Once considered a “guilty pleasure,” chocolate’s potential health benefits are attracting customers.
By Howard Riell, Associated Editor.
If there is one category that has historically been immune from an economic recession it is chocolate. Despite the difficult times many households have had to endure over the past two years, chocolate is one of those treats that seems to make consumers of all ages feel good, which it why it sits near the top of the pile when it comes to impulse sales.
Candy in general, and chocolate in particular, remain and will remain absolute staples of every convenience store—a fact driven home last month at the NACS State of the Industry (SOI) summit in Chicago. The trade association revealed that the candy category came alive at the beginning of 2010 and kept going. The numbers, according to NACS, showed a great opportunity for convenience stores to capitalize on novelties and seasonal products, which showed a very strong 9% sales growth across the channel in 2010, according to Nielsen syndicated data.
But as with oil, chocolate faces a price increase in the coming months due to global unrest. Currently, a ban on exports from Ivory Coast, a leading cocoa grower, is sending ripples of concern over availability of supply through all layers of the industry. At presstime fighting in Ivory Coast’s capital Abidjan had intensified.
“We always have concerns over supply issues,” said Jerry Straub, marketing manager for Express Mart Convenience Stores in DeWitt, N.Y. “For now, I don’t see what’s going on over on the Ivory Coast as being a long-term problem.” Express Mart operates more than 60 stores throughout upstate New York.
“Whenever we see bans on exports or problems with crops in one part of the world or another, this question comes up. What it is going to mean is that retailers will be attaching higher prices to their chocolates,” said Lynn Dornblaser, director of CPG trend insights at Mintel International in Chicago.
That said, Dornblaser admitted she would be “a little bit surprised” if the situation on the Ivory Coast, which began in the first quarter of the year, brought about any long-term significant shortages of chocolate products. “Manufacturers are producing product all year long, and most chocolates, unless you’re talking about very high-end stuff, do keep pretty well,” she said.
Thus, the supply chain should be able to offset any hiccups in supply for the short term. Should a ban go on for a very long time, however, there could certainly be impact on supply. “But it would surprise me very much if there would be a substantial impact on supply to operators,” Dornblaser said.
A Bloomberg News report in April estimated a 14% rise in cocoa prices for the first quarter and predicted further increases. “We haven’t seen an increase in prices to consumers, so clearly the market can take a little bit of this, depending on how long the ban would go on. I would think it might still be a while before prices go up,” Dornblaser said.
So while things remain stable for now, Dornblaser urged c-store operators to consider that they could be facing increased prices from suppliers down the road.
Educate vs. Expedite
While Americans have not been fully educated about the health benefits of chocolate, they do know that it offers some benefits.
“What they probably have seen is references in publications aimed at parents of young kids or the Dr. Oz TV show that chocolate contains antioxidants, that it has all these good things in it,” Dornblaser said. “One of the things we know about consumers is that they hear a lot of different things at different times about chocolate’s health benefits, then when they are faced with a snacking decision they remember, ‘Oh yeah, this food is good for me’ as justification for a chocolate purchase.”
That’s good news for retailers, who benefit from what Dornblaser called a double-whammy. “On the one side now there is a lot of talk about antioxidants and polyphenols in chocolates and the positive health benefits—that’s a positive health story. Then, as people know anyway, chocolate just makes you feel good anyway. It gives you that emotional benefit, as well. So that’s a really good one-two punch for a chocolate bar.”
While educating Americans about the health benefits of chocolate is a good idea in general, it is not a mission that c-store operators should or need undertake. “It’s a complex story,” Dornblaser said. “It’s not like ‘this soda doesn’t have any calories.’ That’s a different kind of a thing. It’s much more of a complex message. With c-store real estate being as limited as it is, this is a tough thing to do.”
Dornblaser recommended shelf-talker displays and other marketing materials that make it easy for consumers to see and understand the idea: chocolate can be good for you. “Something that reminds them that chocolate is a wonderful treat is ideal,” she said. “There is nothing negative about that. But a full-blown educational campaign at store level is a bad idea. Let the manufacturers handle that.”
C-stores should instead focus on getting customers in and out quickly while marketing confections in high-impulse areas to capitalize on consumers’ love affair with all things chocolate.
“When you’re walking into a c-store you already have a good idea of what you’re there to buy, but you’re also accustomed to making an impulse purchase or two,” Dornblaser said. “You’re just not going to take the time to read a pamphlet explaining why chocolate is good for you. But a quick and easy reminder that it has some health benefits is effective.”
Level Playing Field
Retailers are the first group of people to admit they don’t spend a lot of time debating the benefits of chocolate.
“I’ve seen the reports…chocolate can do this, and chocolate can do that. Personally, I don’t know whether any of it’s true. What I do know is that chocolate in general just continues to sell, and people are going to buy it regardless of whether it has health benefits or not,” Straub said. “I don’t think that was a concern so much before. People just like chocolate.”
Straub is among those, like Dornblaser, who don’t believe that educating consumers in stores is the way to sell more chocolate. “Most candy sales, including chocolate, come from impulse. We buy quite a few shippers that we put out there and, since candy is such a big impulse item, they’ll just grab it,” he said. “Chocolate is one of those staples in the candy category that people just gravitate toward, whether it’s your standard Hershey bar or a seasonal promotional product.”
Offering two-fers can boost incremental sales but, Straub said, “limited-time offers (LTO’s) tend to cannibalize our core top-selling items. The best sales tool we have to sell chocolate is the shipper that can be marketed at multiple impulse locations throughout the store.”
Straub confided that nothing particularly excites him about the category at present and he is looking for the next big product to drive store visits. “I think the chocolate industry has kind of leveled off from some of the LTO’s they were running in previous years,” he said. “Companies have back-pedaled and seem to be a little more cautious about what they are putting out there. That shouldn’t really be a surprise because there was a time that all the line extensions and new products confused customers and crowded the candy aisle.”