May 2009 United States Confectionery Market

U.S. Confectionery Market Overview

USA Economic Trends U.S. and world economies in recession Stock market declines 30%+ Retail sales declining in 2008 Q 3-4 and 2009 Q 1 Unemployment over 8% in May 2009 Up from 4.6% at year-end 2006 Housing market bubble burst Unstable oil prices Year ends with historically low interest rates Difficult to borrow – credit crunch Consumer spending declines Commodity prices higher

USA Retail Trends Shopping trips declined Spending shift to value channels Increased coupon usage Confectionery seen as a recession proof category Organic sales decline 2008 Holiday retail sales declined Other than gasoline purchases retail sales declined 1.5% in December vs 2.4% growth in 2007 Credit crunch and lost investments impacting consumer spending

Cocoa Prices at Historic Highs Cocoa price per ton

Sugar Prices near Historic Highs U.S. Cents per pound Refined beet sugar f.o.b. Midwest

Corn Sweetener Prices near Historic Highs U.S. $ per pound

Commodities Pricing Milk Corn Syrup Peanuts Walnuts Pistachios Almonds

The 2008 U.S. Confectionery Market % $Change Retail Sales$ % Manufacturers Shipments$ % Domestic Manufacturer Shipments$ % Imports $ % Exports $ % The retail profit margin is approximately 35% for the confectionery category. The U.S. Retail Confectionery Category generates approximately $28 billion in retail sales Estimated sales in billions NCA Shipment Data and Global Trade Atlas Import/Export Data

Trade Total Sales% GrowthChocolate% GrowthNon-Chocolate% GrowthGum % Growth Measured Confectionsvs. 2008Confectionsvs Confections vs vs FDMx$8.9 billion+3.7%$5.0 billion+3.7%$2.5 billion+2.4%$1.3 billion +6.1% FDMW$12.7 billion+3.2%$7.0 billion+4.1%$3.6 billion+1.3% $2.0 billion +3.4% FDMWC$17.2 billion+3.7%$8.9 billion+4.4%$5.0 billion+2.9%$3.3 billion +3.0% All Others$11.4 billion*$7.3 billion*$3.7 billion*$0.3 billion * Total Sales$28.0 billion+3.7%$16.1billion+4.1%$8.6 billion+2.3%$3.3 billion +4.9% 2009 Confectionery Sales Retail Sales Summary through April 2009 NCA Estimates base on U.S. Dept. Of Commerce MA311D Report and Information Resources, Inc US Department of Commerce 311D Confectionery Report 2008 IRI Reports through 4/19/2009 Trade Channels: F – Supermarkets D – Drug Stores M – Mass Merchants W – Wal-Mart C – Convenience Stores

The average U.S. Consumer spent $93 on confectionery products in US Department of Commerce 311D Confectionery Report 2008 Per Capita Retail Sales

This analysis shows figures for 2008 shipments and retail sales. Chocolate Candy represents approximately 59% of total confectionery dollar sales. CategoryRetail Sales $ Billions Domestic Shipments $ billions Shipment % Growth Vs Imports $ billions Import % Growth Vs Exports $ billions Export % Growth Vs Total Confections $28.3$ %$ %$ % Chocolate$16.0$ %$ %$ % Non-Chocolate$8.6$ %$ %$ % Gum$2.7$ %$ %$ % 2008 Confectionery Categories Analysis NCA estimates based on Source: 2008 US Department of Commerce, Census Bureau 311D, Confectionery Report and NCA Manufacturer Shipment Reports

The Confectionery Market is Very Diverse The confectionery category is much more diverse than other similar sized food categories. There are 300+ suppliers competing for the remaining 30% of confectionery sales. The uniqueness of the confectionery category is that each suppliers makes distinctly different items catering to the diverse tastes and demands of the consumer. Manufacturer Market Share Concentration 52 Week Sales December 30, 2008 Euromonitor There are more than 300 domestic confectionery manufacturers

Confectionery Sales Steady Due to price increases in the confectionery industry in 2008 we saw an increase in dollar sales combined with a decrease in tonnage US Dept of Commerce 311 D Report

U.S. Confectionery The Retail Market

Retail Confectionery * * Others include: department stores, food service and ingredient sales, fundraising, give-aways, independent grocers, mail order/internet, military, specialty/candy stores, theaters and concessions *estimates NCA 2008 estimates based on IRI, U.S. Department of Commerce, MSA Vending Data, NCA Shipment Report and other industry sources. Market Share by Trade Channel

2008 Retail Channel Performance Channel2009 $ Sales2009 % Growth Supermarkets$ % Wal-Mart$ % Mass X Wal-Mart$ % Convenience Stores$ % Drug Stores$ % *Warehouse Clubs$ % *Dollar Stores$.9+3.1% Vending$ % *Bulk$ % Based on 52 Week Sales – Ending April 19, 2009 Source: NCA estimates based on input from Information Resources, Inc. NCA/CMA Monthly Shipment Reports and U.S. Department of Commerce. Sales Figures in billions The confectionery retail market has grown across all trade channels but convenience stores, club stores, dollar stores and chain drug stores have outpaced the overall retail market. * Indicates NCA estimate

Total Chocolate/Non-Chocolate/Gum Dollar Share U.S. Department of Commerce Census Bureau 2008 MA 311D Report

Candy and Gum Ranked 3rd Among Food Categories- April 2009 IRI Food, Drug & Mass Excluding Wal-Mart 4/19/2009 Candy and Gum Ranked 3 rd among 2008 Food Categories in Food, Drug and Mass Outlets

Candy and Gum is the Largest Snack Category IRI Food, Drug & Mass Excluding Wal-Mart 4/19/2009

Confectionery Seasonal Merchandising

What Affects Seasonal Sales? Date/Day of Holiday The Economy Consumer Confidence Merchandising Strength/Visibility

projections Valentine’s Day - $970$971$1,036$1,024$928 Easter - $1,761$1,884$1,987$1,846$1,990 Halloween - $2,088$2,146$2,202$2,209$2,225* Christmas - $1,375$1,389$1,420$1,376$1,400* * – projections for 2009 Results and Projection as of May 2009 Source: Sales figures are compiled by National Confectioners Association based on input from Information Resources, Inc. NCA/CMA Monthly Shipment Reports and U.S. Department of Commerce Confectionery Seasonal Sales (** in millions of dollars)

NCA estimates based on December 28, 2008 IRI Data, NCA Manufacturers Shipment Reports and U.S. Department of Commerce MA311D Report Syndicated IRI data understates actual seasonal sales. It only includes packages with seasonal graphics, and does not count regular packs sold during the season Total Confectionery Seasonal Shares

Seasonal Confectionery Trends VALENTINE’S -9.4%-0.2%+6.7% +0.1% -4.0% -3.0% EASTER +7.9%-7.1%+5.4% +7.0% -7.6% +5.5% HALLOWEEN *+0.1%+2.6% +2.8% +2.3% +2.4% CHRISTMAS*-3.1%+2.2% +1.0% +2.4% -3.5% * IRI FD&M NCA projects a 2.0% increase in 2009

Holiday Valentine’s Sat. Sunday Monday Tuesday Thursday Easter 4/12 4/4 4/24 4/83/31 Halloween Sat. Sunday Monday Wed.Thursday Christmas Friday Sat. Sunday Tuesday Wed Thanksgiving 11/26 11/25 11/24 11/2211/28 Shopping Days Holiday Dates/Days Indicates positive date for holiday salesIndicates neutral date for holiday sales Indicates negative date for holiday sales

U.S. Confectionery Trends

Trends - for 2008/2009 Everyday gourmet chocolate sales rose 28% in 2008 Growth slowed in second half of 2008 Dark chocolate sales continue to grow but at a slower pace Dark chocolate sales increased 12% Core mass brands grew in units and dollars Emerging trends Exotic chocolate flavorings: citrus, spice, salt, fruits High cocoa content chocolates Gourmet packaging for chocolates Single origin chocolates Increased offering of “Everyday Gourmet” chocolate items Consumers want gourmet product at a value price

Trends - for 2008/09 Sugar Free gum % sales Exotic fusion flavors Fortified products Value products grew significantly Theater Box candies Licorice grew 9.4% Gummies and chewy candy grew 7.6% Seasonal candy declines Reflection of difficult economy and unfavorable dates Seasonal confectionery down 2.9% More favorable dates in 2009 Increased sugar-free product offerings Increase lower calorie products offered