The $11.6 Billion Treat Just Days Away

Third quarter earnings season is underway.

And it can be frightful (I’ll delve more into specific names in coming weeks).

But there’s another event lurking in the shadows that’s poised to spark a multi-month splurge.

Now, I enjoy horror stories, ghouls, ghosts, demons and slasher flicks.

I also love candy… Though, who doesn’t?

But these two joys combine for one glorious annual celebration: Halloween.

It’s also known as All Saints’ Eve or All Hallows Eve.

It originally began as the Celtic festival of Samhain, celebrated more than 2,000 years ago.

Now, Halloween’s roots in the U.S. only stretch back to the 1840s. It was a tradition brought over by Irish immigrants fleeing the potato famine.

And Halloween is an often-overlooked event by the markets. But it’s one I definitely don’t think investors should ignore… and there are billions of reasons why.

Scary Stats

For the $48 billion confectionery industry, Halloween is the Super Bowl.

In the U.S., costume-clad children travel door-to-door carrying classic pumpkin-shaped buckets or the ever simple-yet-effective plastic grocery bag. At each house they cry out “trick or treat!” and are rewarded with a fistful of candy.

Now, roughly 70% of Americans celebrate Halloween each year.

About half of Americans will wear a costume. Which, considering the U.S. population is more than 345 million, that’s a sizable number.

It’s safe to assume his year, we can expect to see a lot of Wolverine, Asterid Deetz and Shrunken Head Bob from Beetlejuice, Beetlejuice, as well as Harley Quinn and Joker costumes.

But humans aren’t the only ones who dress up. We also love to squeeze our furry family members into costumes as well.

And in 2023, Americans spent roughly $700 million on costumes for their pets. I’ll admit, my dogs have a collection of Halloween costumes (though I refuse to dress my Dachshund mix as a hotdog!).

This is also why I love the e-commerce pet products company, Chewy (CHWY), this time of year.

Finally, typically, 32% of Americans go trick-or-treating (those with young children).

All of this translates into a lot of money for a lot of companies.

Last year, Americans spent $12.2 billion on Halloween. This was a record. This year, expectations are for a slight dip to $11.6 billion.

Now, we can also see that Halloween spending isn’t as consistent as hitting new annual records, like winter holiday shopping. It tends to ebb and flow.

This year, the decline is pinned on an expected pullback of $4.62 in average spend, falling from $108.24 in 2023 to a projected $103.63.

Spending on adult costumes will be $1.8 billion, while spending on children’s costumes is expected to be $1.3 billion.

Of course, besides the scary movies, spooky decorations and chances to dress up as your favorite character, Halloween is really centered on one thing and one thing only: candy.

Lots and lots and lots of candy.

Top 10 Showdown

Americans enjoy candy year-round.

But Halloween is the most epic day for candy consumption in this country.

In fact, 96% of American households buy some sort of candy for Halloween.

And it’s projected Halloween revelers will dish out $3.5 billion to hand out bowls full of mini-Snickers, individual Reese’s Peanut Butter Cups and Kit Kats.

Last year, Halloween candy purchases accounted for 7.4% of all candy sales for the year.

Of course, we all have our favorite type of candy... but let’s be honest, chocolate is by far the candy most of us crave more than any other.

The reality is, that more than 63% of all the money spent on Halloween candy will be spent on chocolate.

That means this time of year is extremely important to candy manufacturers such as Hershey (HSY), Mondelez International (MLDZ), Nestle S.A. (NRSGY) and Tootsie Roll (TR).

Year-to-date, these are largely underperforming the S&P 500.

But there is an opportunity for some of these to pick up some momentum.

Here’s a graphic breaking down 17 years of candy sales by CandyStore.com …

Now, Reese’s Cups, Hershey Kisses and Hershey Mini Bars are all owned by… you guessed it… Hershey. The candymaker also pays a nearly 3% dividend yield.

Sour Patch Kids are made by Nestle. And the company sold off Butterfinger in 2019 for $2.8 billion to Ferrero (which also spits out Candy Corn).

M&Ms, Skittles and Starburst are sold by Mars Incorporated, one of the largest privately held companies in the world.

Hot Tamales are manufactured by the family owned Just Born.

And of course, not in the top 10, but Tootsie Roll, Tootsie Pops, Charms Blow Pops, DOTs (all my personal favs and probably my most controversial stance) are distributed by Tootsie Roll.

It’s also important to remember that half of all candy purchased for Halloween is for self-consumption.

Everybody does the “a treat for me, a treat for you.” So, you’re not alone if you run out of Halloween candy before the big night and must race out to buy more.

The great thing for candy makers is, that Halloween – a mere handful of days away - is only the beginning of a candy-buying spree that stretches from now until Easter in April. That’s a sweet opportunity no investor should want to pass up.

Heading to the store to buy more candy,
Matthew