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Higher Feedstock Prices Burn the Candle Industry

May 2, 2007

Despite major expansion during the 1990s, the U.S. candle market’s growth has dimmed slightly since 2003. The market, estimated at $2.3 billion in 2006, has experienced success across all consumer groups, but lower-cost alternatives and lack of brand distinction continue to plague the category.

Even though sales have declined by more than 7% from 2005 to 2006, consumer usage has continued to soar. According to a new study by Mintel, 77% of consumers said they purchased a candle in 2006; that’s up from 64% in 2002. In addition, nearly 33% of consumers said that they purchase candles once a month or more often. With the accessibility of low-cost offerings in the candle category, consumers are saving money but manufacturers are not enjoying higher profit margins.

“Candle manufacturers have to contend with cheaper alternatives and increased production costs,” said Chris Haack, analyst for Mintel. “Petroleum is a key resource in the candle manufacturing process, and it has continued to soar in price during the past few years. This, coupled with the fact that major category competition prevents candle companies from passing along the added costs, is contributing to the downturn in sales.”

Companies are creating new scents and more decorative offerings in order to continue building loyalty. In addition, new consumer groups are discovering the candle category. Among male survey respondents, 65% said that they purchase candles. In addition, 64% of male candle purchasers agreed that there should be more male-targeted candle products.

As the low- and mid-cost candles continue to erode under the pressure of strong competition, the high-end segment continues to tap into the home decorating angle for increased sales. From 2004 through 2006, this segment rose more than $130 million to reach $772 million last year.

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