CONFECTIONERY SHIPMENTS DOWN -24.1% IN 1Q 2009

By Generation Research, 3 September 2009

Not even the usually resistant and resilient confectionery category can escape the challenges and impact of the global financial downturn.

"In the first quarter of this year confectionery shipments to the world's duty free and travel retail shops slumped no less than -24.1% in value and -21.0% in volume as compared to the same quarter in 2008", says Yngve Bia, President of Generation Research. "Such a huge quarterly decline in the business is unprecedented, of course".

"In the first quarter of the year confectionery was heavily de-stocked", says Steve Brock, General Manager ITR Cadbury. "We saw a better second quarter, but still not great everywhere".

According to the latest TRIQ Confectionery Index figure, global duty free and travel retail confectionery sales are on a steady path of decline. The TRIQ Confectionery Index measures the quarterly evolution of markets and companies based on shipments made by the suppliers.

"Despite the negative numbers, it must be remembered that confectionery is still a category that is performing better than most other categories in these troubled times", says Bia. "Clearly it is travellers' spend on high-ticket discretionary items that has been especially affected".

First quarter 2009 sales by value in all regions recorded double-digit declines led by Asia Pacific (-37.7%). The smallest drops in business were recorded in the British Isles (-13.6%), Europe Total (-19.7%), Continental Europe (-20.5%) and Africa & Middle East (-22.6%). Shipments to the Americas fell -27.2% in value terms.

In volume terms, shipments to the British Isles actually advanced +4.1%, a figure that is very close to the growth in value sales calculated in GBP at +4.0%. In 1Q 2009 the Pound Sterling lost -27.3% in value against the US dollar as compared to 1Q 2008. Declines in shipments were recorded in Asia Pacific (-40.3%), the Americas (-35.2%), Africa & Middle East (-21.2%) and Europe Total (-11.7%).

Companies that got off to a relatively good start in 2009 performing above the average evolution of the global market (-24.4%) include van Slooten, Godiva, Mars, Toms, Fazer, Nestlé and Ferrero.

Given the average appreciation of the US dollar against other major currencies in 1Q 2009 vs 1Q 2008, the evolution of the global duty free and confectionery business calculated in other currencies are (US dollar evolution = -24.4%):

• CHF -19.0%
• EUR -13.4%
• GBP +4.0%
• SEK +0.7%
• DKK -13.4%

The past several quarters have seen a continuous and substantial decline in the evolution of shipments as compared to the same quarters in previous years.

"In 1Q 2008 we saw a value growth in shipments of +42.5% against 1Q 2007. One year later when we compare 1Q 2009 against 1Q 2008 we see a negative number of -24.4%", says Bia.

The 12 Months Rolling Index compares the accumulated results of the current and most recent three quarters with the results of the previous four quarters. Given that the current analysis concerns 1Q 2009, this means that the results of the four quarters stretching from the current 1Q 2009 back to 2Q 2008 are compared to the numbers with the results for the four quarters covering 1Q 2008 to 2Q 2007.

"These 'annualised' results probably give a better overview of trends in the performances of markets and companies as they reflect a more balanced reflection on overall performance rather more than the 'extreme ups' or 'extreme downs' in any one quarter – for whatever reason: stock shortages, supply issues, general downturn in markets – including recession, etc", says Bia.

In value terms, the annualised pace of growth – corresponding to a 365-day average – in global duty free and travel retail confectionery sales is at present calculated at +3.6% based on the sales evolution in US dollars. In volume terms this number is negative: -7.0%.

"The 12 Month Rolling Index based on value shipments has lost steam declining from 126.0 in 3Q 2008, to 116.5 in 4Q 2008 and now closing 1Q 2009 at 103.6. A number below 100.0 means that the global duty free and travel retail confectionery industry is actually contracting and it is likely we will see this confirmed following the results in 2Q 2009", says Bia.

The 12 Month Rolling analysis reveals that Africa & Middle East has seen sales grow by +17.5%, followed by Continental Europe +10.0%. Positive numbers are also recorded for the Americas (+3.5%) and Europe Total (+2.3%). Negative trends are recorded for British Isles (-15.2%) and the Nordic Countries (-5.2%).

The trend for volume sales is negative for all regions. Three markets have performed above the global average decline at -7.0%, namely: Africa & Middle East (-0.1%), Continental Europe (-1.5%) and the Americas (-4.4%). Below average performing markets include British Isles (-20.7%), Nordic Countries (-13.5%), Asia Pacific (-10.3%) and Europe Total (-7.8%).