Catering to Your Candy Customers

SONY DSCAmericans 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.

By Howard Riell, Associate Editor

Americans love candy, but maximizing sales from this complex, yet essential category takes focus and attention. Melding new products and line extensions with must-have favorites in sizes and packages that please customers takes a deft hand, a discerning eye and a long memory.

“The interesting thing about candy, and chocolate in particular, is the longevity of many of the iconic brands,” said Steven J. Montgomery, president of b2b Solutions, LLC, in Lake Forest, Ill. “The top brand families have been on the top of the c-store candy hierarchy for a number of years. Many of the top 10 items were created many, many years ago. Examples include Snickers, Reese’s, M&M’s, Kit Kat, etc.”

The lesson to be gleaned is that brand extensions yield greater returns than new brands. That said, candy introductions easily top 1,500 a year underscoring the need for category management at retail.

Effective Product Placement
What Montgomery said he views as one of the most interesting changes in candy marketing are multi-vendor endcaps (MVEs) and the use of multi-purchase pricing, or two-fers.

“Neither is a really new concept, but both of these have found great success in recent years,” Montgomery said. “The MVE allows retailers to market a number of brands in one location. This is especially important in locations where space does not afford them the ability to have endcaps dedicated to individual brands.  The two-fer pricing increases the penny profit from a candy purchase.”

According to Montgomery, the top 10 items in each candy segment account for a very significant portion of candy sales. “Too many retailers don’t ensure they are in stock at all times,” he said.

Secondary locations account for more than 30% of candy sales. “Too many retailers fall into one of two camps: too many secondary displays or too few,” Montgomery said. “Floor and counter displays need to be planned carefully, with their number and placement tightly controlled. Floor and counter space are far too limited to allow it to be misappropriated.”

The kinds of promotions that work best are in-and-out floor displays, depending on the product, and counter displays of seasonal candies such as Cadbury and Reese’s Eggs.

“I have noticed that more of the in-and-out displays feature items with a two-fer pricing to induce consumer trial,” Montgomery said. “Suppliers and distributors can provide assistance in two key areas: candy resets and category management. With the tremendous number of new items introduced every year, c-store retailers need help in sorting out the winners and losers before devoting money and space to them.”

Emphasizing What Sells
Amer Hawatmeh, the principal of St. George Oil in St. Louis, which operates Coast to Coast convenience stores, said he approaches candy the same way he does the rest of his product categories: with his eye squarely on the bottom line.

“One of the things that I’ve done is pretty simple: I’ve taken candy and I’ve gone strictly king-size,” he said. “I did this in the beginning in December. After studying what my customers were buying, I learned that candy customers preferred the king-size bars because the price difference was very small. However, the margin is a little better. It made sense to move in the direction.”

At the same time, Hawatmeh has given liquor a lot more of that space. “Dollars generate dollars. I don’t want to generate pennies anymore. That’s why I went king-size, because obviously king-size means I have to carry less SKUs, and that the bottom line. I’m trying to create dollar sales. Chasing after pennies, nickels and dimes doesn’t pay your bills anymore.”

Hawatmeh is also a believer in going with what works. “What’s selling is what has always sold: Snicker’s, M&Ms and the major candy lines,” he said. “Those are the brands that are consistently selling in my stores. For a decade those have been the top SKUs and it’s the primary reason why I went to king-size. It’s what customers want.”

After two months, the results have been strong. “I think it’s working out just fine,” Hawatmeh said. “I gained four feet of linear shelving. Let’s say we had $600 or $700 worth of inventory on it. Now that same space has got close to $1,000 worth of inventory on it, so now I’m making dollars for dollars.”

How Consumers Think
Convenience stores have, and will continue to be, the first place customers go for quick treats like candy and gum.

“I recently looked at a study that examined the grab-and-go behaviors of consumers,” said Darren Seifer, food and beverage industry analyst for the NPD Group.

“First and foremost, the top place where they obtain those items is at convenience stores. The top items they typically grab for at this times are things like candy bars and gum–a lot of high-margin, quick-sale items that are well known to be carried at convenience stores.”

This behavior, he added, is typical starting very early in the day and stretching into the afternoon. “Not so much in the evening when people start to go home for dinner time.”

Consumers also like to pop candy in their mouths on the way to work. “One of the key things is that as soon as you open your doors in the morning you should be sure to have a lot of these items stocked and ready to go for consumers,” Seifer said.

Looking at consumers’ behavior can indicate the best way to arrange the store. “More than 60% of the time these occasions are accompanied with a beverage,” Seifer noted. “So it’s not just about the foods that they are eating.”

Thus, placing candy near the soda fountains, or bottled items close to the checkout alongside the candy bars might drive additional revenue. “Earlier in the day it might be coffee, but later on it might be soda or bottled water,” he said.

What the Customers Want
Tariq Khan, the principal of four-store operator Sentar Convenience Stores in Rockville Centre, N.Y., devotes 15-20 feet of shelf space to confectionery products. “It’s a big business when you look at it dollarwise,” he said.

Throughout 2013, he focused on bagged candy, a strategy that paid big dividends in a location close to a movie theater. “We stocked those king-sized bags, but we also put some endcaps in a couple of our stores, which was helpful,” Khan said.

Candy’s success seems to run counter to Americans’ well-documented interest in healthier eating. As Khan noted, “As much as people are health conscious and watching their sweets, the confectionery category is healthy.”

New flavors and smaller, more convenient packages have helped overcome resistance among health-conscious Americans.

“I think one of the mistakes we continue to make is that we look at the candy section as a large section and we don’t micromanage it,” Khan said.

Knowing what moves best must be seen on a store-by-store basis. “A lot of us continue to order the same old-fashioned way rather than looking at movement,” Khan said.

Having a single individual purchase for several stores could be leading retailers down the wrong road. “Let the store sales reports dictate what should be sold. All operators should train category managers to watch movement at each individual location,” Khan said. “Let them monitor it, work with it and let them be in charge. In a very short time, you will see a sharp turnaround.”

Retailers may also put too much emphasis on the steady stream of new products hitting the market. They must stay focused on what sells. “At the end of the day, chocolate – whether it’s Hershey’s or Mars – is still a big player in the stores. They deserve the most space.”

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