Doing Confections to Perfection

Americans aren’t eating out as much as they used to, but they are eating more chocolate, which means the time has come for c-store retailers to rethink, revamp and restock their chocolate sets.

By Howard Riell, Associate Editor.

Data from Experian Simmons research group noted that, among chocolate eaters, 56.4% have visited a c-store in the last four weeks. On average, these consumers visited c-stores five or six times per month.

“Chocolate over the past 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.”

Some convenience store retailers are aggressively—and successfully—working to increase both their revenues and unit movement. Oklahoma City-based, 290-unit, Love’s Travel Stops & Country Stores’ strategy begins with basic organization within its front-of-the-store displays. The chain’s candy buyer Linda Tillinghast explained this entails keeping like-size products with similar price points together.

Since 90% of the population is right-handed, candy displays should be arranged with a right-hand bias, said Paco Underhill, president of New York City-based consumer behavior research firm, Envirosell. Also, less is more when it comes to countertop and aisle clutter.

A clear counter allows customers to put down any items they are carrying, freeing their hands for at-the-register impulse shopping. Underhill also emphasized the need for retailers to keep the sight-line between the cooler and the candy display clear so customers can have a chance to be inspired to “accessorize” their beverage.

Maximizing Margins
When Jim Callahan, director of marketing for Geo. H. Green Oil Co. in Fairburn, Ga., displays candy next to the register, he makes sure the ring is worthy of the real estate. For example, he avoids selling “change makers,” which retail for 25 cents apiece, preferring to go for the bigger ring.

“When I do sell these small items, I push them at four for $1 or 29 cents each, which gives us 16% more return,” said Callahan, who oversees 50 convenience stores in Georgia.
To make sure retailers select the best product assortment for their stores, Larry Wilson, vice president of customer relations for NCA, advised retailers to “think globally and act locally.” While the household name brands (core items) will always comprise a major part of the product mix, be sure to also include beloved regional and local brands along with new innovations.

“In the end, it’s the consumer who should drive the candy assortment,” Wilson said.

To avoid missing out on adding hot new items, retailers should check out the other retail channels to see what is selling best for them. A brochure from the American Wholesale Marketers Association (AWMA), NACS and NCA noted that other trade channels are handily beating c-stores to market with new products, particularly within the first 12 weeks of product introduction.

The organizations recommend that retailers establish partnerships with wholesalers and manufacturers to attain current movement and sales data. Manufacturers should give retailers a heads-up of at least 4-6 months prior to a new product launch to give retailers a chance to get in sufficient stock.

Since convenience stores remain a key outlet for chocolate and because they compete on value, among other things, they have had to incorporate chocolate price hikes into that strategy. Pat Zelochoski, buyer and category manager for 33-store NOCO Express stores in Tonawanda, N.Y., said one of the challenges retailers have been facing of late is absorbing the price increases in a still-struggling economy. Many chains have been hesitant to pass this price increase onto their customers.

Generating Value
To deliver extra value to their customers, NOCO has tried bundling candy with coffee—with the help of fixtures like a 24-count counter display—as well as offering one-day discounts through its text-messaging coupon program. Selling a Snickers bar for 79 cents for one day could double sales, said Zelochoski, who added that chocolate makes up 85% of her overall candy business.

“It becomes hard to offer a value with the price up so much,” Zelochoski said. “There was a point in time where you’d be able to buy a king-sized candy bar for 99 cents, now that’s regular size. People are still looking for that lower price.

“They want to buy a candy bar for 79 cents. That eats into your margin, so you have to weigh that out. Is it really worth doing (the text promotion), and for what period of time do you want to do it, if you do?” she said.

Text coupons are an effective strategy for candy because they play into the category’s impulse appeal. As such, merchandising is crucial. While some NOCO stores are too small to have an eight-foot gondola set of candy bars, they will have up to six feet of selling space plus racks by the front counter to spur impulse sales.

Negotiating contracts with suppliers is extremely important when it comes to maximizing each store’s selling space.

“Some suppliers and candy manufacturers want you to have 65 items on a planogram to do their full contract,” Zelochoski said. “That’s tough, especially for a smaller convenience store. Plus, they often want a counter unit by the registers and seven shippers a year. The other companies are not as demanding, though they have similar contracts. We’re talking 144-plus-count shippers.”

With candy, NOCO will usually feature one hot item per month. “That amounts to one shipper a month, but we don’t want to limit it to one manufacturer, either. We want to have the variety out there for the consumer coming in,” Zelochoski said. “You want to keep it fresh.”

Chew on This
With so many of the candy and snack makers promising to significantly increase the number of products they bring to market in 2013, the convenience store channel can profit greatly by improving its new-item speed-to-shelf performance. Testing items like gum and mints can also help drive business to the candy aisle. But knowing what to add—and what consumers want—is the key.

Euromonitor reported that global gum sales have risen by 37% since 2001, even as growth in revenue from sugar-free products has tapered off. Lots of the innovation is, in fact, coming in gum. Kraft’s Stride Shift reportedly changes flavor inside the chewer’s mouth. Trident’s Vitality, which will hit store shelves in the coming months, is said to include a burst of Vitamin C. Wrigley’s Extra Dessert Delights offers such unusual gum flavors as Chocolate Mint Chip and Key Lime Pie. Orbit has launched a canister of pellet gums that can be imprinted with a logo to commemorate causes or events.

In December, Beth Bloom, food and drink analyst for Chicago-based Mintel, said that health can and should play a role in the candy category. “The non-chocolate confectionery category is in a position to drive perceptions of the healthfulness of product offerings, and to suggest responsible category participation, rather than suffering from consumer flight due to health concerns.”

One product that will probably not prove a major gainer in 2013 is candy cigarettes. City inspectors in St. Paul, Minn., warned a retailer in January to remove candy cigarettes, bubble gum cigars, and Big League Chew from their shelves. According to CBS News, the retailer was threatened with a $500 fine if it continued to sell items that the city claims violate an ordinance prohibiting the selling of candy smokes and cartoon character lighters. That sentiment appe
ars to be spreading.

Intel and Gut
John Archer, a Shell dealer in Hinsdale, Ill., is aided in his determination about what to stock and what to delete by wholesale distributor Eby-Brown’s Speed to Market report, which covers a variety of product categories in the c-store channel.

“That gives me an idea of what’s new in the supply system, and then it’s really just sales. It’s pretty obvious if something new is going to work because it will sell pretty quickly,” Archer said.

Trend reports aside, Archer said he likes to be guided by his gut instincts. “I’ve been doing this for 30 years. I’ll see something and I’ll think, ‘OK, that looks like that might work here,’ so I’ll try it,” he said. “When my candy reps come into the store to tell me about new products I’ll already have them. Not all of them, of course, but a lot of times I am ahead of the curve, and that is very important in the retail business.”

Product launches are coming fast and furious, Archer said. “Right now there are a million new kinds of gum; lots of new Stride gums, for example.” Cadbury Adams’ Stride offers such exotic flavors as Always Mandarin, Eternal Melon, Forever Fruit 2.0, Mintacular, Nonstop Mint 2.0, Spark Kinetic Berry, Tropical Trance, Uber Bubble 2.0 and Winterblue 2.0. Healthier gums, he added, are also making inroads.

Archer has increased space for the category to keep pace. In addition to the 16-20 feet underneath his three front registers already devoted to candy, he added a 12-foot gondola, as well. It was a good decision. “It’s been huge. We’ve done really well. I’d had a section where candy went to die. I eliminated that and moved it right into the center of the store. We have a lot of candy in the store.”

Promotions and value pricing are also extremely important.

“The best promotions are the pre-priced, two-for-something deals. Hershey and Reese’s do a lot of that—two-for-$2 on regular candy, or two-for-$3 on king sized bars,” Archer said. “Consumers like it because it’s pre-priced and it comes in a shipper so you can put it right up front. People see it, it’s got nice point-of-sale signage and a good price. Those are all effective ways to attract customers.”

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