Candy makers have enjoyed a healthy period despite a pandemic, with sales up 4 percent from March 15 to September 6 this year. The spike is mainly due to higher purchases in grocery stores. In addition to being pandemic-proof, cheap candy has become an essential source of comfort for many people.
Growth of Chocolate and Non-Chocolate Categories
Consumers in the candy industry embrace innovation, and non-chocolate confections are a growing market. Consumers, particularly GenZ, want their favorite flavors with a twist and are open to novelty products and experiences. This trend has created a new need for companies to develop new non-chocolate confections.
In 2016, the candy industry reported strong growth in the chocolate and non-chocolate categories. Chocolate accounted for more than half of total sales, but non-chocolate sales saw double-digit growth. Growth in chewy, novelty, and complex sugar categories was more than double that of chocolate. The latter category was also a strong performer during the holidays, with sales of seasonal non-chocolate accelerating by 19.6 percent during December.
Non-chocolate categories of candy continued to grow strongly during the last decade. Rising disposable incomes and a growing population fueled growth in this category for wholesale candy. Additionally, consumers enjoy snacking. As a result, candy marketers are developing new and innovative products and focusing on the customer’s experience. New technologies such as e-commerce have also opened up new avenues for impulse purchases. Young adults increasingly opt for convenient online grocery shopping options, resulting in a strong demand for non-chocolate confections.
The candy industry is facing a significant challenge as more consumers shop online. Online purchases may not replace in-person visits, but they are helping drive impulse purchases. 71% of product searches start on retail websites, while 55% start on Amazon. Despite this challenge, some candy makers are leveraging online technology to keep up with consumers’ growing digital habits.
According to the National Confectioners Association (NCA), online purchases of candy jumped more than 50% in the last year. The primary drivers were convenience and the inability to find items in stores. Moreover, consumers can enjoy free shipping online and get better deals. Online purchases of confectionery are predicted to reach $44.9 billion by 2026.
In the candy industry, innovation is a crucial factor in remaining competitive. Due to fierce competition, domestic companies dominate a sizable portion of the world market for candies. Significant players include The Hershey Company, Mondelez International Inc., and Perfetti Van Melle Group BV. These companies have used various strategies to stay competitive, including launching new products and incorporating mergers and acquisitions.
Another way to innovate is by licensing products.
Cost of Raw Materials
The cost of raw materials in the candy industry can be an essential factor in the profitability of a business. Higher shipping costs, shortages of labor, and commodity delivery delays can contribute to increased costs. In addition, smaller producers are often forced to plan ahead and find alternative solutions to these problems.
Cocoa and sugar are two critical raw materials that can dramatically affect the cost of a product. Price fluctuations in the global marketplace have led to fluctuating prices for these commodities. In addition, unfavorable weather, crop diseases, and labor availability affect cocoa yields. These factors can result in a shortage or an oversupply of the products. In the upcoming years, candy manufacturers will likely face more challenges due to fluctuating prices.
Some companies are addressing the cost of raw materials in their business plans.
Impact of the COVID-19 Pandemic
The confectionery industry has been significantly impacted by the COVID-19 pandemic. In just over a year, the coronavirus has killed over 27 thousand people in Germany and affected every aspect of our lives. It has also led to significant changes in the retail side of the industry. Many consumers have resorted to online ordering, from click-and-collect to home delivery.
In a survey conducted after the outbreak, we found that six out of 10 shoppers had changed their candy purchase habits. They switched brands, types of candy, and pack sizes. The reasons included changing routines and finding a better value. We also saw a decrease in candy outlets and the growth of alternative channels such as grocery stores.