Candy, Nut, and Confectionery Stores

SIC 5441

Industry report:

This category includes establishments primarily engaged in the retail sale of candy, nuts, popcorn, and other confections.

Industry Snapshot

There were approximately 8,500 establishments in the candy, nut, and confectionery industry, according to the U.S. Census Bureau. More than 90 percent of firms had fewer than 10 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 Confectioners's Association (NCA), Walmart, supermarkets, drugstores, and convenience stores accounted for nearly 60 percent of all candy sales in 2010. Although slowed by the economic recession at the end of the first decade of the 2000s, candy and gum sales grew 3.9 percent in 2011, with most of the growth coming from within the chocolate sector (5.6 percent), while non-chocolate sales were up 3.4 percent and gum sales remained steady.

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) rounded out the sector.

Specific economic trends directly impacted the industry in the late years of the first decade of the 2000s. The global economic recession, 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 2006 and hit record highs in 2008, reaching above $3,000 per ton, compared with around $1,500 per ton in 2005. By 2010 cocoa prices had topped $3,500 per ton. Corn sweetener prices also climbed throughout the decade, reaching $20 per pound in mid-2007, compared to approximately $13 per pound from 2003 to 2005. By 2010 prices had stabilized but were at record highs just above $25 a pound.

Fannie May Confections Inc. was founded in Chicago in 1920 and included the Fannie May and Fanny Farmer brands. Before being purchased in the 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 2010 annual report, 1-800-FLOWERS.com reported good growth for the Fannie May division, based primarily on e-commerce sales. In addition, in 2012 the firm signed a 62-store franchise deal that was expected to further increase sales of Fannie May Fine Chocolates. Overall sales for 1-800-FLOWERS.com reached almost $690 million in 2011.

Founded in 1981 in Durango, Colorado, Rocky Mountain Chocolate Factory manufactured confections. In 2011, the company operated 12 company-owned stores and 300 franchise stores in 37 states, Canada, and the United Arab Emirates. Rocky Mountain also operated Lucy's Chocolate Factory, which manufactured chocolates for drug store and grocery stores. Although Rocky Mountain fared better than Fannie May during the middle of the first decade of the 2000s, the company felt the effects of the recession 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, but by 2011 sales had rebounded to $31.1 million.

Other industry leaders in the early 2010s 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 operated more than 450 specialty boutiques in major U.S. cities and more than 1,000 additional outlets in department and specialty stores. In 2008 �lker Bisk�vi Sanayi A.S., a food company based in Istanbul, Turkey, purchased Godiva from Campbells's Soup for $850 million. A year later, Godiva expanded into China when it opened a chocolate shop in Shanghai. Revenues for the company reached $241.7 million in 2011.

Stuckey's, best known for its pecan logs and other candies, owned and franchised about 175 stores in 20 states. Catering to tourists, Stuckey's operated 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.

According to the NCA, dark chocolate sales rose rapidly in the middle of the first decade of the 2000s, following reports that dark chocolate had health benefits. 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 nearly 30 percent between 2003 ($1.26 billion) and 2005 ($1.62 billion). Dark chocolate continued its upward trend, with year-on-year sales increasing by 12 percent between 2007 and 2008. Although growth slowed during the end of the first decade, sales increased 9 percent in 2009. Other trends included growing demand for exotic chocolate flavorings, such as citrus-, spice-, and fruit-flavored chocolates; gourmet packaged chocolates; and more private-label chocolates.

According to the NCA, confectionery products in all trade classes totaled $29.3 billion in 2010. Chocolate candy retail sales grew to $16.9 billion, and non-chocolate candy sales rose to $9.3 billion, while gum retail sales increased to $3 billion. Confectionary sales are especially sweet for retailers around holidays, but the recession at the end of the first decade of the 2000s resulted in stagnant to lower year-on-year sales for several important holidays, including Valentine's Day. By 2010 seasonal sales had rebounded, growing about 1.2 percent. Halloween remained the biggest season for candy, followed by Easter, Christmas, and Valentine's Day.

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