Industry Report in autumn/winter 2016
Candle consumption at an all-time high, manufacturers´ profit at an all-time low
Candles with their warm and cosy light are immensely popular with consumers and they consumed more than 700.000 tons last year which is a new record.
From a statistical point of view, each EU citizen from infant to great-grandfather bought almost 1,4 kg of candles. The fact that the candle manufacturers were able to increase the domestic production again and nine out of ten candles were produced in Europe is particularly good news. Manufacturers expect further robust growth of the consumption this year. The demand for LED imitations on the other hand seems to have passed its peak and sales have stagnated for the very first time. These products are primarily used where candles would be too much of a risk anyway because of their open flames, e.g. at kindergarten or retirement homes.
But despite this good news, many European candle manufacturers face enormous challenges because the price pressure put on them is at an even higher level than the candle consumption. Many producers have arrived on the edge of profitability and some have even crossed this line already. If profitability does not improve significantly in the next years – and unfortunately there are no indications for this – additional shutdowns especially in Western Europe will be unavoidable. The development in the following areas will be of key importance here:
growing low-priced imports from China
After low-priced candle imports from China had brought the European candle industry to the brink of collapse, antidumping duties were protecting it for a period of almost seven years. The manufacturers used this breather to modernise their production facilities and increase their efficiency as far as possible, but it also resulted in a significant excess capacity and fierce competition. Approx. one year ago, the European Commission came to the completely incomprehensible decision of stopping the protection of the domestic industry and eliminated the antidumping duties despite clear evidence that dumping was still going on. And of course the imports of cheap Chinese candles have significantly increased again since then. European manufacturers do not have to be afraid of fair competition – but there is a big question mark if the Chinese government will not provide an unfair competitive advantage to their manufacturers by means of massive subsidies again, targeting at the European candle industry.
uncertain base material supply
Paraffin is still the most widely used base material for candle production. But in the past two years, one third of the already too low production capacities in Europe were shut down and so the manufacturers have no other choice than importing large volumes in the meantime. The consequences are partly extreme price surges due to exchange rate fluctuations and an uncertain supply situation – and the candle manufacturers require a price level of their base materials that is as stable as possible of course.
Alternative base materials, mostly fats and stearin produced from fats, are available in the required quality and quantity, but their price has only moved in one direction for more than one year – steeply upwards. Candle manufacturers explicitly welcome that more and more customers require certified sustainable products, but the extra costs for these base materials and the efforts for the necessary certification are significant.
increasingly strict legal requirements
Candle manufacturers take compliance with the increasingly stricter legal requirements very seriously and keep careful records, but the efforts are tremendous. In addition, there are separate national approaches of member states intending to modify the EU wide requirements to a greater or lesser extent, causing additional effort. The European Commission could easily halt this rank growth that is particularly bothersome for companies that are active all over Europe by eventually publishing the future safety requirements they developed together with the member states and the candle industry more than a year ago already. This would make the legal requirements even stricter, but the uniform interpretation of product safety all over Europe and consistent continuation of standardisation are two of the candle manufacturers´ most important objectives.
increasing customer demands
The consolidation of retailers has continued and given the big retailer groups even more power. One result is an extreme price pressure that gets even higher because of the continuous shift of candle sales from small retailers and specialist shops to price-conscious discounters. Orders are placed later and later each year and the response time gets extremely short. The necessary flexibility can only be realised by foresighted long-term storage, causing extra costs and risks for the manufacturers and binding important working capital.
At the same time, customers are demanding more and partly very different commitments and documentation, e.g. for supply chain management or social responsibility to name only two.
The sales area for candles in the shops is getting smaller and smaller and so customers have less choice in the individual shop. The candle manufacturers´ product ranges are getting broader and broader at the same time with lots of different shapes, colours and fragrances because the retailers want to differentiate from their competitors and offer different assortments. But it is still the classics that are mostly sold, such as white tea lights, pillar candles or tapered candles for example.
If consumers are looking for large and extravagant candles, which can be used as the central eye-catcher of flower arrangements for example, they can still find them at home decor chains, floristics shops and garden centres. Online trading of candles contributes to creative diversity as well.
Apart from the classics, there are strong sales of tea lights and maxi lights with transparent plastic cups that allow a clear view of the flame, often combined with colours and scents. Other trends are “rustic” pillar candles and filled glasses in all shapes and colours. Scented candles are very popular as well, but there are strong regional variations.
Consumers determine quality
In spite of price pressure and future challenges, our members are anxious to continue supplying best quality candles because candle consumption will only increase sustainably if consumers are satisfied with the product. And consumers are the ones with the greatest power when it comes to deciding if high quality is supposed to win out in the long term, as they have proven for many other products before. The price should not always be the key criterion, especially since candles are inexpensive products to begin with. Consumers should pay more attention to an attractive appearance and good workmanship. If a candle nevertheless falls short of the expectations when it is lit, there will be sufficient alternatives on the market that will convince entirely.
If consumers want to make sure to buy high-quality candles before lighting them, they should look out for the RAL Quality Mark for Candles. The award stands for premium quality of all base materials as well as an impeccable burning behaviour of the candles. It increasingly attracts retailers and especially consumers´ attention also beyond Central Europe in the meantime.
European Candle Association ASBL
Stuttgart, December 2016