The category isbooming with demandfrom health-conscious adult consumersthat are seeking out sugarless gums andmints, while high-ring novelty items aredrawing in kids.
This demand is a welcomed addition.The confectionery category is one of themost profitable in c-stores. According to aJuly 2007 Information Resources Inc. (IRI)report, convenience stores have shown a7.8% increase in the confectionery category over the last 52 weeks. The report isdivided into sub-groups of chocolate, non-chocolates, gum and mints. In it, standardbars and king size make up the majorityof sales in the chocolate sector, bringingin the highest profit margins inthe candy category with 38%and also showing a 3.1%dollar sales increaseover the most recent 52week period.
New product explosion
General Oil Co. inSikeston, Mo. recentlyopened its second Fas GasExpress convenience store.The flagship store, also located in Sikeston, boasts a drive-through window from which the store generates 27%of its inside sales.
Everything in the store is available forpurchase at the drive-through, including candy. Scott Jenkins, vice presidentof General Oil Co., finds the window hasbrought a whole new customer base to FasGas—who normally might not frequent ac-store, but are now pulling up outside forpurchases.
“Candy items are a great add-on fordrive-through customers,” said Jenkins.”They come up to order their cigarettesand hot dogs and will add a candy bar fordesert.”
While chocolate bars and packs stillmake up 40% of in-store candy sales,according to the National Association ofConvenience Stores’ (NACS) 2007 Stateof the Industry report, the gum and mintsectors are outperforming all other candyproducts. Mints have shown a 15.4%increase over the past 52 weeks, and gumsales continued at record growth levelswith a 4.7% increase, led by sugarless gumwith a 10.8% increase.
Fas Gas sees about 2 to 4% of its insidesales from the confectionary category,with the category accounting for 4 to 6%of its overall profits. The company is alsocapitalizing on the demand for gum andmints. Jenkins is seeing the most growthfrom new flavors and packaging thatare coming out every week. As a result,he is slowly devoting more space forthese items.
“We have to keep inventing space for new products,” said Jenkins. “We’renot taking the conventional players down,so we’re trying to find space in nontraditional places to market these items.”
For example, a separate freestandingtriangle rack in the candy aisle is devotedto gum and mints, while wing mastersand the counter wraps are used to houseother new items. Marketing confectionsin high-impulse areas and manufacturer support promotions have also provedeffective. The checkout counter, laid outin a horseshoe design, offers four feet oftiered shelves underneath containingnothing but candy, gum and mints.
Fas Gas is also a strong believer in running specials on candy as a way to thankcustomers for shopping there. Severaltimes a year the chain offers three barsfor 99 cents or a 32-oz. fountain sodawith a discounted candy bar. Althoughthe normal profit margin range for FasGas’s confectionary category is 38 to 40%,Jenkins sees a low gross margin on thosetypes of deals, but the items go quicklyand make regular customers happy.
Products that pack a punch
Pak-A-Sak, which operates 37 stores inIndiana and Ohio, has seen confectionerysuffer in the past year. Gary Tabor, director of marketing and sales for the Portland,Ind. chain, believes consumers have lessdisposable income to spend.
“We’re finding that traditional impulseitems tend to suffer during times withhigh gas prices,” said Tabor. “It’s a quandary that I have not found the deeperanswer to yet.”
The chain relies on single-serve candyto drive category sales and makes a conscious effort to market single-serve rightabove bagged candy packages. Anotherpopular item for Pak-A-Sak is the theater candy pack, which has a promotionalprice point of 99 cents and carries a 30 to35% gross profit margin. Sales are up 15%from last year.
Pak-A-Sak also focuses ondeveloping a productassortment ofcandy and novelty items for kids. Theseproducts are big-ticket items that carry ahigh margin. Tabor ensures the chain’snovelty candy offerings are stocked at eye level for children, where it isaccessible tothem. At an average starting price of $1.99,novelty candy is a great impulse buy andone of the higher price points in the candysector.
Novelty items like Sconza Candy Co.’sGiant Jaw Breakers attract a large amountof business in c-stores positioned in kid friendly areas, such as near a school or park. Kids stop in after school and pick up novelty items with their lunch money.
Special promotions, such as Ring Pop’s 30th anniversary, also hold opportunities for retailers to draw in more customers who may have a special attachment to a candy item.
“C-stores are a kid-friendly environment,” said Jenn Ellek, director of tradecommunications and marketing for theNational Confectioners Association(NCA). “Novelty candy items can sometimes double as a toy and are edible at thesame time—proving to be very popularwith children.”
Industry research conducted on c-storeconsumers found that candy purchases areimpulse-based almost 90% of the time. Forthe standard c-store customer who stopsin two or three times a day, confections area part of their lifestyle. As c-stores evolveto meet the growing needs of customersthrough foodservice and other areas, thecandy category remains an indulgence.
“We’ve done a lot of research and eventhe most healthy shoppers give themselves permission to indulge and havea candy bar now and again,” said Ellek.”That’s why single-serve items are themost popular in the category—not manypeople are buying bulk candy ina c-store. It’s all about theimpulse buy.”
Seasonal space constraints
The number of new products and brand extensions flooding the candysector can be overwhelming for retailerswho have limited space. Candy manufacturers are consistently coming out withlimited editions and new extensions.Retailers welcome the innovativeproducts, but can’t alwaysincorporate new items because of limited space.”It’s difficultas a buyer to makedecisions about which newproducts to pick up,” said Pak-A-Sak’s Tabor. “We are fairly conservativewhen it comes to trying new brand extensions in the candy category because of thegreat limitation on space in our store. Weutilize our wholesaler’s planogram andlet them guide us to the right products.”
With the major holidays around thecorner, candy manufacturers are starting to roll out seasonal items. The c-storeenvironment is not one that responds wellto the bagged, bulk candy that usuallyaccompanies holiday promotions. Sincemost candy purchases in c-stores areimpulse buys, single-serve items fare thebest during the holidays.
Fas Gas does some pre-booking for seasonal items during August and Septemberto ensure the best assortment of productshit its stores. Holiday-specific packagingis a bonus for the c-store environment,since retailers can use merchandisers fordisplay in the store. After a seasonal itemsells out, Jenkins can throw away thepackaging and not worry about takingspace away from other products.
Chocolate does exceptionally wellaround the holidays, with companies suchas Hershey putting out single-serve itemslike Reese’s Peanut Butter Eggs, CadburyCreme Eggs and York Snowmen. Sincesingle serve products are the best bet forc-stores, any holiday displays should feature the most popular items.
“I’ve been noticing a blurring of categories lately in regards to confectionsand sweets,” said Gary Tabor of Pak-A-Sak in Portland, Ind. “Some of these alternative snacks still contain chocolateand candy pieces, but are perceivedby customers as being better for them.So as people shift to a healthier snackchoices, manufacturers are taking notice.”
More adults are turning to sugarless gum as an alternative to traditionalsweets. Consumers view these sugarless products as being healthier andbetter for their teeth and body.
Scott Jenkins of Sikeston, Mo.-basedGeneral Oil Co. finds that customerswant gum to compliment their carb-conscious diets. More manufacturers areputting out flavors of sugarless gumsthat are surpassing the quality and tasteof regular gum with sugar.The variety ofproducts to choose from can help drawcustomers into the store even when gasprices show no sign of dropping backdown.
“Candy is part of the backboneof the c-store industry,” saidJenkins. “With the high gas and cigarette prices, we have to make up the sales somewhere. The confectionery category is presenting itself for some really strong growth in the future.