy bars; breakfast bars; candy, except solid chocolate; chocolate bars made from purchased chocolate; chocolate candy, except solid chocolate; confectionery cake ornaments; fudge; granola bars; marshmallows; candy-covered nuts; candied, glazed, or crystallized fruits; and popcorn balls and candy-covered popcorn products. Establishments engaged primarily in manufacturing solid chocolate bars from cacao beans are classified under SIC 2066: Chocolate and Cocoa Products. Establishments manufacturing chewing gum are included under SIC 2067: Chewing Gum, while those primarily engaged in roasting and salting nuts are classified in SIC 2068: Salted and Roasted Nuts and Seeds. Establishments primarily engaged in manufacturing confectionery for direct sale on the premises to household consumers are classified in SIC 5441: Candy, Nut, and Confectionery Stores.

Industry Snapshot

Americans have an insatiable appetite for candy. The U.S. population consumes more than 7.7 billion pounds of candy each year. Approximately 60 percent of that total is chocolate, with gummy bears and a wide variety of other nonchocolate confections accounting for the remainder. Despite the slow economy in the United States in the late 2000s, candy sales continued on an upward trend, with retail sales of candy reaching $24.5 billion in 2008, according to the National Confectioners Association (NCA).

In the first decade of the twenty-first century, analysts forecast a number of challenges for the industry's equipment and ingredient suppliers, including the shift in technical knowledge from the manufacturer to the supplier, increased product development, new distribution channels, continued plant and company consolidation, and the introduction of so-called nutraceuticals into confectionery products. This also included the passing of several state legislative measures designed to restrict sale of candy in schools. By the late 2000s, several states had banned junk food, including candy, from school vending machines.

According to the U.S. Census Bureau, approximately 1,608 establishments operated in this category in 2007. Industry-wide employment was approximately 50,242 workers who received a payroll of more than $1.8 billion. Companies in this industry tended to be small, with 80 percent employing fewer than 20 workers and only 7 percent reporting more than 100 employees. Value of total shipments reached $15.6 billion in 2007, down from $17.2 billion in 2005.

Background and Development

Many of the most popular candy bars sold in the early twenty-first century were developed between 1890 and 1920 by various candy makers around the United States. Rights to many of these candies were bought and sold many times since they were developed and are owned by large corporations such as Mars, Hershey Foods, Warner-Lambert, and RJR Nabisco.

Milton S. Hershey manufactured the first chocolate bar in the United States in 1894. Hershey Kisses were introduced in 1907. The Bunte Brothers are credited with manufacturing the first chocolate-covered candy bars in 1911. During World War I, Hershey and other candy makers shipped large blocks of chocolate to army training camps, where the blocks were cut into smaller chunks for distribution. This task became too time-consuming for military personnel, and the manufacturers started wrapping individual chocolate bars before shipping them. After the war, candy makers continued to sell candy commercially in this form, and this method of selling candy became popular and convenient.

Many lines of candy bars were first sold for a dime, but sales did not catch on because consumers could buy a pound of loose candy for that same price. Immediately after World War I, however, sugar and chocolate prices dropped, and the price of most candy bars was cut to a nickel. The price remained constant until the late 1960s, when the price went back to a dime because of rising costs. Since that time, prices have steadily climbed.

The forerunners of Canada Mints and NECCO wafers were first produced in 1847 by Chase and Company, with Canada Mints themselves introduced in Canada in the late 1880s and brought to the United States in 1908. NECCO wafers were introduced in 1912 by the New England Confectionery Company, which was formed by Chase and two other candy companies. The NECCO brand name is derived from the company's initials.

LifeSavers first rolled into production in 1912 in a small factory in Cleveland, Ohio, when chocolate maker Cornelius Crane developed mint tablets as a summertime product to compensate for the drop in sales of chocolate during the hot summer months. Crane went to a pill manufacturer to produce the mints, and a malfunctioning machine produced mints with a hole in the center, thus creating the first LifeSavers product.

The first part of the twentieth century marked an explosive period of growth for the industry. Dozens of candy products were introduced during this period, and many endured. Ferrara Pan, a candy company formed in 1919 in Illinois, produced Jaw Breakers, Atomic Fireballs, and Boston Baked Beans. In 1919, the Oh Henry! bar was first manufactured by the Williamson Candy Company of Chicago. Charleston Chews were first sold in 1922 by the Fox-Cross Candy Company near San Francisco, Goobers in 1925 by the Blumenthal Chocolate Company in 1925, and Milk Duds in 1926 by the Holloway Company. During the 1920s and 1930s, the James O. Welch Company introduced several favorites that continue to be sold, including Sugar Daddy, Sugar Babies, Pom Poms, and Junior Mints. Heath Bars, manufactured by the L.S. Heath Company, went on the market in 1932, and Chunky was developed in the mid-1930s by Philip Silverstein, a New York candy maker.

In 1930, Snickers, the most popular candy bar in the United States, was created. Snickers is one of the few candy bars that continues to be produced by its creator, Mars Inc., which today is the largest candy maker in the United States. Mars introduced the Milky Way bar in 1923, Three Musketeers and the Mars Bar in the 1930s, and M&M's in 1941.

Peter Paul Candy Manufacturing Company was formed in 1919 when it introduced its first candy bar, the Konabar. Two years later, the company introduced Mounds, the dark chocolate-covered coconut bar that served as the cornerstone of the company's product line. The first Mounds was a single bar for a nickel, but during the Depression, Peter Paul doubled the size of the package by adding a second bar without increasing the price. This two-for-one tactic increased sales despite the hard times. Peter Paul replaced hand wrapping with machine wrapping by converting a machine designed to wrap soap bars. The company also became one of the first to venture into broadcast advertising. In 1946, the company combined almonds with coconut to launch Almond Joy. Peter Paul acquired York Cone Company, makers of York Peppermint Patty, in 1972. Six years later, Cadbury Schweppes PLC acquired the company for $58 million.

The candy industry went through a period of consolidation in the last half of the twentieth century. In the 1960s Hershey acquired Reese's, which had been making Reese's Peanut Butter Cups since 1923. In 1977 Hershey acquired Y&S Candies, which had marketed licorice Twizzlers and Nibs beginning in the 1920s. Hershey's acquisition of Cadbury Schweppes' U.S. division in 1988 propelled Hershey to first place in the industry, temporarily displacing Mars from the top spot. The purchase gave Hershey the rights to Peter Paul Almond Joy and Mounds, as well as Cadbury and Caramello products, which reinforced its already impressive product line.

Despite the presence of such corporate giants as Mars and Hershey, several independent companies maintain a significant presence in the industry. Many members of the U.S. candy industry continue to be family-owned, especially the gourmet candy and confectionery manufacturers. For example, leading candy maker Mars Inc., is privately held by the Mars family. Chicago-based Tootsie Roll Industries has remained an independent company since its founding in 1896 in New York City. It markets a line of Tootsie Roll products, as well as several products including Mason Dots. In 2000, it acquired the popular line of Andes Candies, and in 2004 it purchased Concord Confections of Toronto, Canada, producers of Dubble Bubble gum.

Another company that has remained independent since its beginnings is PEZ Candy Inc., with its flavored rectangular sugar tablets and vast array of plastic flip-top dispensers. Orange, Connecticut-based PEZ was founded in 1952. The first PEZ tablets were invented in 1927 in Vienna, Austria, as a peppermint tablet and cigarette substitute. PEZ was an abbreviation for pfefferminze, the German word for peppermint.

Sales for candy rose in 1992, after steep declines in 1990 and 1991. Manufacturers launched aggressive new product campaigns in 1992 and maintained the trend towards products with reduced fat and sugar content.

In the mid-1990s, candy makers also began to cash in on the holiday markets. The seasonal candy market posted overall respective dollar and unit volume gains of 10.4 percent and 9.7 percent in 1995. Mars, Hershey, and Nestle traditionally stayed away from the holiday candy market, but when candy consumption and sales remained flat, the candy giants saw great opportunity to capture a major share of the holiday sales. The three companies repackaged many of their most famous goodies in pastel colors for Easter. Their entry into the holiday market shoved aside many of the usual holiday candy manufacturers. According to the NCA, Halloween candy had the highest 2008 revenues, with sales of $2.2 billion, followed by Easter with $1.8 billion, Christmas with $1.3 billion, and Valentine's Day with $1.0 billion.

The health-conscious adult market also was seen as a major growth market for the industry. In the 1990s, Nabisco's Snackwell's products pioneered a new era in this industry. The resounding success of Snackwell's motivated many manufacturers to join this trend of products designed to placate consumers worried about the fat and calorie content in existing products. Hershey and Mars offered their new alternatives with the launch of Sweet Escapes and Milky Way Lite, respectively. Smaller companies were quick to join the growing fray as well. The market for sugar-free candies was valued at more than $50 million by the mid-1990s.

Following a period of flat sales in the early 2000s, U.S. candy industry shipments fell only slightly in the mid-2000s, from $17.8 billion in 2004 to $17.2 billion in 2005, according to U.S. Census Bureau figures. As a whole, the U.S. chocolate and confectionery industry generated $28.9 billion in retail sales in 2006, according to the National Confectioners Association. Chocolate candy, especially premium dark rich chocolate, showed improved gains as newly reported health benefits were attributed to cocoa's antioxidant flavanols, prompting manufacturers to create and promote new lines featuring dark chocolate.

In 2006, Stagnito Communications published a special report on the U.S. confectionery industry based on sales in 2005. The statistics represented food, drug, and mass merchandiser sales, excluding Wal-Mart. According to this report, chocolate candy sales trumped nonchocolate hard candies by nearly two to one ($15.7 billion to $8.7 billion, respectively). Brand leaders in the chocolate candy segment in 2005 included Hershey's ($213 million); M&Ms ($210.4 million); Hershey's; Kisses ($126.3 million); Reese's Peanut Butter Cups ($100 million); Hershey's Nuggets ($67.9 million); and Snickers ($47.6 million). Brand leaders in the hard candy segment were Jolly Rancher, Altoids, Creme Savers, LifeSavers, Werther's, and Tootsie Roll Pops. Top brand leaders in the nonchocolate chewy candy category were Starburst, Skittles, Gummisavers, Tootsie Rolls, and Reese's Pieces. In the diet/sugarless/nonchocolate candy segment, Lifesavers, Creme Savers, Pearson Nips, and Altoids were top sellers.

Current Conditions

Despite the lagging U.S. economy in the late 2000s (or perhaps because of it, according to "comfort food" theories), candy sales were booming. NCA reported that, even in a climate of economic uncertainty, the industry continued to post gains. The confectionery industry posted a 3.7 percent gain for the 52-week period ending April 19, 2009. Hershey--one of the top names in the industry--saw a 50 percent surge in profits in the fourth quarter of 2008. The sale of both chocolate and nonchocolate candy was on the rise, with nonchocolate, chewy candy showing a growth rate of 11 percent in 2008. NCA spokesperson Jenn Ellek told Drug Store News in June 2009, "Candy seems to be a recession-proof category."

New trends in the candy industry in the late 2000s included the introduction of new flavors and products that contained fewer calories or had nutritional benefits, as well as an increase in the number of products that could be classified as "organic." Organic candy and snack sales hit $1 billion in 2007, a 21 percent increase over the previous year. Still, organic products, including candy, continued to cost about 30 percent more than traditional items, so the growth in the segment was somewhat inhibited by the economic downturn of the late 2000s.

Industry Leaders

Privately held Mars Inc. of McLean, Virginia, ranked number one in the U.S. candy market in 2008 with about $30 billion in sales and 70,000 employees. Mars greatly increased its size when it purchased gum giant Wrigley for a reported $23 billion in 2008. As a subsidiary of Mars, Wrigley manufactures its nonchocolate candy brands, including Skittles and Starburst.

The second-largest candy maker in the United States in the late 2000s was Nestle USA Inc. of Glendale, California. Nestle USA was a subsidiary of the largest food manufacturer in the world, Nestle S.A. in Switzerland, which had overall sales of $104 billion in 2008. Nestle USA accounted for about 10 percent of sales. Based in Hershey, Pennsylvania, the Hershey Co. was in third place, with 2008 sales of $5.1 billion and 14,000 employees.

America and the World

By the mid-2000s, about 400 companies manufactured more than 90 percent of chocolate and confectionery products in the United States while an additional 250 companies served as their suppliers. They included companies supplying about 2.4 billion pounds of sugar, 1.1 billion pounds of milk and milk products, 328 million pounds of peanuts, 54 million pounds of almonds, and 1.4 billion pounds of corn syrup sweeteners annually.

Worldwide confectionery trade was estimated at $17 billion in the mid-2000s. The United States accounted for 15 percent of total imports, or $2.5 billion, while exports decreased to 5 percent of worldwide totals, or $600 million.

According to Global Trade Atlas statistics reported by the National Confectioners Association, Canada was the United States' largest customer with imports of $418 million in 2006. South of the border, candy exports to Mexico increased substantially early in the century, with exports reaching $118 million in 2006. This represented a 43 percent share of Mexico's import market held by the United States. Because of the North American Free Trade Agreement (NAFTA), import tariffs were removed from confectionery products, but Mexico had a 15 percent value-added tax collected by Mexican customs upon entry.

National Confectioners Association figures showed that the value of U.S. imports of confectionary products totaled $2.0 billion in 2008, whereas exports increased more than 21 percent to reach $1.2 billion.

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