State of the industry: Confectionery

by Monica Watrous and Keith Nunes
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The U.S. confectionery market is estimated to reach $35.86 billion in sales during 2016.

KANSAS CITY — The U.S. confectionery market is estimated to reach $35.86 billion in sales during 2016 and $38.19 billion by 2020, according to market research firm Technavio, Elmhurst, Ill. From a volume perspective, Technavio said confectionery companies sold 7.31 billion lbs in 2015, and that volume will increase to 7.61 billion lbs by 2020, growing at a compound annual growth rate of 0.81%.

In response to the tepid growth forecast, large manufacturers are taking a number of steps to adjust to the new market realities, including peer-to-peer acquisitions, portfolio diversification through acquisitions, the alignment of indulgences with current consumer trends and international expansion.

In June, Deerfield, Ill.-based Mondelez International offered to acquire the Hershey Co., Hershey, Pa., for $107 per share. The combination would have created a global confectionery powerhouse, but Hershey’s board of directors rebuffed the offer, and by late August Mondelez said it was no longer pursuing a merger with Hershey.

With that option off the table, both companies must consider other options to improve the profitability of their confectionery businesses.

The Hershey Co., which in 2015 accounted for 31% of the confectionery market in the United States, according to Nielsen data, has embraced a variety of initiatives to improve performance, including acquiring such companies as Krave meat snacks and barkTHINS for diversification, seeking to establish a greater foothold in China and relying on consumer insights in a greater fashion to drive new product innovation.

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