Welcome

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Welcome to the 2008 ALL CANDY EXPO
Sponsored by
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US Immediate Consumption Snacking Trends
Jill Manchester Vice President, Immediate
Consumption Kraft Foods, Inc.
Carolyn HendriksmaSr. Director, U.S. Insights
Advanced Analytics The Hershey Company
Sponsored by
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Consumer Snacking Trends
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(No Transcript)
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Important lifestyle trends are drivingImmediate
Consumption Snacking Trends

• Growing sense of time pressure among consumers
• Increased stress level
• More time spend in transit
• Shifting work patterns
• Shorter lunch breaks
• Growth in single person households
• Spending less time preparing eating foods at
  home

Growing need for MORE CONVENIENCE
Datamonitor, The Future of On-The-Go Eating
Drinking Patterns, 2007
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Changing mealtime attitudes and fragmentation are
driving Immediate Consumption Snacking
Changing mealtime occasions
Evolving the definition and the role of SNACKING
Datamonitor, New Trends in Snacking Drinking
On-The-Go, December 2005
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This eating behavior is being supported by
expertsand the mass media
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Immediate Consumption is predicted to increase in
the U.S.
U.S. On-The-Go Eating Drinking Occasions Per
person number of eating/drinking occasions per
year
11.2 Chg.
5.3 Chg.
Datamonitor, The Future of On-The-Go Eating
Drinking Patterns, August 2007
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While men are more regular IC consumers, women
are forecasted to grow their IC consumption
incidence at a higher rate
U.S. On-The-Go Eating Occasions Per person number
of eating occasions per year
3.2 Chg.
7.5 Chg.
Datamonitor, The Future of On-The-Go Eating
Drinking Patterns, August 2007
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Competition for Consumer share of stomach for
snacking is growing
Consumer Identified Snacking Outlets
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QSR SNACK traffic is up 5 and growing twice as
fast as overall QSR traffic
Quick Service Restaurants Snack Traffic Trends
(000s)
Source The NPD Group/CREST
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Key Messages

• Lifestyle trends driving mealtime fragmentation
• Growing On the Go Snacking Consumption
• On the Go Snacking Predicted to keep growing
  strong
• Competition is intensifying - everyone wants
  their fair share of the snacking trend
• What can we do differently to capture
  this growth opportunity?

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Snacking Industry Trends
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The Snacking Universe is big and growing
U.S. Snack Marketplace 76 billion CAGR (03-06)
3.0
Source Data Monitor 2006 U.S. all channels
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Salty Snacks
52 wks thru Apr 08
Apr 07
Change 3.6 2 Yr CAGR 3.5
Nielsen 3 outlet WM Syndicated Summary 52 w/e
4/19/08
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Cookies
52 wks thru Apr 08
Apr 07
Change 1.1 2 Yr CAGR 1.4
Nielsen 3 outlet WM Syndicated Summary 52 w/e
4/19/08
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Crackers
52 wks thru Apr 08 Apr
07
Change 2.9 2 Yr CAGR 3.8
Nielsen 3 outlet WM Syndicated Summary 52 w/e
4/19/08
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Nuts
52 wks thru Apr 08
Apr 07
Change 4.9 2 Yr CAGR 3.4
Nielsen 3 outlet WM Syndicated Summary 52 w/e
4/19/08
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Bars
52 wks thru Apr 08
Apr 07
Change 11.0 2 Yr CAGR 8.7
Nielsen 3 outlet WM Syndicated Summary 52 w/e
4/19/08
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Meat Snacks
52 wks thru Apr 08 Apr
07
Change -3.7 2 Yr CAGR .2
Nielsen 3 outlet WM Syndicated Summary 52 w/e
4/19/08
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U.S. Confectionery Category Trends
Carolyn HendriksmaSr. Director, U.S. Insights
Advanced Analytics The Hershey Company
Sponsored by
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Key Messages

• The confection category is highly attractive
• Largest snacking category
• Strong growth performance
• Nearly all households purchase confection
• Short purchase cycle
• Category is highly impulsive and decision are
  made quickly
• Chocolate and gum segments are driving overall
  category growth
• Opportunities exist to simplify the shopping
  experience

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Confection is the largestsnack category in the US
U.S. Snack Marketplace 76 billion CAGR (03-06)
3.0
Segments Chocolate Sugar Confection Refreshment -
Gum - Mint
Source Data Monitor 2006 U.S. all channels
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and is purchased everywhere
Confectionery CategoryRetail Take-Away by COT
Annual 2007
Source Data Monitor 2006 U.S. all channels
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CMG growth is strong
CMG Category FDMxC Retail Take-Away Trends (B)
4-YR CAGR 3.2
Source IRI/Nielsen
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with high HH penetration
Latest 52 Week Household Penetration
Source Nielsen HH Panel
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and short purchase cycle
Latest 52 Week Purchase Cycle (in Days)
Source Nielsen HH Panel
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Category is highly Impulsive
Percent of Purchase Decision Made In-Store
50 CMG purchased off displays is impulsive
75
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Brand Decision Not Made
Did not Plan to Buy Category
Source SmartRevenue
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THE CANDY SHOPPER

• Confections is one of the most unshoppable
  categories
• Shoppers shop by usage occasion first then pack
  type, with menu of acceptable brands
• Shopper spend less than 60 seconds in the
  confection aisle
• Most purchase decisions are made in store (60)
• Nearly ¼ of shoppers walk away without purchasing
  as they cannot find what they are looking for

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The consumer decision follows a defined path

• Chocolate
• Sugar Confectionery
• Refreshment

Segment

• Gift Fine Chocolate
• Candy Dish
• Etc.

Usage

• Laydown Bag
• Standup Bag
• Etc.

Packtype
Brand

• Hersheys
• Snickers
• Reeses
• Butterfinger
• Etc.

Item Purchase Decision
Source CLASS Study Needscope Churchill Group
Sorensen
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With high loyalty to segment and occasion
Attribute loyalty consumers substituting to
stay within attribute
Source Sorensen
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Aisle segmentation and order simplifies shopping
experience
Candy Aisle
Gift Fine Chocolate
Candy Dish
Movie Snack Candy
Fruity Chewy
Gum Mints
Front of the store
Non-chocolate
Chocolate
Routine trip (quick grab)
More careful shopping
Everyday Products
Specialty Products
Source SmartRevenue, Focus Groups
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Hershey, Masterfoods, and Wrigley are Key
Category Players
Annual 2007 Manufacturer Share FDMxC
Source IRI/Nielsen
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Chocolate Dominates the Category
FDMxC Segment Shares Annual 2007
Source IRI/Nielsen
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driving growth along with gum
Confectionery CategoryRetail Take-Away by COT
FY 2007 vs. FY 2003
11.6B
10.2B
4-YR CAGR 3.4 6.9 1.7
(2.8)
Source IRI/Nielsen
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• Segment Overview
• Chocolate

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Majority of sales are from everyday
Chocolate SegmentRetail Take-Away Trends
3.4 CAGR
Source IRI/Nielsen
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Instant Consumables and Packaged are the leading
Pack-Types
Chocolate SegmentRetail Take-Away by Pack-type
Source IRI/Nielsen
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Big Brands dominate
Chocolate Segment Top 10 Franchises (Ms)
500M
Source IRI/Nielsen
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Premium growth rateexceeds Mainstream or Trade
Up
Chocolate Category by Segment (bn)Retail
Take-Away by COT FY 2007 vs. FY 2003
6.7B
5.4B
3-YR CAGR 5.1 28.2
2.6
Source IRI/Nielsen
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• Segment Overview
• Non-Chocolate

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Hard and Chewy Candy are maintaining category
strength
Non Chocolate SegmentsRetail Take-Away Trends
1.7 CAGR
Source IRI/Nielsen FDMxC Annual Data
Source IRI/Nielsen
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Chewy is the largest segment and growing rapidly
NChoc SegmentCategory Take-Away by Type
NChoc SegmentCategory GROWTH by Type
Source IRI/Nielsen
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Packaged Candy dominatesthe Non-Chocolate Segment
Non-Chocolate SegmentRetail Take-Away by
Pack-type
Source IRI/Nielsen
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Big Brands dominate
Non-Chocolate Segment Top 10 Franchises (Ms)
100M
Source IRI/Nielsen
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• Segment Overview
• Gum

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Sugar-Free Gum and Functional Gum are driving
growth
Gum SegmentRetail Take-Away Trends
6.9 CAGR
Source IRI/Nielsen
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Mint is the largest flavor segment,but Fruit is
driving growth
Gum SegmentChange by Flavor 4YR CAGR
Gum SegmentRetail Take-Away by Flavor
17
Source IRI/Nielsen
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Sugar Free is big and getting bigger,driving
growth
Gum SegmentRetail Take-Away by Type
Gum SegmentChange by Type 4YR CAGR
17
Source IRI/Nielsen
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Single Packs continue todominate the Gum Segment
Gum SegmentRetail Take-Away by Pack-type
Source IRI/Nielsen
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Big Brands also dominate the Gum Segment
Gum Segment Top 10 Franchises (Ms)
200M
Source IRI/Nielsen
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• Segment Overview
• Mints

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Sugar-Free mints are over half of the category
but stalling
Mint SegmentRetail Take-Away Trends
-2.8 CAGR
Source IRI/Nielsen
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Mint is the largest flavor segment,but it is not
driving growth
Mint SegmentChange by Flavor 4YR CAGR
Mint SegmentRetail Take-Away by Flavor
17
Source IRI/Nielsen
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Dispenser Packs are thepreferred Mint Pack-Type
Mint SegmentRetail Take-Away by Pack-type
Source IRI/Nielsen
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The top 5 Mint Franchises Represent 75 of
Segment Volume
Mint Segment Top 5 Franchises (Ms)
100M
Source IRI/Nielsen
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Summary

• Develop usage occasion segmented aisle set to
  make it easier for shoppers
• Drive chocolate segment through focus on big
  brand programming and select premium offerings
• Capitalize on gum innovation and consumer
  movement to added benefits like sugar free and
  functional benefits, such as whitening
• Fuel more profitable growth in non-chocolate
  segment through best brand and pack type
  selection
• Reinvigorate mint growth with a new wave of
  innovation focused on delivering functional needs

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Thank You
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US Immediate Consumption Snacking Trends
Jill Manchester Vice President, Immediate
Consumption Kraft Foods, Inc.
Carolyn HendriksmaSr. Director, U.S. Insights
Advanced Analytics The Hershey Company
Sponsored by