Table 2: Percent of Candle Sales by Distribution Channel

Distribution Channel	Percent of Total
Specialty Retail Stores (gift, card, collectible, and decorative accessory shops)	68
Department Stores	9
Mass Merchandisers and Discounters	8
Internet	4
Consumer Direct Marketing (catalogs, direct response ads, or promotional mailings)	4
Other	7

Source: Unity Marketing, 2000.

Market Trends

In their reporting of product statistics, the Economic Census reports nearly a doubling in the
number of candle manufacturers from 1992 to 1997. As discussed above, recent years have
shown new entrants to the candle manufacturing industry. Although many new manufacturers
have entered the market, according to a the Unity Marketing survey, the majority (75 percent) of
gift manufacturers that produce and market candles and candle accessories have been in the
business for a long time. Half of the companies in the survey have been in business for 11 to 25
years, while another 25 percent have been in business longer.

The NCA reports that, in the last 5 years, the industry has doubled its sales. Trade association
sources as well as numerous trade publication articles attribute this tremendous growth to the
rapid increase in sales of aroma therapy and other scented candles. A supermarket trade
publication reported that in 1999, candles were generating annual sales increases of around 20
percent (Supermarket News, 1999). The same publication states that retailers and suppliers
attribute the upswing in sales to the fact that consumers view candles as a relatively cheap and
accessible fashion accessory for the home for special events or seasonal decoration, or just as an
accessible means of augmenting the atmosphere within the home.

Shipments of candles are forecast by the Freedonia Group, a private research firm, to expand 8.1
percent per year reaching $1.6 billion in 2003 (The Freedonia Group, Inc., 1999). They predict
that, in addition to the mature market for ceremonial and utilitarian lighting applications,
introduction of numerous fashion-driven, upscale offerings and mood-enhancing scented
varieties, will spur gains; as will the increasing market presence of candle-only stores.
Supermarkets, drug store chains, and upscale department stores have all expanded their candle
offerings, including displays in multiple departments, such as air-freshener, body/bath sections,
and health and beauty products displays.

The Freedonia Group report predicts that the pace of growth will slow from the double-digit
increases of the earlier decade, due to increased competition from imports and some loss of
consumer interest. This is in contrast to the Packaged Facts report that observes that, even
though the trade press has previously reported that the popularity of candles and potpourri
usually alternates on a 5-year cycle, candles are continuing to sell beyond that cycle and are
showing no signs of slowing down.

Another business publication reports that candles are the largest growing segment in the giftware
market. Sales have been buoyed by the introduction of high-fashion candle stands and display
accessories as well as innovations in candle design, shape, color, and fragrances. Longer lasting
scents and unique decorative styles have attracted buyers. Females between the ages of 25 and 54
with household annual incomes over $25,000 are the prime market. Men purchase candles at
about half the rate of women (Business Wire, 1999).

Sources of Imported Candles

The Census Bureau tallies import data from the various ports of entry by originating country.
These data show that in 1999, China, Hong Kong, Mexico, and Canada were the largest suppliers
of candle imports. (See Table 3.) A total of 197.9 million kg of candles valued at $484.2 million
were imported in 1999. The Freedonia Group reports that candle imports more than tripled
between 1993 and 1998.

Unity Marketing investigated the sources of imports when surveying candle manufacturers. (See
Table 4.) This survey showed that 68 percent of companies reported China as the top country
supplying imported candles.

Table includes data only from countries supplying 1 percent or greater of the total quantity of imports.

Source: US Bureau of the Census, 2000.

Source: Candle Report, Unity Marketing, 2000.


Product Use in the US

Candles are purchased for utilitarian, religious, or other institutional purposes, but the majority of
candles, particularly scented candles, are purchased for non-utilitarian home use. Consumers
buying scented candles derive utility from the decorative and aromatic attributes of the candles.
The NCA reports that 7 out of 10 US households use candles, and candle manufacturers’ surveys
show that 96 percent of all candles purchased are bought by women (NCA, 1999).

Some candles are purchased for special events, such as parties, or for seasonal decorations. Thus
candle sales do especially well in parts of the country that experience four seasons. Impulse
buying accounts for a significant portion of purchases on a regular basis because people are
attracted to the scent when they encounter candles while shopping (Supermarket News, 1999).

People encounter candles more often as supermarkets, drug stores, and mass-merchandisers
increase their candle offerings. Candles are sold alongside floral and gift merchandise, as well as
greeting cards. Candles for home decorating and fragrance have broad appeal, crossing all
demographic lines (Supermarket News, 1999). The NCA reports that seasonal (e.g., Christmas
and other holidays) buying accounts for roughly 35 percent of sales (NCA, 1999).

3.B INCENSE

Incense has been used for centuries for ceremonial purposes as well as to fragrance the
environment, conceal undesired ambient odors, or freshen clothing. Most incense is made from a
combination of fragrant gums, resins, woods, and spices. One traditional method of making
incense is to prepare a paste of pulverized botanicals, water, and charcoal and wrap the paste
around a bamboo twig. After the twig dries, it is dipped into perfumed essential oils or powders.
Incense is available in sticks, cones, rods, coils, small blocks, wands, and powders (Packaged
Facts, 1999).

The US Census Bureau does not maintain data to the level of detail required to capture incense
manufacturers. Economic data for incense manufacturers are aggregated under NAICS material
code 325998, which is defined as other miscellaneous chemical products, manufacturers of
chemical preparations not elsewhere classified, including essential oils. This category covers
production of all types of essential oils, pyrotechnics, fireworks, drilling muds, and other
industrial preparations, such as foundry and rubber processing supplies. ERG was unable to find
a detailed source of government data covering specifically incense manufacturing and sales.

The Thomas Register of American Manufacturers on-line database lists 26 companies as
manufacturers of incense. After contacting nine of the companies listed, we were able to find
very little additional information about incense manufacturing in the US. One company
representative said that many companies listed as manufacturers may indeed be repackagers who
import incense and repackage it for sale in the US. Another stated that there are many domestic
manufacturers that are very small—possibly single individuals making incense for sale locally.
One manufacturer contacted claimed they had $500,000 in annual sales.

The US Census Bureau data on domestic exports for 1999 show a total value of $4.6 million for
incense. This figure represents total exports worldwide. The highest percentages of exports
went to Canada, followed by Mexico, the United Kingdom, and Japan. Quantities (weight) of
exports were not reported.

The Census Bureau also reports data on imports of incense to the US. In 1999, $12.4 million of
incense was imported to the US. The largest percentage of imports came from India, followed by
China, Thailand, and Japan. (See Table 5.)

(a) Countries each supplying less than 1 percent of imports, including Canada,
The Netherlands, Belgium, Germany, Italy, Greece, Syria, Israel, Saudi Arabia,
Pakistan, Nepal, Burma, Indonesia, Macao, Korea, Taiwan, Australia, Egypt,
and Ethiopia.

Source: US Census Bureau

Given that $12.4 million worth of incense is imported to the US, and $4.6 million is produced
domestically for export, the US market for incense is at least $17 million, excluding the value of
what is produced domestically for domestic consumption.

Descriptive literature on the incense industry is very limited. Only one article was found despite
a thorough search of market literature databases. This article discussed the incense
manufacturing industry in Japan. It reported that the largest Japanese manufacturer of incense is
Nippon Kodo Co. Ltd., who manufactures more than 2,000 fragrance products made from natural
materials. One-third of its annual turnover is derived from overseas markets, including Europe
and the US. Company officials claim they control more than 50 percent of the incense market in
the country. The company has six plants in Japan, one in Taiwan, and one in Hong Kong and
imports its raw materials from Vietnam and Indonesia. This year, the company began
distributing incense in Malaysia to satisfy the increasing demand for environmentally friendly
incense for religious, home fragrance, and anti-stress purposes (Bernama, 2000).