U.S. confectionery Goliaths losing market share to SMEs – IRI

By Oliver Nieburg contact

- Last updated on GMT

Small companies outpacing the big four in U.S. candy market, says IRI
Small companies outpacing the big four in U.S. candy market, says IRI

Related tags: Confectionery, Vice president

The top four U.S. candy manufacturers are growing at slower rates than smaller companies, that are able to bring new products to market quicker, says an IRI analyst.

U.S. national candy manufacturers outside the top four grew 2014 sales by 5.7%, compared to 1.9% for the big four: Hershey, Mars, Lindt and Nestlé. The smaller players now account for 26% of candy sales in the U.S. market, according to IRI data.

"The Davids are winning,”​ Larry Levin, executive vice president of industry insights at IRI, told ConfectioneryNews at the recent Sweets & Snacks Expo in Chicago.

"Part of it is that they're more nimble. They can get new product innovation out to the marketplace more quickly than some of the bigger companies,” ​he said.

‘They should be really worried’

2014 candy sales

  • Top 4 manufacturers - $17bn (71%)
  • Other national manufacturers - $6.4bn (26%)
  • Store brands – $667m (3%)
    Source: IRI

IRI found U.S. candy SMEs made a +0.7 pt share gain against the top four candy makers in the country in 2014.

"They should really be worried,”​ said Levin. “That's huge and they're doing it by building penetration - they're getting into more households and once they get into the households they're getting people to buy again."

Levin said a similar trend was unfolding in other industries. For example, smaller U.S. snack makers gained a +1.1 pt share gain against the top four snack producers in 2014.

“You think about a company like Chobani - a couple of years ago Chobani was a David client, now it's without a doubt the darling of the yogurt industry. So companies have to evolve and become this or they end up getting purchased by the bigger companies,”​ said Levin.

Further consolidation?

In U.S. confectionery, the big four players still account for 71% of sales.

Contribution to 2014 growth

  • Top 4 manufacturers - +1.9% (49.8% of growth)
  • Other national manufacturers - +5.7% (52.4% of growth)
  • Store brands – -2.1% (2.2% of growth)
    Source: IRI

According to Levin, the market could be poised for further consolidation if big companies continue to lose share and see smaller players as attractive acquisition prospects.

But he added smaller companies in many cases enjoyed autonomy and may resist approaches from bigger players. "They like the fact they don't have to go through a lot of stage-gate to get new products launched,” he said.

Bigger pie for everyone, says NCA

John Downs, president of the National Confectioners Association (NCA), told this site the entire U.S. confectionery market grew 2% last year and there was room for everyone.

“The pie is getting a bit bigger so everyone gets a bigger slice, whether they are small medium or large…innovation is a big driver in terms of growth of the business….and if you look in innovation, small to medium-sized business is where a lot of it comes from.”

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