American Industry Overview: Candy And Other Confectionery Products

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.

Industry Snapshot
Americans, and for that matter just about everybody else, have an insatiable appetite for candy. The U.S. population as a whole consumes more than 6.5 billion pounds of candy each year. Only about half of that is chocolate, with gummy bears and a wide variety of other non-chocolate confections accounting for roughly 3.5 billion pounds. In the first decade of the twenty-first century, analysts forecast a number of challenges to be faced by the industry's equipment and ingredient suppliers. These challenges include the shift in technical knowledge from the manufacturer to the supplier, increased new product development, new distribution channels, continued plant and company consolidation, and the introduction of so-called nutraceuticals into confectionery products. This also included the introduction, in the mid-2000s, of several state legislative measures designed to restrict sale of candy in schools.

Background and Development

Many of the most popular candy bars sold today were developed between the 1890s and 1920 by various candy makers around the country. Rights to many of these candies have been bought and sold many times since they were developed and now 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, the 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 since consumers could buy a pound of loose candy for that same dime. Immediately after World War I, however, sugar and chocolate prices dropped and the price of most candy bars was dropped to a nickel. The price remained fairly constant until the late 1960s, when the price went back to a dime because of rising costs. Since then, 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, a company 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 Cornelius Crane, a chocolate maker, 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 new candy products were introduced during this period, and many have 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 were first made by the Blumenthal Chocolate Company in 1925. Holloway Milk Duds were introduced in 1926 by the Holloway Company. During the 1920s and 1930s, the James O. Welch Company introduced several favorites that are still around today, 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. Chunky was developed in the mid-1930s by Philip Silverstein, a New York candy maker. In 1930 the most popular candy bar in the United States was created--Snickers. Snickers is one of the few candy bars still produced by its creator--Mars, Inc., which today is one of the largest private companies in the United States. Mars introduced the Milky Way bar in 1923, 3 Musketeers and the Mars Bar in the 1930s, and M&M's in 1941. Peter Paul Candies was formed in 1919 when it introduced its first candy bar, the Konabar. Three years later, the company introduced the dark chocolate-covered coconut bar that served as the cornerstone of the company's product line--Mounds. 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 1948 the company combined almonds with coconut to launch Almond Joy. Peter Paul acquired York Peppermint Patty in 1972. Several 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 began making Reese's Peanut Butter Cups in 1923, and 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 past Mars to become the leading U.S. candy maker. The purchase gave Hershey the rights to Peter Paul Almond Joy and Mounds, as well as Cadbury and Caramello products, to buttress its already impressive product line. Despite the presence of such corporate giants as Mars, Inc., and Hershey Foods Corporation, 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. Even leading candy maker Mars, Inc. is privately held by the Mars family. Tootsie Roll Industries has remained an independent company since its founding in 1896. It markets a line of Tootsie Roll products, as well as several products including Mason Dots and Bonomo Turkish Taffy, which it acquired through the purchase of smaller companies. Another company that remained independent since its beginnings is PEZ Candy Inc., with its flavored rectangular sugar tablets and vast array of plastic flip-top dispensers. PEZ was founded in 1952 and is based in Orange, Connecticut. The first PEZ tablets were invented in 1927 as a peppermint tablet and cigarette substitute. PEZ was an abbreviation for pfefferminz, 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 recent trend towards products with reduced fat and sugar content. In the mid-1990s candy makers 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, according to the Candy Industry overview of this industry. 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. The health conscious adult market also was seen as a major growth market for the industry in the late 1990s. By then, Nabisco's Snackwell's brand of products pioneered a new era in this industry. The resounding success of Snackwell's motivated many manufacturers to join this trend of new comparable 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 in the mid-1990s. The children's market, along with Americans' increasing preoccupation with healthy eating were not the only marketing opportunities exploited by candy manufacturers. The new millennium provided many candy manufacturers with a new vehicle. At the industry's annual All Candy Expo, held in Chicago in June 1999, a number of candy makers introduced confections boxed and branded with the words "Year 2000." Others offered more elaborate Y2K gimmicks, including the Countdown Millennium Watch offered by Gallerie Au Chocolat. A digital clock, it was shaped like a stopwatch, emitted a buzzing sound, and dispensed candy when one of its side buttons was pushed.

Current Conditions
The U.S. candy industry was valued by shipments at more than $17.8 billion in 2004, according to U.S. Department of Commerce figures. As a whole, the U.S. chocolate and confectionery industry generated more than $20 billion in sales, according to the National Confectioners Association. Following a period of flat sales in the early 2000s, a strong business climate for chocolate candies was predicted for the industry's future in the United States. Chocolate candy, especially premium dark rich chocolate, showed improved gains as newly reported health benefits were attributed to cocoa's antioxidant flavanols. Non-chocolate candies faced the bleaker forecast of a negative 2 percent compound annual growth rate (CAGR) for 2004 to 2009, according to New Yorkbased Packaged Facts, a division of MarketResearch.com. However, in its October 2004 "U.S. Market Profile for Confectionery Products," the USDA's Foreign Agricultural Service (FAS) projected a modest gain of a percent or so for non-chocolate sales. The U.S. census report showed that confectionery manufacturer dollar sales increased 6.1 percent in 2004, while pound sales, measuring the net shipments of domestic manufacturers's shipments plus imports minus exports, increased 1.7 percent. Domestic manufacturers's shipments grew 5.9 percent. In 2005, Stagnito Communications published a special report on the U.S. confectionery industry, based on sales from the prior 52 weeks ending December 26, 2004. The statistics represented food, drug, and mass merchandiser sales, excluding Wal-mart. According to this report, chocolate candy sales trumped non-chocolate hard candies by more than two to one. Brand leaders in the chocolate candy segment in 2004 included, in descending order according to sales, M&Ms; Hershey's; Hershey's; Kisses; Reese' Peanut Butter Cups; Hershey's; Nuggets; and Snickers. Russell Stover boxed chocolates beat Whitman's; by a margin better than two to one. 2004 Brand leaders in the hard candy segment were Jolly Rancher, Altoids, Crme Savers, LifeSavers, and Werthers. Top brand leaders in the chewy candy category were Starburst, Skittles, and Tootsie Roll. In the diet/sugarless candy segment, Russell Stover, Hershey's, and Carborite led the market.

Industry Leaders

Hershey Foods Corp. and Mars Inc. rank number one and number two, respectively, in the U.S. candy market. Privately held, Mars Inc. is guarded about its financial performance, but analysts estimate its 2004 revenues at about $11 billion. Although this was palpably less than Hershey's 2004 sales of $18 billion, much of the Mars revenue is generated by its non-candy operations, including Uncle Ben's rice products and a full product line of pet foods. In candy sales alone, Hershey is the leader, carrying 43 percent of the market, compared with a 23 percent market share by Mars. Other major industry leaders include Nestle, Wrigley, and Russell Stover.

America and the World

By the 2000s, more than 500 companies manufactured more than 90 percent of chocolate and confectionery products in the United States. Another 250 companies supplied those manufacturers. They included companies supplying more than three billion pounds of sugar annually; 653 pounds of milk and milk products; 322 million pounds of peanuts; 43 million pounds of almonds; and 1.7 billion pounds of corn syrup sweeteners. Together, the U.S. confectionery and chocolate industries exported more than $700 million in confectionery products to more than 50 countries. South of the border, candy exports to Mexico were up 70 percent from 1999, with 2002 exports of $100 million. This represented a U.S.-held 65 percent share of Mexico's import market. 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 (VAT) collected by Mexican customs upon entry.

Further Reading

"Annual Update Unveils Industry's Fortune." Candy Industry, January 1995. "Champions a Gold Medal Year." Candy Industry, July 1996. Corcoran,Jim. "Confectionery Industry Rebounds with Economic Turnaround." Candy Business, May 2004. Dornblaser, Lynn. "Candy Is More than Dandy." Prepared Foods, 15 April 1996. "The Expanding Market for Bulk Candy." Candy Industry, July 1996. Fishman, Ted C. "We're Killing Ourselves with Sweetness." USA Today, 23 August 1999. Henry, Jim. "Keeping it in the Family: and Industry Discussion." Candy Industry, January 1996. Lodge, Steve. "State Legislative Activity:" Candy Business, May 2004. "Media Kit." Candy Industry, 2003. Available from http://www.candyindustry.com/mediakit.asp. National Confectioners Association. "U.S. Chocolate and Confectionery Industries Comments Concerning Negotiations of Free Trade Agreement with the Dominican Republic." (PR Doc. 03-22018). November 2003. Rogers, Paul. "Outside the Numbers: Special Report on the Candy Industry." Candy Industry, 2005. United States Census Bureau. "Statistics for Industries and Industry Groups: 2002." Annual Survey of Manufactures, 2004. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacture, February 2002. Available from http://www.census.gov. "U.S. Candy Industry Looking to Cash In on Y2K." Reuters, 23 June 1999.