Overall retail sales are slowing at mass, dollar and grocery stores, but confectionery sales remain strong for convenience operators.
The U.S. retail confectionery category generated approximately $29 billion in sales in 2007 and the profit margin for the category was approximately 35%, according to the National Confectioners Association’s (NCA) U.S. Confectionery Market report released last month at NCA’s Annual State of the Industry Conference in Orlando, Fla.
In terms of retail segments, convenience stores accounted for 15%, or $4.5 billion, of overall candy sales in 2007. Led by new products and line extensions, the industry’s sales increased 6.2% over 2006. Supermarkets reported higher sales, $4.6 billion, but sales growth slowed to 2.4%. Wal-Mart’s confection sales posted the highest sales gains growing 7.3%. The Bentonville, Ark. retailer rang up $3.5 billion in candy sales last year. Other big box operators also saw strong sales increases growing 6.6% to $1.4 billion. Combined, hypermarketers tallied $4.9 billion in sales.
On average, every consumer in the U.S. spent $94 on confectionery products in 2006, the NCA report said.
"Confectionery sales continue to grow in convenience stores, so the category remains a solid sales tool for c-store retailers, as well as a strong destination for all consumer groups," said Jenn Ellek, director of trade communications and marketing for NCA.
A breakdown of the numbers finds chocolate sales again dominated the category increasing 2.9% to $16.3 billion. Non-chocolate sales rose 3.8% to $9.4 billion, while gum posted the strongest increase surging 4.1% to $3.2 billion. In terms of category share, chocolate candy accounted for 56% of category sales, followed by non-chocolate (33%) and gum (11%).
Buoyed by new products and line extensions, candy and gum sales increased 3.5% to $8.5 billion ranking it third among food categories in 2007, behind carbonated beverages ($13.5 billion) and milk ($12.4 billion) in the major retail outlets. Among snack groups, candy and gum sales trumped all other segments including salty snacks ($7.9 billion), ice cream ($4.5) billion and cookies ($4 billion).
"Research shows that c-stores carrying more confectionery SKUs can grow their profits into the double digits. The consumer is looking for variety as well as new items in a c-store. In fact 30% of retail sales come from products developed in the last two years," Ellek said. "Make sure both variety and new items are displayed and in multiple locations to maximize sales and profits."
For example, studies show that marketing candy items at the cooler, the front counter or the coffee area doesn’t cannibalize sales, but augments them.
"Remember that candy is an impulse item and also boasts one of the highest profits per price sold, so multiple confectionery in-store displays are always a great option to generate more sales," Ellek said.
A Taste for all Seasons
Confections, unlike most other in-store categories, are heavily geared for seasonal sales spikes with demand peeking around the major "candy holidays," Valentine’s Day, Easter, Halloween and Christmas. Major sales increases were evident during each of these holidays in 2007, the report said, with the biggest jump (6.7%) coming at Valentine’s Day from $971 million in 2006 to $1.04 billion. Easter showed the second biggest spike (5.4%) from $1.88 billion to $1.99 billion, followed by Halloween (2.6%, $2.15 billion, $2.20 billion) and Christmas (2.2%, $1.39 billion, $1.42 billion).
NCA projects sales gains for all holidays in 2008 with the exception of Easter, for which it’s forecasting a nearly $80 million decline.
What to Watch for in 2008
NCA predicted 2008 will be a strong year for chocolate. Dark chocolate sales jumped more than 50% in 2007. Consumers’ tastes are gravitating toward more upscale chocolate experiences such as wine pairings; exotic flavorings like citrus, spice, salt and fruits; and high cocoa content chocolates. Other trends worth watching include:
• Gourmet packaging for chocolates.
• Urban names for upscale chocolates.
• Sugar-free gum, which increased 13.5% in 2007.
• Exotic fusion flavors.
• Fortified products.
• Single-serve seasonal items.