Sweeten the Deal for Chocolate

Market researchers report that between 82% and 92% of Americans admit to indulging in chocolate candy. Even more important is the revelation that the majority of them do it at least once a month.

By Marilyn Odesser-Torpey, Associate 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.

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.

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“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.”
In a retail sales summary for chocolate and non-chocolate candy and gum covering the 52 weeks ended Feb. 18, 2012, SymphonyIRI Group showed that convenience stores led the channel pack in dollar growth, up 6.1%. At the same time, cost increases narrowed profit margins and softened unit sales across all categories and retail channels.

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,” Callahan said.

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.

Smaller size bars (less than 3.5 ounces) have been and still are the biggest sellers across all retail channels, said George Puro of White Plains, N.Y.-based Puro Research Group and author of Packaged Facts’ “Chocolate Candy in the U.S.” report.

Convenience stores sell twice as much product in this category as all the other channels combined. However, for the past few years, king size chocolate bars have been making major inroads with consumers.

Reece Mahlmann, category manager for the over 160 Speedy Stop c-store locations throughout Texas, agreed that king size is a major money-maker.

“Since Hershey and others raised their prices on their standard sizes, consumers are perceiving king size as a better value,” Mahlmann said

Taking a cue from widely publicized concerns about obesity in America, Mars has stepped up the game by changing its large size format from king size to multi-piece “2toGo,”, “4toGo” and “Sharing Size” packages, said a spokesperson from the chocolate colossus. Mars also includes calorie counts on its front-of-pack labels, promotes some products that are “well under 200 calories” and has made a commitment to stop shipping chocolate products exceeding 250 calories by the end of 2013.

Value is the real key to winning consumers’ hearts and confectionery dollars. In a report released in April 2012 by global market research firm, Mintel, eight out of 10 people said they are looking for the best value in size and price, said Marcia Mogelonsky, a market analyst for the company. “They want clear labeling when sizes or prices change—that’s been a big problem in chocolate,” she said.

Mogelonsky and NCA’s Wilson both emphasized that “value” means quality as well as fair pricing. Strong brand equities enable manufacturers and retailers to rely less on price and more on offering quality at a fair price, Wilson noted.
“Seeking value just may be the new normal,” Wilson said. “Even when the economy improves and people have more money, they won’t necessarily go back to their old buying habits.”

At Speedy Stop, Mahlmann has increased sales by offering special deals, featuring two regular size bars for $2 and two king size bars for $3. In May, he will also test bundling a $1 king size candy bar with a fountain purchase.

However, when he does these promotions, he features only one product at a time and runs promotions about every other month.

“I keep everything other than the featured products at regular prices because I don’t want to give away the entire chocolate category,” he said. “We also don’t want customers to start thinking our promotional prices are our everyday prices.”
Loves’ Tillinghast said buy-one-get- one specials and two-for value deals work best for her stores. While bundling offers with other products does add value, she noted, it can be tricky to find a fit with non-beverage items.

While Mahlmann believes that candy manufacturers do a good job at communicating sales trends and making planograms for the c-store channel, he would like to see some additional financial support.

“We could use more rebates so we can do special price two-for and bundling promotions,” Mahlmann said.