Sweet Spot in the economy
Battered consumers reluctant to ignore their sweet tooth.
Associated Press
Published on: 06/24/08 Chicago —- Like a lot of people, Nate Towne is cutting back on spending. He’s carpooling to work and only shops at grocery stores that take coupons or offer discount “rewards” cards.
But even in this economy, he remains a self-described “candy snob.”
“I’m serious when I say I’ll pay a premium for my top favorites because in the grand scheme of things, it’s only a few bucks,” says Towne, a 37-year-old public relations consultant in Madison, Wis.
He’s not the only one who’s stuck on candy. Americans buy billions of dollars’ worth each year —- more than $29 billion in retail sales in 2007, according to the National Confectioners Association. That’s about a 3 percent increase from the previous year.
That sizable sweet tooth is a big reason many analysts say the candy business is likely to fare better than other nonessentials in these economically trying times, even as prices for commodities such as sugar, milk and cocoa have risen.
The bottom line: As vices go, candy is still relatively cheap for most consumers.
“People may not be able to flip for Starbucks or even to go to McDonald’s. But they have the ability to pay a dollar for a treat,” says Jim Tillotson, professor of food policy and international business at Tufts University in Massachusetts.
Analysts at Nielsen Co., which tracks consumer habits, go as far as calling the candy business “recession-proof,” compared with other discretionary items, such as tobacco and carbonated beverages (though beer also tends to do well when the economy is hurting).
They note that consumers are cutting back on longer-distance shopping trips to save gas.
As a result, they are spending more at drug and convenience stores with big, easy-access candy sections.
Then there’s the “feel good” factor.
“A dollar candy bar treat in the face of filling up the gas tank for nearly $100 can be a powerful psychological motivator,” says James Russo, vice president of marketing for Nielsen’s food sector.
It’s also a time when you’re likely to see the biggest candy makers consolidating, much like the airline industry, says Pat Conroy, a consumer products expert at accounting and consulting firm Deloitte & Touche USA LLP. The rising price of ingredients is part of the issue.
Earlier this year, Hershey Co., one of the nation’s biggest candy makers, raised its prices and, last year, announced job cuts and a plan to close several U.S. manufacturing plants, causing merger speculation.
This spring, Mars Inc., the Virginia-based maker of M&Ms and Snickers, announced the purchase of Chicago’s Wm. Wrigley Jr. Co., which is known for its Juicy Fruit and Doublemint gum as well as Life Savers.
“Unless you have a very powerful niche, the worst place you want to be is in the middle [in size],” Conroy says. “That’s the danger zone.”
Associated Press SWEET TREND Americans spent $29.1 billion on candy in 2007, up about 3 percent from the previous year. U.S. candy sales Bar graph shows candy sales in billions from 2001 to 2007. Pie chart shows percentage of candy sales by types of candy: Gum: 11% Non-chocolate: 33% Chocolate: 56% Source: National Confectioners Association
