This article was originally published in the Weekly Wonk.
Roaming the candy aisle of my neighborhood Safeway around Halloween is a dizzying encounter with choice. Towering stacks of sumptuous sweets glisten under garish tube lights, the seasoned regulars (Twix, Twizzlers) joined by seasonal guests (pumpkin spice Kisses, Spooky Nerds). It’s a paragon of dazzling variety.
Or so it seems.
I counted over 40 different brands of candy but, when you look closer, almost all of them are produced by one of three companies: Hershey, Mars, and Nestle, with a specialty product or two by Ferrero and Palmer’s Company. Such is the state of grocery stores across America. As Spidermen and Miley Cyruses (Cyrusi?) swoop the country’s streets to trick-or-treat tonight, the booty they collect will look, more or less, the same. The vast bulk of the $2 billion spent nationally on candy this season – whether bought in Alabama, Oklahoma, Montana or Maine – will end up in the coffers of two, maybe three companies. This degree of consolidation mirrors a wider trend across America’s political economy. From the beer industry and the seed market, to book publishing and telecom, a handful of companies now dominate, with implications on true diversity and choice.
It wasn’t always so. Through the 1960s America’s candy market was largely regional. “You ate the candy that was produced in your town,” recalls Dave Wagers, owner of the Idaho Candy Company, one of a dwindling number of independent candy makers in the country.
Candy was a sprawling and diverse industry at that time, run by confectionery tinkerers that tirelessly stirred and tweaked to dish up new sweets. To distinguish their creations, producers pegged treats to national sports stars, disgraced politicians, or even the local preacher. There was the Winning Lindy bar for Charles Lindbergh, the Dr. IQ bar for a ’30s radio quiz show, and the Oh Henry! bar named after the guy who moved barrels of corn syrup at one manufacturer’s candy plant.
The Second World War was – as it was for many other American industries – good business for candy makers. The military included fudge and chocolate peanut bars in soldiers’ field rations, and a national sugar ration kept candy dear. The boom continued past the war, sustaining around 6,000 candy producers through the late 1940s.
The diversity didn’t last. In the 1960s bigger players began eating up their smaller rivals. Hershey bought up Reese’s in 1963, a prelude to later purchasing Twizzlers and Almond Joy. Nestle followed suit, snapping up brands like Goobers, Baby Ruth, and Wonka Bars. The companies that escaped or resisted their buying spree found themselves now competing with fattened giants. In one instance, the Heath Bar – enormously popular by the late 1970s – caught the eye of Hershey, which asked for rights to produce the candy. When Heath declined, Hershey bought the original recipe from another company and introduced the Skor Bar to compete head-on. Heath Bar sales fell, and the company struggled until it was acquired, first by a Finnish company and then, ultimately, by Hershey.
This pattern of consolidation has helped thin the market down to around 150 candy producers today. From those 150, Mars and Hershey control around 75 percent of the national chocolate market, and 60 percent of the US candy market overall.
Their size tilts the playing field, enabling them to dish out huge sums in “slotting fees” to grocery and convenience stores. These payments buy companies shelf space, ensuring you’ll see the same pattern of brands prominently displayed in any Wal-Mart, Giant, Kroger, or 7-11. Retailers, too, have consolidated dramatically, leaving less shelf space for sale and empowering chain stores to demand discounts and deals from candy makers, terms independent producers can’t afford.
Wagers estimates Hershey and Mars contract up to 80 percent of the shelves in candy aisles –a spot for which retailers can demand up to $25,000 – with a few other national brands jumping on the remaining 20 percent. “We’re lucky to get one or two boxes in the store, and that’s only in areas where we’re well known,” said Wagers, whose business has gone from producing 50 different types of candy over the years to four today.
Not only is it hard landing a spot on retailers’ shelves, it’s tougher to reach them in the first place. In their heyday, independent candy makers commissioned sales representatives to merchant their goods around the country. A regional sales broker representing a few clients, each producing a small number of candy bars, could do good business advertising treats from Minneapolis in Seattle, and sweets from Omaha in St. Louis. Small distributors, too, could amass decent business hauling the wares of many regional producers. But as the players at the top have consolidated, they’ve pushed the trend down along the supply chain, largely eliminating the infrastructure that independent players once used to reach markets.
Russ Sifers, owner of Sifers Valomilk Candy Company based near Kansas City, estimates there were around 10 sales representatives and 12 distributors in his region 30 years ago; today there are two and four, respectively. “The distributors became a powerful force after consolidating. Today if you’re not big enough they won’t give you the time of day,” he said.
Sifers makes Valomilks, vanilla milk chocolate cups of semi-liquid marshmallow, created in 1931 under his great-grandfather. Sifers says he’s long considered introducing a line of dark chocolate Valomilks but doesn’t believe today’s market structure gives him a real shot. “I’m fighting for my life getting one item on store shelves, how the hell am I going to get two?” he said.
Steve Almond, author of “Candyfreak,” says bringing a new candy bar to mainstream markets as an independent producer today is “virtually impossible.” His book – born of an obsessive love for Caravelle, a candy bar that was discontinued when he was in high school – tours the surviving businesses behind America’s candy bars of yore, trying to uncover what changed and why. The barriers today, he learned, are formidable. “I’d have to have billions of dollars just to be able to scale up enough to make a decent quality bar at a competitive price. Then I’d have to worry about getting the word out about the bar, and getting it widely distributed,” he said. “And if it posed anythreat to the Big Three, they would do what giant companies do: buy me out, or bury me with competitive pricing, or [by] introducing a similar bar.”
Ruing the disappearance of a diverse candy market isn’t just nostalgia. Fewer people concocting means dominant players have fewer reasons to innovate. Earlier this month the industry buzzed over the major news of the season: in January Hershey will introduce Lancaster, bags of caramel soft crèmes that will come in three flavors. It’ll be the first new and original candy – not acquired, not spun-off an existing brand – the company has brought to market in 30 years.
If we want a healthier market, we could start by reviving some of our antitrust laws, which we traditionally used to create a level playing field among companies, regardless of size. Enforcing current laws – whittled down by federal courts – won’t do much to dent the dominance of Mars and Hershey or the massive retailers, but could curb their ability to throw their weight around at the expense of the independents.