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Staying Alive
Variety, excitement and high margins breath new life into the c-store candy section.
By Cecelia Blalock
The sweet, the sour, and the downright weird sit side by side in the candy aisle. From chocolate bars, which some consider one of the basic food groups, to novelty items that make kids’ eyes dance and parents’ lips curl, the candy category offers something for everyone. And that makes it ideal for c-stores. Throw in candy’s generally high margins and you have a significant profit center, if managed properly.
As a category, dollar volume in sales of candy has been relatively flat or even down slightly over the past year. According to ACNielsen, for the 52-week period ending January 18, 2003, sales of non-chocolate candy were down 1.3 percent across all channels, although they still accounted for nearly $3.2 billion. Chocolate candy sales reached some $5.4 billion in that period, up 0.9 percent. The picture was brighter for c-stores where sales of non-chocolate candy were up 3.9 percent and chocolate candy sales were up 2.7 percent.
A further breakdown of the figures gives clues to possible reasons for flat sales and a hint of emerging trends in the candy category. While overall candy sales volume increases were low or even down, sales of dietetic varieties of both chocolate and non-chocolate candy in c-stores skyrocketed, 68.3 percent for the former and 63.9 percent for the latter. Warnings about the growing problem of obesity among Americans may be changing buying patterns. Consumers may be trying to control their weight, but don’t want to give up the sweet treats they love. Candy companies are responding to this trend by rolling out a variety of sugar-free products, including some old favorites. In March, Hershey’s launched a line of sugar-free Reese’s peanut butter cups, Hershey bars, and dark chocolate bars.
The state of the economy also may contribute to flat candy sales. The economic downturn has made retailers more cautious, according to several candy companies.
"We’re not seeing the same level of creativity," says Steve Moskowitz, director of marketing for Impact Confections of Colorado Springs. "Retailers are gun shy of trying really new products because of the economy. They are sticking to the tried and true."
Jeff Kreidenweis, director of sales for Dayton Nut Specialty, Inc. of Dayton, OH, has noticed a similar trend. Candy is not as much of an adventurous category, he says. Retailers are not as hungry for something new and it’s harder to place new items. Even though candy offers high margins, retailers are wary at the moment.
"In an economic downturn, large national brands have an advantage," Kreidenweis says. "Their deals become really good for retailers and wholesalers."
Smaller companies compete by relying on creativity and innovation to generate excitement and by offering niche products.
Try It, You’ll Like It
A conservative approach to candy is exactly the wrong way to promote the category and the c-store itself say candy manufacturers.
C-stores historically have been a slower channel in getting new products on the shelf, notes Dave Onorato, vice president of national c-store sales for Hershey Food Corporation. New items mean new growth.
"There are some chains that promote and feature new items," says Rich LaRue, national sales manager for Goetze’s Candy Co. of Baltimore, MD. "They realize that they are the life blood of the category. Candy has the potential to be a dynamic category, but not everyone chooses to do that."
Unless the category is given proper attention, it will lose its appeal. C-stores need a point of differentiation and candy can be one of those points that draw people or not, LaRue says. The success of the category is often determined by the buyer and how much effort he or she wants to put into it.
"You can walk into a store and get an idea of the buyer," LaRue observed. "Some c-stores let the category manager of a company set it. It depends upon the creativity of the buyer. With new items coming out each day, you can do a lot. Ninety percent of candy purchases are impulse buys. You have to stimulate that impulse."
Most retailers don’t give enough credit to the consumer’s desire for variety, says Armand Hammer, president of Innovative Candy Concepts of Atlanta, GA. Simply offering different sizes of the same candy bars is boring.
"There is plenty of candy that would be intriguing but never gets to the shelves," Hammer says. "Retailers need to get more creative in bringing in a wider variety rather than the same things every other store carries. There is a much larger opportunity to grow the customer base."
What’s New?
C-store operators have no shortage of candy products from which to choose. And new products and line extensions are constantly introduced to keep the category fresh and to meet the changing needs of consumers.
Hershey has introduced To Go Tubes with its popular branded items like Reeses, York, Whoppers, and Kisses in handy 2-oz. snacking packages for consumers on the go.
"We’re creating a new usage occasion," says Onorato. "It’s an instant consumable pack that talks to the expandability of the category. We try to listen to what people are saying. They say they want top selling, branded, profitable, portable, affordable, easy to consume items. "
Hershey also has added a new flavor, Extra Creamy Kisses® with Toffee and Almonds, to its line of Limited Edition Kisses® and will bring back its Limited Edition Rich Dark Hershey’s® Kisses® for a spring run.
Goetze’s Candy has added a strawberry caramel cream to its popular line of wheat-based caramel creams that are low in fat and high in carbohydrates. For c-stores, they are offering 100-count tubs and 5 oz. bags of their items.
Atkinson Candy Co., Lufkin, TX, is still making old-fashioned candy from recipe books that date back to the 1930s, reported company President Eric Atkinson. In fact, the Texas legislature recently passed a resolution honoring the company and its popular Chico Sticks for its contribution to the state. But that hasn’t stopped Atkinson from expanding its offerings. Atkinson acquired Coconut Long Boys, a caramel stick with coconut, from the American Candy Company and is "running with it," according to Atkinson. Additional flavors and package sizes are being developed.
Little Rewards from Dayton Nut Specialty, Inc. capitalizes on the crossover trend between snacks and confections. The cream filled pretzel nuggets come in four flavors and are offered in single serve and 5.5 oz. packages. They also come in tins that would work well in c-stores, says Kreidenweis.
"We wanted a durable package that could go through the distribution channels without breaking up the product," he says. "The product appeals to adult tastes, but kids like it too. It’s not sweet or salty. Rather than making a choice, everything is blended."
The mint category has been one of the fastest growing segments over the past six to seven years, reported Steve Schuster, president of Shuster Marketing Corporation, Milwaukee, WI. Recently, the category has seen a lot of activity, with sales of traditional mints declining dramatically while sales of sugar-free power mints have soared. The popularity of sugar-free gum and the new breath strips have pulled from mint sales.
Typically aimed at the 20-somethings and older consumer, teens were a forgotten demographic when it came to mints, notes Schuster. He’s out to change all that with his Blitz Stoked Power Mints. Available in three very strong fruit flavors – Berry Blast, Green Apple, and Fruit Frenzy – they appeal to the extreme taste favored by the young. Blitz Stoked Power Mints is the first mint line sweetened with Splenda. They are low in calories and low in carbohydrates.
Schuster predicted a huge trend in functional candy in the near future, with additives that offer consumers something beyond a taste treat.
Innovative Candy Concepts’ Hammer thinks the candy category as a whole is heading for exciting times within the next year or two based on a new generation of products that will make a real difference. His company is poised to introduce one of those products that will transform candy.
How Odd
Novelties remain an important part of the candy category. Designed to capture the imagination of kids, the more bizarre the better, says Steffani Ciccone, president of Generation Foods of Covina, CA.
"Anything interactive goes well," she says. "Kids are bored with just picking up an item and eating it."
Her company’s Brain Drips was the first candy in an eyedropper. This year, eyedroppers dispense Alien Drool on the tongue. The strictly sour candy is hitting all its marks even in a slow economy, Ciccone reports. Kids are willing to part with $1.99 for this interactive experience.
Tremors, another new product from Generation Foods, consists of a powdered asphalt candy with a sour subterranean stretchy worm hidden inside. It comes in a copyrighted resealable tube which allows kids to eat only a small amount at a time.
Sour remains popular, but kids are leaning toward hot and spicy, according to Ciccone. The hot spicy trend also reflects the growing influence of the Hispanic market.
"It’s tricky to go to hot and spicy," she says. "Kids want it to taste good and they have great expectations. They know the difference between products that taste good and that have a good after-taste. That’s what gets them coming back."
Though a small part of the novelty candy category, candy kits are a big hit with kids. Impact Confections’ Ice Cream Dipper falls into the "dip and lick" variety of kits. A swirl shape lollipop is dipped into a plastic cone filled with crushed toppings. The four flavors sound like ice cream: a vanilla cream pop with a cookie dough topping, a cherry cream pop with cookies and cream topping, a strawberry cream pop with bubble gum topping, and a sour blue raspberry pop with sour candy topping.
"We try to do products with a twist," says Moskowitz. "We try to have innovative and fun products with a point of difference."
Its Twist & Glow pop is a good example. The light bulb-shaped pop is attached to a plastic coil that a child can wear on a finger. Twist the light bulb and the inner plastic stick glows for up to an hour.
"If c-stores are reluctant to try new products, they won’t give kids the variety they like," Moskowitz says. "I think they should give new products a place and let kids determine if they should be stocked. You never know what will be a hit."
"Kids love extreme flavors and everything else," says LeRoy (Butch) Mansson, president of Family Sweet Company in Winston-Salem, North Carolina. "It’s up to the manufacturers to be creative an innovative in the shape, design, and delivery vehicle of our products. I’ve seen a lot of creative stuff lately." In addition to packaged candy, his company is now offering its popular Toxic Waste in a 2.1-oz. bag.
Location, Location, Location
Creative merchandising is critical to strong c-store candy sales, say candy manufacturers. Simply stocking the candy aisle isn’t good enough.
"One of the biggest challenges lies with merchandising," says Peter Healy, vice president of marketing and international sales for the Jelly Belly Candy Co. of Fairfield, CA. "It’s inherently more difficult in c-stores because of less space, the explosion of offerings and the increased diversity of people’s tastes. It makes it essential that c-store operators leverage merchandising as a way to position themselves among the competition." Jelly Belly is moving ahead to bring several of its products to the c-store segment keeping in mind merchandising, price points, and the consumer mix.
Margin erosion from gasoline and cigarettes has generated renewed interest in the candy category because of its high profit margin, says Onorato. That has led to a renewed focus on merchandising.
"Don’t hide candy," Onorato advises. "Merchandise candy not just down the aisle but in front of the consumer. We call it the ‘point of interruption.’ Try to reach the person who had no intention of buying candy. Confections have gained in perimeter placements to capitalize on incremental purchases of high margin items."
Space is always at a premium, notes Mansson. He reports seeing more floor displays in c-stores, adding "if you can pack a shipper with the right amount of product it will move."
Kid power should not be underestimated, says Hammer.
"Kids influence where parents shop so it’s critical for c-stores to have a strong candy category," he says. "Displays of kids candy will get kids to choose which c-store the parents use. One of the problems for c-stores is drawing customers into the store. What greater way to drive them into the store but candy. It increases in-store traffic."
C-stores could have a section for interactive or fun candy, Moskowitz suggested. "Right now, kids have to search though a lot of products to find what’s different," he says.
Don’t forget the floor as advertising space, urges Ciccone, suggesting giving c-stores large peel-off tabs that advertise products, particularly for children. "Kids don’t look up," she says. "They look at eye level or down. It’s a great way to market, especially to the young. At trade shows we have low level displays that bring the message down to the demographic. We call it ‘downward marketing.’ It’s much more creative."
This is a great time to be in confections working with the c-store channel, Onorato says. C-store retailers are looking to enhance their margins on inside sales and we are a perfect opportunity for them.
"Just making a few changes each day can lead to real profitability," he says.
Cecelia Blalock is a food industry writer based in Jessup, MD.
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