Convenience stores continue to be a dominant retail outlet for confections, and the outlook for 2008 is just as strong. That was the message delivered by the National Confectioners Association’s (NCA) U.S. Confectionery Market report released in March.
The U.S. retail confectionery category generated approximately $29 billion in sales in 2007 and the profit margin for the category was approximately 35%. 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.
On average, every consumer in the U.S. spent $94 on confectionery products in 2006, the NCA report said.
Eighty-two category buyers representing 12,300 chains and $513 million in annual candy, gum and mint sales participated in CSD’s Brand Preference Study and reported that The Hershey Co., Wm. Wrigley Co. and Mars Snackfood U.S. were the leading suppliers in the convenience industry, driving sales through innovation, new products and effective marketing. The honorable mentions in the category were Cadbury Adams/Jaret International and Nestlé USA.
Helping to drive sales have been retailer partnerships with candy, gum and mint suppliers to capitalize on traditional and seasonal promotions. Exxon Mobil Corp., for example, partnered with Hershey on a special promotion in its On the Run convenience stores offering a free Kit Kat bar with the purchase of any size Bengal Traders coffee, cappuccino, hot chocolate or other hot beverage.
Chocolate and coffee have always gone hand-in-hand, especially in c-stores. Many chains, 7-Eleven and Wawa to name two, have even designated shakers of chocolate powder that can be stirred directly into hot beverages. By partnering with Hershey, On the Run was able to take advantage of this tendency with the candy bar promotion and draw rave reviews from customers happy to walk away with something free, ExxonMobil spokeswoman Melissa Changcoco said.
The National Association of Convenience Stores (NACS) 2007 State of the Industry Report found that hot dispensed beverages and candy rank right next to each other as two of the top 10 category revenue contributors. Since chocolate bars and multi packs still make up the majority of candy category sales, On the Run’s promotion was strategically conceived to couple the popularity of chocolate candy and its own coffee program.
Kit Kat bars are among Hershey’s top-selling in-store confectionery items, inc-stores and carrying higher profit margins because of their standard size. Single-serve candy products perform the best in a c-store environment, and the standard 1.45-ounce and 1.60-ounce Kit Kat bar sizes offered with the On the Run promotion plays off that trend.
Trends 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.
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%).
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.