Despite last year’s price increases, Americans are still treating themselves to the little luxury that is chocolate. Retailers report how they control this ever-growing category and keep their focus on consumers’ sweet spot.
By Marilyn Odesser-Torpey, Associate Editor
It’s hard to think of anything that 85% of Americans would agree on. One consensus, however, is their love of chocolate, according to the Chocolate Confectionery—US, 2015 report published by Mintel Group Ltd.
The U.S. boasts the world’s largest chocolate market and more than half of Americans consume chocolate once a week or more.
Between 2009 and 2014, chocolate confectionery sales grew 24% to reach $21 billion, the report said.
While retail price hikes necessitated by increases in sugar and cocoa prices, a national emphasis on more healthful eating and competing chocolate-flavored offerings across food and drink menus may have somewhat slowed the momentum (sales rose only 3% from 2013 to 2014), they couldn’t quash Americans’ cravings for the sweet stuff.
It wasn’t that consumers didn’t notice the higher prices—71% of respondents surveyed by Chicago-based research firm Mintel said they did—but it didn’t stop them from buying chocolate. Only 3% of the consumers had stopped buying chocolate altogether due to the price increase.
And the National Confectioners’ Association (NCA) predicts that the majority will keep on buying. The
organization is forecasting sales of $25.6 billion in 2019.
Mintel reported that new chocolate product launches grew 18% between 2013 and 2014 worldwide, 12% of that in the North American market. Within the U.S., 42% of new product launches were comprised of new takes on familiar products, such as a change in shape or packaging.
Looking at new product launches shows there has been a steep decline in the number of plain/unflavored chocolate candies. That’s because consumers are no longer satisfied with a plain piece of chocolate. They are looking for additional flavors and textures.
In the Mintel survey, 71% of the respondents said they preferred options with mix-ins as opposed to plain/unflavored varieties. Most popular are varieties with nuts and nut flavors. White and dark chocolate are gaining growing numbers of fans as well.
“Consumers in North America tend to prefer ‘favorite’ products and are not willing to experiment with innovative or novel—and typically more expensive—products,” said Marcia Mogelonsky, director of insight for Mintel’s food and drink analyst team. “Efforts to innovate will continue to run up against a consumer base that tends to be more conservative in product choice.”
Even a 10-cent rise in retail prices could not keep the chocolate category sales from soaring 11% over the past six months at Mokena, Ill.-based Gas N Wash and Food N Fuel stores, said District Manager Greg McLemen.
“We’ve only been open for two years and this is the first time I was able to sign up for the top level of promotional support from Hershey, so we’re doing a lot of big displays of pre-priced bars and two for $3,” McLemen said. “Our rep from Eby-Brown also comes in once a month to go over our candy sets, move things around and keep them looking fresh. And twice a year we do major resets.”
Although he sees a lot of new products coming onto the market—McLemen believes that at times there may be too many—it’s the old workhorses that really carry the category.
“We sell a lot of king size bars, Reese’s Peanut Butter Cups and 99-cent Snickers,” McLemen said. “In one of our stores we sold 1,100 Snickers in 10 days.”
McLemen said he prefers to carry less variety and save the space for the proven top sellers. Between inline, end cap, shipper and check-out counter displays, his stores dedicate 15-20% of their total square footage to chocolate candies.
To motivate staffers in the four stores—two Gas N Wash and two Food N Fuel—to sell more 99-cent Snickers, the company has turned it into a one-month competition.
At Duchess Shoppes’ 123 locations in Ohio and West Virginia, chocolate sales have been on the rise as well.
“Right now we’re up 1% year over year,” said John Tomlinson, director of purchasing and merchandising. “King-size is selling best, especially our No. 1 seller Reese’s king size along with Snickers.”
Duchess is the retail division of Englefield Oil Co., based in Columbus, Ohio. Tomlinson noted that this year manufacturers have reined in the avalanche of new product introductions to an appropriate number.
“There were too many new products a year ago. We spoke up and they backed down,” Tomlinson said. “Now they’re leveled off to where they should be.”
Right now, he said, the big guys in the chocolate candy arena are going strong on promotions for their products. M&M Mars is going all out to promote its crispy M&Ms and has been running 99-cent specials over the last year. Hershey, which he noted was somewhat soft on promotions last year, is back with renewed energy.
Tomlinson dedicates 12 feet of inline space to confectionery, including chocolate. There’s also 4-8 feet of peg space under the counter dedicated to candy, plus a rack on the front counter where he showcases the top sellers.
Traditionally, the stores have done a lot of shippers, but about three or four months ago, the chain reduced the number of shippers and went with a “manager’s monthly special” end cap to highlight selected items. Each month, a new planogram is designed for the space.
Like McLemen, Tomlinson promotes chocolate candies with two-for offers—right now Duchess is promoting king size two for $3.33 or $1.99 for one, regular size two for $2.22 or $1.29 for one.
Customers who are members of the stores’ loyalty program can redeem the points for chocolate treats.
Tomlinson also attributes the success of his chocolate sales to having “great relationships” with the major manufacturers and his distributor, H.T. Hackney Co.
“Hackney does a time plan out for the whole year, so I know what I have coming in,” Tomlinson said. “Hershey and M&M Mars do the same thing.”
Aside from tweaking the sets throughout the year with the latest and greatest innovations, Tomlinson schedules major category refreshes in April and November.
Twenty-three percent of consumers in the NCA survey said they are spending more on little luxuries. Nearly three-quarters (72%) of consumers surveyed by Mintel said they eat chocolate candy when they want to treat themselves.
Thirty-one percent of consumers told NCA that in any given month, they buy candy from a convenience store. Supermarkets and drug stores all came out ahead of c-stores as channels of choice for customers purchasing sweets.
NCA pointed to the increase in shareable packaging as one of the major growth drivers for chocolate sales. The association expects the candy-sharing trend, including on-the-go sharing, to yield a 10% compound annual growth rate (CAGR) over the next five years. Line extensions and new product introductions are also expected to fuel sales growth.