1. © 2009 Craft & Hobby Association. All rights reserved. CHA Attitude & Usage Study 2008 Annual Report 12 Months Ending 12/31/2008

2. 2 © 2009 Craft & Hobby Association. All rights reserved. 2  CHA A&U Study Background  Detailed Findings  What’s the State of the Industry Today?  What Are the Key Trends?  How Do Light, Moderate and Heavy Crafters Differ?  How Do Beginner, Intermediate and Expert Crafters Differ?  Is Shopping Behavior Changing?  How Can You Drive Craft Spending in a Tougher Economy?  Q&A Agenda

3. © 2009 Craft & Hobby Association. All rights reserved. CHA A&U Study Background

4. 4 © 2009 Craft & Hobby Association. All rights reserved. 4 39 craft segments are monitored in four broad categories cont.  Needle & Sewing Crafts  Cross-stitch/Embroidery  Knitting  Crocheting  Needlepoint/Plastic Canvas  Other Needlecrafts  Apparel/Fashion Sewing  Craft Sewing  Home Décor Sewing  Quilting  Other Sewing Crafts  Painting & Finishing Crafts  Art & Drawing  Decorative Painting  Fashion Fabric Painting & Decorating  Home Décor Painting/Accessories/Finishing  Stenciling  Other Painting & Finishing Crafts  Floral Crafts  Floral Arranging  Wedding/Bridal  Wreath-making/Floral Accessorizing  Other Floral Crafts

5. 5 © 2009 Craft & Hobby Association. All rights reserved. 5 39 craft segments are monitored in four broad categories.  General Crafts  Paper Cutting  Scrapbooking /Memory Crafts  Rubber Stamping  Card Making  Other Paper Crafts  Beading/Bead Crafts  Cake Decorating  Candle Making  Ceramics  Doll Making  Do-it-yourself Framing  Glass Crafting  Jewelry Making  Leather Crafts  Macramé  Non Floral Wreaths  Potpourri Making  Woodworking  Other General Crafts

6. 6 © 2009 Craft & Hobby Association. All rights reserved. 6 What the Research was Designed to Provide The A&U successfully provides CHA with:  An overview of crafting households:  Demographics  Behaviors  Attitudes  A means of determining and tracking household participation rates in the US by craft and hobby segment  Shows trends over time  Documentation of shopping patterns by retail channel  Guidelines for sizing the market  Relative size of individual categories and market as a whole

7. 7 © 2009 Craft & Hobby Association. All rights reserved. 7 What the Research Was NOT Designed to Provide The survey provides a wealth of data, but is not designed to:  Be a substitute for scanner data  Spending behavior is self-reported and is accurate only within a broad range  Dollar volumes have a wide margin of error, especially for individual craft segments  Changes reported over time can only be guidelines  Distinguish between growth components  Growth vs. YAG is driven by 1) real growth, 2) inflation or 3) product price increases

8. 8 © 2009 Craft & Hobby Association. All rights reserved. 8 What the Research Was NOT Designed to Provide (Continued) Nor is the survey designed to:  Assign attitudes and shopping behavior by:  Specific crafting segments (e.g., Quilting, Jewelry-Making, etc.)  Individual demographic targets Information is collected at the household level only Most households participate in multiple types of crafts

9. © 2009 Craft & Hobby Association. All rights reserved. Detailed Findings

10. © 2009 Craft & Hobby Association. All rights reserved. What’s the State of the Industry Today?

11. 11 © 2009 Craft & Hobby Association. All rights reserved. 11 U.S. Retail Sales (Million $) - Among Total U.S. Households - Market Size = $27,297 Million (±11%) $10,267 Million $7,266 Million $6,432 Million -21% vs. $13,027 Million YAG -14% vs. $31,799 Million YAG -12% vs. $7,285 Million YAG -9% vs. $7,949 Million YAG Projected Base: 111 Million Total US Households Spending behavior is self-reported by consumers, and is accurate only within certain ranges. $3,333 Million -6% vs. $3,538 Million YAG Data based on 12 months ending December 31, 2008 The craft and hobby industry has not been immune to the current economic crisis. A 14% decline in retail sales has taken place overall.

12. 12 © 2009 Craft & Hobby Association. All rights reserved. 12 While most participation rates remain virtually unchanged since 2007, General Crafts had the most notable drop-off. Incidence of Crafting - % of Total U.S. Households - Participation rates are based on screening data. Screening is conducted among the Ipsos Insight Mail Panel to identify crafters. On an annual basis, the screener is sent to 50,000 households (25,000 twice a year in May and Nov). -0.8 pts-5 pts-1.2 pts-1.5 pts Point Change vs. YAG: Projected Base: 111 Million Total US Households -1.2 pts

13. 13 © 2009 Craft & Hobby Association. All rights reserved. 13 Annual HH spending declines were seen across all crafting categories, except Floral Crafts. Average Annual Craft Spending - By Crafting Category - Projected Base: 63 Million Total US Crafting Households -14%-11%-6%-8%±0% % Change vs. YAG: Data based on 12 months ending December 31, 2008

14. 14 © 2009 Craft & Hobby Association. All rights reserved. 14 Spending on the average project held steady from 2007, with exception of General Crafts, which dropped 11%. Average Per Project Spending - By Crafting Category - Projected Base: 63 Million Total US Crafting Households -1%-11%+4%+3%+2% % Change vs. YAG: Data based on 12 months ending December 31, 2008

15. 15 © 2009 Craft & Hobby Association. All rights reserved. 15 While crafters spent nearly as much time on crafting (per week) as they did the previous year, they completed fewer craft projects, especially in the Needle and Sewing and Painting and Finishing categories. Average Number of Projects - By Crafting Category - Projected Base: 63 Million Total US Crafting Households -13%+1%-9%-10%-1% % Change vs. YAG: Data based on 12 months ending December 31, 2008 Average Hours Spent Per Week 20072008 5.45.0

16. 16 © 2009 Craft & Hobby Association. All rights reserved. 16 Scrapbooking continues to generate the largest sales volume, but like many other segments, has declined year over year. Dollar Sales ($Million) % Change in total spending vs. YAG 1 Scrapbooking/Memory Crafts $2,505-3% 2 Art & Drawing $1,795-8% 3 Other Painting & Finishing* $1,613-13% 4 Floral Arranging $1,509+21% 5 Crocheting $1,207+17% Top 5 Crafts – Dollar Sales Data based on 12 months ending December 31, 2008 Projected Base: 63 Million Total US Crafting Households * Painting & Finishing Crafts other than Art & Drawing, Decorative Painting, Fashion Fabric Painting & Decorating, Home Décor Painting/Accessories/Finishing, Stenciling

17. © 2009 Craft & Hobby Association. All rights reserved. What are the Key Trends?

18. 18 © 2009 Craft & Hobby Association. All rights reserved. 18 Some segments experienced notable growth, particularly the Needlepoint/Plastic Canvas segment. Data based on 12 months ending December 31, 2008 Projected Base: 63 Million Total US Crafting Households Greatest % Segment Sales Growth vs. Year Ago - Among Total U.S. Households - Dollar Sales (Mill) $487 $1,509 $695 $258 $1,207 Segments > $100MM

19. 19 © 2009 Craft & Hobby Association. All rights reserved. 19 Many segments showed declines vs. year ago Data based on 12 months ending December 31, 2008 Greatest % Segment Sales Decline vs. Year Ago - Among Total U.S. Households - Projected Base: 63 Million Total US Crafting Households $153 $367 $219 Dollar Sales (Mill) $475 $825 $854 Segments > $100MM

20. 20 © 2009 Craft & Hobby Association. All rights reserved. 20 Even in the current economy, new growth opportunities are emerging.  When crafting households were asked what NEW crafts they expect they will try in the upcoming year that they currently do not participate in, the segments generating the greatest interest were:  Decorative Painting (3.9%)  Scrapbooking/Memory Crafts (3.2%)  Home Décor Sewing (2.9%)  Needlepoint/Plastic Canvas (2.9%)  Home Décor Painting/Accessorizing/ Finishing (2.9%)

21. © 2009 Craft & Hobby Association. All rights reserved. How Do Light, Moderate and Heavy Crafters Differ?

22. 22 © 2009 Craft & Hobby Association. All rights reserved. 22 Heavy Crafters, who account for 26% of all crafters, spend far more than their segment size would suggest. Crafter Type Levels Data based on 12 months ending December 31, 2008 Projected Base: 63 Million Total US Crafting Households CDI 236 81 14

23. 23 © 2009 Craft & Hobby Association. All rights reserved. 23 Regardless of crafter type, Scrapbooking is the largest category. Crocheting is more popular among Moderate and Light Crafters, while Jewelry, Wedding/Bridal and Beading are more common among Heavy Crafters. Light Crafters Scrapbooking/Memory Crocheting Art & Drawing Woodworking Home Décor Painting/Acc/Finishing Cross-Stitch Embroidery Home Décor Sewing Floral Arranging Quilting Apparel/Fashion Sewing Moderate Crafters Scrapbooking/Memory Art & Drawing Crocheting Floral Arranging Quilting Home Décor Painting/Acc/Finishing Woodworking Apparel/Fashion Sewing Cross-Stitch Embroidery Decorative Painting Heavy Crafters Scrapbooking/Memory Art & Drawing Floral Arranging Card Making Home Décor Painting/Acc/Finishing Apparel/Fashion Sewing Quilting Jewelry Making Wedding/Bridal Beading/Bead Crafts Crafts in black grew from previous year. Crafts in red declined from previous year. Top Ten Crafts - By Type of Crafter - Total $1,220 mill Total $16,976 mill Total $9,100 mill

24. © 2009 Craft & Hobby Association. All rights reserved. How Do Beginner, Intermediate and Expert Crafters Differ?

25. 25 © 2009 Craft & Hobby Association. All rights reserved. 25 The majority of crafters consider themselves to be intermediate in terms of expertise. Expert crafters spend disproportionately more than other groups Crafting Ability (Self-Assessment) Data based on 12 months ending December 31, 2008 Projected Base: 63 Million Total US Crafting Households CDI 150 98 65

26. 26 © 2009 Craft & Hobby Association. All rights reserved. 26 While the Top Ten Crafts vary from one level of expertise to the next, several crafts are found to be common across all - Art & Drawing, Crocheting and Scrapbooking/Memory Crafts (although experts favor more challenging crafts and may need to be encouraged to return to Scrapbooking). Beginner Crafters Art & Drawing Scrapbooking/Memory Crocheting Home Décor Painting/Acc/Finishing Floral Arranging Doll Making Home Décor Sewing Quilting Needlepoint/Plastic Canvas Fashion Fabric Paint/Decor Intermediate Crafters Scrapbooking/Memory Art & Drawing Quilting Card Making Floral Arranging Apparel/Fashion Sewing Home Décor Painting/Acc/Finishing Crocheting Beading/Bead Crafts Woodworking Expert Crafters Floral Arranging Cross-Stitch Embroidery Art & Drawing Wedding/Bridal Decorative Painting Jewelry Making Crocheting Woodworking Knitting Scrapbooking/Memory Crafts in red declined from previous year. Crafts in black grew from previous year Top Ten Crafts - By Expertise Level - Total $3,499 mill Total $6,646 mill Total $17,151 mill

27. © 2009 Craft & Hobby Association. All rights reserved. Is Shopping Behavior Changing?

28. 28 © 2009 Craft & Hobby Association. All rights reserved. 28 The channels where crafters are making their purchases are evolving.  Internet sales continue to grow:  Internet +19% (7% of total sales)  Three channels accounted for 60% of Craft sales in 2008, with Craft Chain Stores showing the greatest decline of this group  Craft Chain Stores -15% (25% of total sales)  Discount Store -4% (22% of total sales)  Fabric and Craft Stores -1% (13% of total sales) *Note: The questionnaire was revised in Jan 2008 to more clearly define channels and may account for some of the differences seen here.  Other craft retailers are experiencing more severe declines in sales. Store closures are contributing to the losses for Local Craft Stores. Softening of the Home Décor Painting segment seems to have impacted the Variety Hardware Stores:  Craft Fair/Flea Markets -59% (1% of total sales)  Local Craft Stores -57% (3% of total sales)  Variety Hardware Stores -49% (5% of total sales)

29. © 2009 Craft & Hobby Association. All rights reserved. How Can You Drive Craft Spending in a Tougher Economy?

30. 30 © 2009 Craft & Hobby Association. All rights reserved. 30 As consumers continue to tighten their belts, it ’ s very important to remind them why they craft in the first place.  A factor analysis reveals eight primary reasons for crafting: 1. Sense of Accomplishment 2. Relaxation 3. Memory Keeping 4. Health 5. Economy/Value 6. Recommended by Friends or Family 7. Enables Spending Time with Others 8. Interaction with Children  OPPORTUNITY reinforce these quality-of-life messages in communication vehicles and in-store at point of sale

31. 31 © 2009 Craft & Hobby Association. All rights reserved. 31 Emotional drivers are strong influencers of craft sales for all levels of expertise.  Irrespective of ability levels, crafters strongly agree on the following statements:  Completing a craft gives me a feeling of accomplishment  I like to work with my hands  However, Expert level crafters are especially likely to believe that:  I forget about my daily problems when I work on a craft or hobby  Doing crafts or hobbies makes me feel better  I am a creative person  I prefer to craft alone

32. 32 © 2009 Craft & Hobby Association. All rights reserved. 32 Reinforce consumers emotional ties to crafting to increase spending.  Emphasize “family fun” and “creativity”  The greatest drivers of craft spending are children crafting and crafting is a creative outlet Consumers are cutting back on entertaining and are spending more time at home  Appeal to the family orientation and inherent desire people have to be creative  Crafting is fun and an affordable alternative to a day/night on the town

33. 33 © 2009 Craft & Hobby Association. All rights reserved. 33 Reinforce consumers emotional ties to crafting to increase spending.  Inspire crafters with the emotional as well as functional aspects of crafting.  Emotional - Accomplishment; Relaxation; Spending time with others or children  Functional - Saving money; Preserving memories; Health/well-being (especially relieves stress)

34. 34 © 2009 Craft & Hobby Association. All rights reserved. 34 Prominently displaying a variety of Crafting books and magazines can help generate consumer interest/ideas and sales. Consider displays both by the checkout and in aisles. Source of Project Ideas Data based on 12 months ending December 31, 2008 Projected Base: 63 Million Total US Crafting Households Especially Intermediate and Expert Crafters Especially Beginning and Expert Crafters

35. 35 © 2009 Craft & Hobby Association. All rights reserved. 35 Gifting represents a huge opportunity that may be largely untapped. Usage Of Completed Craft Projects Data based on 12 months ending December 31, 2008 Projected Base: 63 Million Total US Crafting Households % of Crafting HH Especially Intermediate, Expert and Heavy Crafters

36. 36 © 2009 Craft & Hobby Association. All rights reserved. 36 84% of households craft because of a holiday or special occasion Occasions for Which Crafts are Made Data based on 12 months ending December 31, 2008 Projected Base: 63 Million Total US Crafting Households

37. 37 © 2009 Craft & Hobby Association. All rights reserved. 37 Crafting classes/parties can be an important way to encourage spending.  Those who attend class/parties spend more than twice as much as those who do not!  Classes should be offered for crafters of all levels – most crafters consider their skills to be “intermediate”. Few Beginners attend but this can be a way to encourage new participants. Average spending per year $624 $300 Incidence of Attending Average spending per year $327 Incidence of Attending $566 $608 Do Not Attend Host Guest Attend Do Not Attend Classes Home Parties Data based on 12 months ending December 31, 2008

38. © 2009 Craft & Hobby Association. All rights reserved. Recommendations for CHA Members

39. 39 © 2009 Craft & Hobby Association. All rights reserved. 39  Remain sensitive to price due to the economic climate but don’t focus solely on price; remind shoppers about the joys of crafting  Unadvertised sales are also a key influence on purchasing decisions  Don’t limit consumers to brick & mortar hours – Online sales are continuing to increase  People are busy, stores are closing - making around-the-clock online shopping available can help sustain sales. Strive for online success with: Fun websites with plenty of inspiration ideas Fast and affordable shipping Shopping lists, “Items you will need to complete this project” for one-click shopping  Reward your best customers  Heavy Crafters account for a largely disproportionate share of sales Consider “Frequent Crafter” reward programs to support, and possibly grow, this segment  Grow craft segments by leveraging store layouts to best reflect the cross-participation that exists  Cross-Stitch Embroidery, while not a leading craft, has a high degree of cross participation among the five leading crafts, and is the number two craft among Experts. Action Steps/Opportunities

40. 40 © 2009 Craft & Hobby Association. All rights reserved. 40 Steps CHA Members Can Take Now  Use effective messaging that reflects the crafters needs  A factor analysis revealed eight primary reasons for crafting. To sustain sales it is important to reinforce these quality-of-life messages: Economy/Value Recommended by Friends/Family Enables Spending Time with Others Interaction with Children Sense of Accomplishment Relaxation Memory Keeping Health  Emphasize gifting and seasonal crafting  53% of all crafting HH’s report that they make handcrafted items for gift giving.  Generate new entries to the industry by promoting craft sets/packages as great gifts for friends and family

41. 41 © 2009 Craft & Hobby Association. All rights reserved. 41  Remind consumers that crafting is fun!  A great way to spend time with kids/family/friends to share a common activity or interest and build relationships  Life is stressful – crafting provides a way to relax  Crafting is a great creative outlet Steps CHA Members Can Take Now

42. 42 © 2009 Craft & Hobby Association. All rights reserved. 42  Accessing the Reports  Reports are free online to CHA Members  All of the reports are available under the RESEARCH tab on www.craftandhobby.org www.craftandhobby.org  Company Member ID numbers and passwords are needed to gain access  If you need your Company Member ID number or have any questions about the research, contact Keri Cunningham, Marketing Manager at 201.835.1229 or at kcunningham@craftandhobby.orgkcunningham@craftandhobby.org

43. © 2009 Craft & Hobby Association. All rights reserved. Q&A