MCJ Capital Partners

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Memo to: MCJ Capital Partners

From: M. Carter Johnson

Re: Halloween by The Numbers

Date: 10/20/2021

The origins of Halloween can be traced back to early days of the Celtic calendar. However, Halloween as we know it today in the U.S. is largely rooted in demographic shifts from the 1920s through the 1950s. It was around this time that urban populations began migrating to suburbs. The suburbs, and their affordable appeal of bigger homes on bigger lots, also created more space between neighbors. Ultimately that space drove a social desire for more sense of community. It was during this time that Halloween became a community centered holiday with parades, festivals, and you guessed it... Trick or Treating.

This year the National Retail Federation estimates Americans will spend close to $10.2 billion on Halloween, trailing only Christmas for highest overall holiday expenditures. In this memo we explore the big business of Halloween and where consumers spend all that cash…

Costumes, Decorations, Candy  and Greeting cards 

 $10.2 billion is no small sum. To put that number in perspective, 69 countries in the world currently have less than $10 billion in annual GDP. So how do American’s plan to spend that large of an amount? The largest category American consumers will spend on is costumes. Adults, kids and even pets will dress up, amassing $3.3 billion in estimated expenditures in the process. The next highest category of spending is decorations, where an overall amount of $3.2 billion is set to be spent. With all those costumes and decorations, trick or treating should be booming and that’s good for the candy business where an estimated $3 billion will be spent. To round out the top categories, the final mass flow of consumer cash will be directed towards greeting cards, where a surprising $700 million is expected to be spent.

Let’s take a deeper look into each of these...

Costumes 

There’s no question about it, U.S. consumers love to spend on costumes. Since 2010, overall Halloween costume expenditures have grown a little over 4.6% annually. Sales of children’s costumes have ticked along at 3.55%. Adult costumes sales have grown at a faster clip of 4.93%. However, the real winner of costume sales isn’t adults or children, it’s pets. This year it’s estimated nearly 30 million people will dress up their pet for Halloween in a trend that’s fueled growth in pet costume sales at an average rate of 6.5% annually since 2010.  

Who makes costumes? Until the 1990s, three big players dominated the high-quality costume manufacturing business. Ben Cooper had exclusive deals with Disney, Marvel and DC, allowing the company to manufacture costumes based on the popular characters from the iconic brands. Collegeville Costumes held exclusive rights with Warner Brothers to manufacture costumes of household favorite cartoon characters. Eventually, an old candy retailer by the name of Rubies reallocated cash from its candy sales to purchase both Ben Cooper and Collegeville Costumes, where it remains the dominant manufacturer of high-quality costumes. Today the company’s license portfolio has a roster including Star Wars, Wonder Woman, Barbie, Batman, and just about every other legacy favorite you could imagine.  

Where do American’s find the perfect costume? Big name retailers are no surprise winners of holiday costume sales. Amazon, Walmart, and Target all are beneficiaries. While all three brands benefit from ecommerce customers, Walmart with 4,743 U.S. stores and Target with 1,915 U.S. stores, both leverage instore costume promotions to lure patron visits that result in additional sales of non-holiday-oriented items. Another big winner in costume sales (and Halloween in general) is Party City. In fact, the company relies on Halloween to generate on average of anywhere between 20 – 25% of their overall annual sales. Party City has an interesting model, manufacturing party goods that can be found in over 40,000 retailers worldwide, while also owning and operating over 900 retail party stores in North America. For the consumer who can’t find the perfect costume at Party City, their next best bet might be shopping at Spirit Halloween. From August through November the company Spirit Halloween operates over 1,400 pop-up stores offering costumes, decorations, and Halloween oriented trinkets. Originally founded by Joe Marver in 1983 and acquired by Spencer Gifts in 1999, Spirit Halloween has come to be a  Halloween holiday staple. The company’s been a huge beneficiary of the “retail apocalypse,” successfully occupying abandoned brick and mortar locations with its pop-up model and just in time seasonal offerings.

Decorations

Just short of costume sales, an estimated $3.2 billion will be spent by U.S. consumers on Halloween decorations. Anchoring decoration sales is the tradition of displaying pumpkin carvings or “Jack-O-Lanterns.” Jack-O-Lanterns were first introduced to America by Irish immigrants in the 1800s. Originally carved out of rutabagas, the Irish placed burning embers in the center of the vegetables to keep “Stingy Jack” and his gift of gab away on the night of All Hallows’ Eve. Once in America, Irish immigrants found pumpkins better suited for carving, and the tradition carried on. Present day pumpkin carving is a big business. Last year it was estimated $687 million was spent on pumpkins for the specific use of carving Jack-O-Lanterns.

Aside from pumpkins, Americans will spend well over $2.3 bill decorating the interior and exterior of their workplaces and homes. Halloween Interior decoration sales benefit retailers such as Pottery Barn, Hobby Lobby, Michaels, and Oriental Trading. Meanwhile consumer spending on exterior decorations and lawn ornaments favor big box home improvement outlets such as Home Depot and Lowe’s. If early transaction trends are any indication of total Halloween sales, 2021 could be a big year. Home Depot reported selling out of Halloween props as early as August, driven in part by the viral love for their popular 12-foot skeleton.

Candy

For consumers less interested in dressing up or decorating their lawn with $300 skeleton yard ornaments, there’s the ageless tradition of buying candy to hand out to trick or treaters. The National Retail Federation estimates $3 billion will be spent on candy this Halloween season. Depending on when you consider the start of candy sales being attributable to Halloween, this number actually swells to as much as $5 billion. Either way, you can be sure candy will be on the minds of consumers and that’s a sweet treat for a handful of companies.

According to candystore.com, the most popular candy this Halloween is projected to be Reese’s Cups, manufactured by The Hershey Company. That’s good for Hershey’s, as Halloween typically accounts for 10% of the company’s annual sales. Brands of Mars Inc occupy four of the top ten spots with Skittles, M&Ms, Starburst, and Snickers all making the list. Hot Tamales, manufactured by family-owned company Just Born out of Bethlehem, Pennsylvania, makes an appearance as the fifth most popular candy. Mondelez International’s Sour Patch Kids occupy the sixth spot. Tootsie Pops of Tootsie Roll Industries finds their way onto the list as the ninth most popular candy. Finally rounding out the list is Candy Corn which is manufactured by multiple producers including Jelly Belly and the Ferrara Candy Company.

Overall the majority of Halloween candy favorites are controlled by four big companies: Mars, Ferrero, Mondelez, and Hershey. Mars controls Halloween favorites that include M&Ms, Snickers, Skittles, and Starburst. Ferrero owns: Butterfinger, BabyRuth, Nestle Crunch Bars (among other North American Nestle brands), and Nerds. Mondelez owns the popular Sour Patch brand. Finally, Hershey controls favorites such as Reese’s, Hershey Kisses, KitKats, and the iconic Hershey’s Bar.

Greeting Cards

 Rounding out Halloween consumer expenditures is the category of greeting cards, where an estimated $700 million is set to be spent. According to the Greeting Card Association, over the prior two years Halloween greeting card sales have been rather consistent with Americans purchasing roughly 21 million units, totaling over $400 million in sales.  This year greeting card sales are projected to jump over 75%, as 45% of all consumers surveyed indicated their intentions of purchasing.

The business of greeting cards is interesting. Since 2005, consumer spending in this category has increased six-fold. This trend has largely been attributed to the demographic pattern of millennials coming of age where sending physical cards by mail becomes popular. While historical giants like Hallmark still dominate the industry, a rise of production from independent homemakers has gained momentum with popular ecommerce platforms such as Etsy.

In Closing

Overall, this year’s Halloween season should reach record levels of spending. American consumers are on solid financial footing and ready to celebrate. As to the question of if spending will exceed the projected $10.2 billion mark, that will likely come down to merchants securing inventory with current supply chain issues.

Happy Halloween,

M. Carter Johnson

P.S. If you are curious as to what candy to hand out this year, take a look at what’s popular in your home state.