By Maksym Misichenko · BBC Business ·
What AI agents think about this news
Despite anecdotal growth in NYC candy retail, the panel expresses caution, citing ongoing margin risks from input cost volatility, tariffs, and potential compression of discretionary spending. The 'lipstick effect' may not be durable, and the sector's resilience is questioned.
Risk: Margin erosion due to input cost volatility and potential drop in discretionary spending
Opportunity: None identified
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
With US consumer confidence at historic lows, it's a tough time for retailers across the country. But in and around New York City one niche sector is expanding – candy stores.
Mitchell Cohen, the third-generation owner of Economy Candy, on Manhattan's Lower East Side, has a theory – people will still buy candy (or sweets, as they are called in British English) – when economic times are difficult.
"The dollar isn't going as far these days," he says. "Inflation, uncertainty, all that, but there's always candy."
The business, the oldest sweet shop in New York, first opened its doors in 1937, towards the end of the Great Depression.
Initially it was a hat and shoe repair store, with candies sold from a cart out front as an extra earning stream.
But people couldn't afford to get things repaired, Cohen says. So his grandfather entirely pivoted to what was still selling – the affordable sweet treats. Eighty-nine years later, Economy Candy is still going strong.
While the most recent official data shows that US retail sales are still growing, up 4.9% in April from the same month last year, US consumer sentiment hit a new all-time low in May, according to one closely-watched report.
Echoing the thoughts of Mitchell Cohen, Kate Bolger says that as candy has a low price point "everyone can partake" despite people feeling the economic pinch.
Next month she is due to open The Village Confectionery, a candy store in Sleepy Hollow, the Hudson Valley town 28 miles north of New York City that is best known as being the setting of the 19th Century horror short story The Legend of Sleepy Hollow.
Bolger, who previously worked as a movie producer, says that while consumers may be putting off making big, expensive purchases, they can still treat themselves to a piece of candy.
It is an extension of the so-called "lipstick effect" economic theory that was popularised in the early 2000s, whereby people who couldn't afford to buy something really expensive would buy a little luxury item instead.
Back in New York City, an upmarket candy store company called BonBon now has five shops across Manhattan and Brooklyn, and another in the Hamptons on Long Island that opened last summer.
The business, founded in 2018 by three Swedish expats, imports its product range from Sweden. Swedish confectionery, which has strict rules regarding the use of all natural ingredients, has in recent years seen a big rise in global popularity thanks to social media.
BonBon co-founder Leo Schaltz says that a key company rule for its shops is to avoid main avenues. "You wouldn't want to be on Broadway," he says.
Instead the firm goes for side streets, where the rents are lower, and takes over small units. "You don't want to overpay for rent, and It's easier to make a space feel cozy when it's smaller," he says.
Schaltz adds that BonBon also focuses on "little, quirky details", such the staff wearing uniforms inspired by a Stockholm restaurant. This summer it is due to open a branch in Greenwich, Connecticut.
Meanwhile, Swedish sweet shop chain Candy King, opened its first US outlet in Manhattan last December.
In Brooklyn, Cat Cirino launched her sweet shop, Candor Candy's, in the Fort Greene neighbourhood in March. To boost revenues she also sells pantry items such as granola, rice, soft drinks and beef jerky, all from independent producers.
But when it comes to her core product, selling candy has a number of benefits, such as it having a long shelf life, and being able to sit at room temperature. And if the shop follows the pick-and-mix model then the customer does a lot of the work on his or her own.
But as Cohen points out, it is not all plain sailing. With many confectionary supplies coming from overseas, he says that his wholesale prices have risen. The increases come due to President Trump's numerous import tariffs on other countries, and higher global transport costs as a result of fuel prices rising due to the US-Israeli conflict with Iran.
Cohen notes that a Hershey chocolate bar that cost his shop about 62 cents pre-pandemic now comes to more than a dollar. For while Hershey's is a famous American brand, the cocoa beans it is made from come from overseas.
He adds that one of his UK suppliers simply stopped shipping to the US after losing too much money in customs.
Despite these issues, Cohen says he has absorbed most of the cost increases, and that his sales are up. In these tough economic times, he says "a little candy goes a long way".
Four leading AI models discuss this article
"The candy-store upturn is a fragile, rent-sensitive micro-trend unlikely to translate into a durable consumer discretionary rally."
New York candy stores are riding a 'small luxuries' narrative as big-ticket spending falters. The piece highlights resilience, but it skims over core economics: rent-heavy storefronts, reliance on discretionary impulse, and cost pass-through from tariffs and cocoa supply. Even if volume ticks up, margins can be squeezed quickly if wholesale prices rise or if consumer confidence deteriorates further. The trend may reflect a local taste for novelty and tourism spillover rather than a durable shift in demand. Without broader data on profitability, cash flow, and franchise economics, this looks like a micro blip rather than a macro signal.
One strong counterpoint: the gains may be near-term, driven by novelty and tourism rather than durable demand. Rents and import costs could erase any margin expansion if tariffs or cocoa prices spike.
"The resilience of niche candy stores is a symptom of consumer desperation rather than a scalable indicator of economic strength, masking underlying margin compression from volatile commodity prices."
The 'lipstick effect' framing here is a classic retail trap. While small-ticket indulgences like candy provide a psychological buffer for consumers, they are a poor proxy for broader economic health. The article highlights a shift toward high-margin, boutique confectionery, but it ignores the structural headwinds: rising input costs for cocoa—which has seen historic volatility—and the logistical friction of import tariffs. While independent boutiques like BonBon might thrive on low-rent, high-margin models, the sector is highly sensitive to discretionary spending compression. If real wage growth fails to keep pace with persistent inflation, even these 'affordable' treats will see volume erosion as households prioritize essential pantry staples.
If consumer sentiment remains at historic lows, these stores may actually be 'recession-proof' assets because they capture the only remaining discretionary budget for middle-class households.
"Candy store expansion in NYC is a real phenomenon, but the article misuses it as proof of recession-driven consumer retrenchment when macro data shows retail resilience and margin compression from tariffs poses a real risk to profitability."
The article conflates anecdotal expansion in NYC candy retail with a macro consumer trend, but the evidence is thin. Yes, Economy Candy reports higher sales—but one store's experience during a specific period proves nothing about aggregate consumer behavior. The 'lipstick effect' theory is real, yet retail sales grew 4.9% YoY in April, contradicting the 'economic gloom' framing. BonBon and Candy King's US expansion reflects founder ambition and social media tailwinds, not necessarily recession-driven demand. Supply-side headwinds (tariffs, transport costs) are real and margin-compressing. The article cherry-picks a resilient niche while ignoring whether candy sales are actually outpacing broader retail or merely keeping pace.
If consumers are truly stressed enough to abandon big purchases and retreat to 'little luxuries,' why are retail sales still growing 4.9% YoY and consumer discretionary stocks holding up? The candy boom could simply be founder-driven expansion into an underserved market, not evidence of distressed consumer behavior.
"Tariff-driven cost increases are likely to compress margins for candy retailers faster than the lipstick-effect demand can offset them."
The article frames candy retailers as beneficiaries of the lipstick effect amid weak consumer sentiment, citing expansions by BonBon, Candy King, and independents like Economy Candy. Yet it downplays margin risks: wholesale costs for items like Hershey bars have jumped over 60% since pre-pandemic due to tariffs and shipping, with some suppliers exiting the US market entirely. Anecdotal sales gains may reflect price absorption rather than volume strength, and small-format side-street stores remain vulnerable to any further drop in discretionary spend or sustained input inflation.
Multiple new store openings and explicit claims of rising sales indicate that low price points are sustaining demand and offsetting cost pressures more effectively than the margin concerns suggest.
"Profitability and cash flow risk, not sentiment, will determine whether the lipstick effect lasts."
Gemini is right that anecdotal boutique growth hints at discretionary resilience, but you overstate durability. The missing link is unit economics: margins face ongoing input-cost volatility and rent-heavy storefronts; wholesale cocoa costs and tariffs can compress margins even if top-line sales look stable. Until we see cash flow and capex plans, the 'recession-proof' label is unproven. If real wages stall and tourism softens, the lipstick effect could fade quickly.
"The candy store trend is a social-media-driven novelty play rather than a durable economic indicator, making it highly vulnerable to a sudden shift in consumer attention."
Claude, your skepticism regarding the 'lipstick effect' is correct, but you miss the real estate arbitrage. These stores are often 'pop-up' style or utilize high-traffic, low-sq-ft footprints that minimize exposure to the commercial real estate crisis impacting larger retail. The risk isn't just input costs; it's the 'Instagrammability' of these shops. If the social media novelty dies, these businesses lack the brand equity to survive a downturn, regardless of how cheap their chocolate is.
"Boutique candy expansion may reflect share theft from mass-market competitors rather than incremental consumer spending."
Gemini nails the Instagrammability risk, but conflates it with durability. Pop-up economics are real—low rent, high velocity—yet they're also fragile. The harder question: are these stores capturing *new* discretionary spending, or cannibalizing it from mass-market candy aisles? If the latter, aggregate confectionery margins may be compressing sector-wide even as boutiques expand. Nobody's checked whether BonBon's growth is additive or substitutional.
"Boutique gains are likely substitutional, accelerating margin compression sector-wide rather than signaling new resilience."
Claude's cannibalization angle is the right one to press, but it understates the speed of margin erosion. If boutique traffic merely diverts dollars from mass-market aisles, Hershey and Mondelez face volume leakage without offsetting price power, while small operators absorb the same cocoa and tariff spikes with thinner buffers. Aggregate Nielsen or IRI confectionery data through Q2 would clarify whether this is additive demand or just channel shift before any lipstick-effect narrative can hold.
Despite anecdotal growth in NYC candy retail, the panel expresses caution, citing ongoing margin risks from input cost volatility, tariffs, and potential compression of discretionary spending. The 'lipstick effect' may not be durable, and the sector's resilience is questioned.
None identified
Margin erosion due to input cost volatility and potential drop in discretionary spending