Despite the economic slowdown, chocolate remains a relatively inexpensive indulgence for cautious consumers.
By Howard Riell, Contributing Editor.
Americans aren’t eating out as much as they used to, but they are eating more chocolate, which means the time has come for retailers who haven’t already done so to rethink, revamp and restock their chocolate sets.
“Chocolate this year has been performing in an outstanding manner in comparison to the last two years,” declared Jenn Ellek, spokesperson for The National Confectioners Association (NCA) in Washington. “The numbers are really, really up.”
More encouraging news, according to Ellek, is that chocolate posted gains during Halloween. “In fact, speaking economically and in terms of consumer confidence, when you compare 2010 Halloween numbers to 2009’s you see kind of a flip flop,” she said.
In 2009, sales statistics show, the biggest seller was the non-chocolate candy category, while chocolate had what Ellek described as “very, very modest” growth. This year, however, chocolate checked in with double-digit growth.
“Non-chocolate is usually less expensive to buy,” Ellek said. “So when consumer confidence is down you’re going to see an uptick in non-chocolate. But when consumer confidence is stronger you’ll see shoppers going back to chocolate products, especially on holiday occasions, which was the case in 2010.”
Chocolate, Ellek predicted, is a hot category for 2011. Symphony/IRI Group’s chocolate-sales statistics show that for the last 52-week period ended Nov. 28, 2010, there was a 1.8% increase in units sold at convenience stores. For the same period, total confectionary and gum sales were up 3.2%.
Chocolate, Ellek said, drove the sales increase. Total chocolate category growth rate was 6.5% over the 52 weeks ended Nov. 28. Non-chocolate finished up 2.6%, while gum sales were actually down 1.1%, making it a natural target for those looking to open up some shelf space.
Repositioning candy to the highest traffic aisle in the store could also significantly boost sales, according to the “Convenience, Candy & Profit” study conducted by Kit Dietz, of Dietz Consulting. Other advice arisen from the study:
• Keep all core candy and gum brands in stock at all times.
• Improve in-store product placement and new item strategies, and develop exit strategies for poorly performing items.
Meeting the Demand
Tim Cote, vice president of marketing for Plaid Pantries Inc. in Beaverton, Ore., said his chain of 103 Plaid Pantry stores carries a bit more chocolate items than the average convenience store. “I would say it would be about 20% more SKUs,” he said. “Our stores tend to be fairly neighborhoody, which gives us an opportunity to sell more candy to kids and families, so we give it a little more space.”
The company also places a strong emphasis on merchandising and promotions with no fewer than four different candy programs going on at any given time. “We’re big users of shippers, counter units and other off-shelf-display merchandisers that help sell more candy,” Cote said. In all, he estimated the candy category accounts for about 5% of total store sales.
Plaid Pantry customers don’t go for fancy chocolates, which means the chain’s assortment is fairly typical, with a strong presence from Hershey and Nestlé and a selection of smaller companies’ products.
“We tried rolling out a premium assortment right before the economy collapsed and it failed miserably. It was a disaster, actually,” Cote said. “But now our big thing is that we’re doing a lot of nostalgia candy; lots of stuff from Annabelle (makers of Abba-Zabba, Big Hunk, Look, Rocky Road and U-NO bars) and Necco (Sky Bar and Clark Bar). Instead of doing in-and-out promotions on these brands—which aren’t too effective—we run sell them at an every day price that’s about 20-30% below other candy brands.”
Closely examining new products and line extensions is also very important for convenience stores. For example, Plaid Pantry stores added Snickers Peanut Butter Squares in December. “It’s been unbelievable,” Cote reported. “Out of the gate it’s become a top-three SKU for us.”
Cote hesitated to define his chain’s chocolate customer. “It’s everybody. Our stores, again going back to the neighborhood thing, tend to be a little more highly skewed toward kids than a normal convenience store,” he said. “Compared to an average store we sell a lot of product to kids.”
Above all else, customers have shown that they like their chocolate affordable. “What we’ve found is that they will buy it, but they’re scared to death of the price point,” Cote explained. “So instead of carrying the 3.5-ounce bar that you would find at a lot of grocery stores selling for between $2.29 and $2.99 depending on the SKU, what they’re really looking for from us is a one to 1.5-ounce offering at a comparable reduction in price.”
NCA’s Ellek calls the selling proposition at convenience stores interesting. “You have to look at c-stores differently because they’re not a big holiday or seasonal player. Their sales depend primarily on merchandising and promotions throughout the entire year,” she said. “C-stores just don’t have the footprint to have a seasonal sales section, although some do when it comes to Valentine’s Day.”
As a result, Ellek recommended that convenience stores emphasize merchandising. A second piece of advice, as Dietz suggested, is to move quickly to get rid of poor sellers. The 80-20 rule applies. The top-selling items tend to come from about 20% of the products.
“There are a lot of items that are not performing well,” Ellek said. “One of the easiest things to do is keep your hot sellers in stock. That’s where the sales potential is and where c-store operators are losing out, the out of stocks. Keep them in stock, even if you have to double-face them. Do it, because you’re just going to grow more sales.”
Making space available for new products involves walking a fine line. “C-store owners have to work very closely with their distributors and wholesalers to develop a timeline for new products coming in,” Ellek said. “This involves updating planograms at least twice a year so that you can capitalize on hot new items.”
Refusing to Burst
While the economy continues to negatively influence certain shopping behaviors, one category’s bubble refuses to pop, Chicago-based research house Mintel International reported. The group was referring to the gum, mints and breath fresheners market, which has seen sales grow through the recession, increasing over 10% since 2007. It’s expected to continue to grow through 2014.
“Although this market is not entirely recession proof, gum, mints and breath fresheners are faring well due to their low price points and the feeling that consumers are getting a small treat,” said Bill Patterson, senior analyst at Mintel. “In addition, innovative packaging and unique flavors are aiding in the upward sales momentum.”
Consumer participants in Mintel’s confections survey suggested that functionality is key in the gum category. Nearly 50% of those surveyed cited packaging that reseals better or is easier to open as being most important. Similarly, 19% want gum and mints to have packaging that’s better for the environment.
According to Mintel’s research, this is what consumers are looking for, with 43% saying they like to try new brands or flavors, and 13% wanting new brands or flavors “because they have yet to find one they love.”