By Jeffrey Steele, Contributing Editor
When it comes to non-chocolate candy, consumers from coast to coast look to convenience retailers to satisfy their sweet tooth.
For smart c-store operators, that phenomenon means large and growing sales and profits.
Health concerns over the intake of refined sugar didn’t appear to impede confectionery sales in 2016. Sales of sugar confections were the swiftest-growing segment last year, according to research by Euromonitor International, increasing 4% to $11.3 billion.
Propelling the growth were a number of developments, including the unveiling of innovative new products and the surging preferences for sour flavors and chewy candy.
Convenience stores increased their sugar confectionery channel shares in 2016, attaining a combined total of 22% last year.
In reporting these findings, Euromonitor noted that falling fuel prices have provided c-store patrons with greater disposable income to indulge their sweet tooth. And prices paid by consumers in c-stores were higher than elsewhere, driving average unit prices across the industry more than 3%, Euromonitor reported.
Headquartered in Beaverton, Ore., Plaid Pantry operates a chain of 110 c-stores located in Oregon and Washington. Non-chocolate and confectionery accounts for about 20% of the chain’s standard and count bulk candy goods, and some 80% of peg bags, which sell better than smaller, non-peg packages. Tim Cote, vice president of marketing said the stores offer 150-200 SKUs in the category, a number expanded this year. Skittles, Starburst, Sour Patch, Sathers and Haribo are among favorites.
“King and standard are in the basic king and standard sets,” said Cote. “Peg bags are generally in a superior section to king and standard.”
Plaid Pantry buys “a bunch” of shippers, he added, noting it offers many price promotions, “often enhanced with coupons. Most of the non-chocolate shippers are peg bag. The product is very impulsive. We work hard to drag it out of the customer.”
While schoolyard buzz is important to offering the right mix of brands, Cote feels it would be an error to assume non-chocolate candy translates directly to just younger customers.
“Non-chocolate has lower fat content, [and] appears to be simpler to make in a way to [advance] health claims like organic or GMO free,” Cote said.
Pastilles, gums, jellies and chews were top performers in the past year. Euromonitor credited a parade of innovative product launches in 2016 for fueling a 5% growth in the category. They included Skittles America Mix, Trilli Sour Brite Weird Beards, Ring Pop Gummies Chains and Haribo Twin Snakes in the spring and Starburst Gummies in early summer, as among the most noteworthy debuts.
Sour flavors are accounting for a disproportionate portion of the growth of chews, leading well-known brands like Ferrara to roll out sour product launches in 2016. Ferrara’s Now and Later Extreme Sour Fruit Chews in three fruit flavors was among the best examples. Sours also demonstrated a lot of pucker power in the hard candy segment, leading Topps Co. to launch Ring Top Sours in February 2016.
In keeping with rising interest in clean labeling, organic sugar confectionery is commandeering a larger—though admittedly still small—share of consumer confection spending. Early last year, Ferrara and Jelly Belly both unveiled organic versions of their Black Forest and Jelly Belly brands respectively. Torie & Howard and Hillside Candy were among organic brands adding items.
Not to be outdone, Wholesome Sweeteners acquired organic maker TruSweets to ensure its presence in the segment.
To stay top of mind with consumers, makers and retailers of confections must ensure brands are effectively marketed and merchandised, according to Euromonitor. Hershey created a memorable marketing campaign for its Jolly Rancher, built around situations that “suck” but “suck more” when Jolly Rancher hard candies are consumed.
Among problems c-stores face with products like bagged confections is “visual or false out-of-stocks,” where products are actually in stock but shoppers can’t clearly see them. So said David Bishop, managing partner with sales and marketing firm Balvor LLC, based in Barrington, Ill.
“If they’re quickly glancing right or left and that product is not readily visible, they may not go the extra step to confirm the product is further back,” Bishop said.
Balvor found that actual out-of-stock rates for center-of-store items liked bagged confections was 3.7%, while the visual out-of-stock rate was 1.6%. The 5.3% total comprised of actual and visible out-of-stocks lowers convenience retailers’ sales and negatively impacts customer satisfaction, Bishop said.
Because re-facing shelves is a manual issue in an era where labor is increasingly expensive, “more retailers today are evaluating testing and utilizing self-facing pusher trays because they essentially automate a manual process,” Bishop said.
Balvor’s work shows such pusher automation will produce sales lifts while alleviating burdensome facing duties, Bishop said.
“Balvor has documented that fact by analysis through convenience retailers. With bag candy, we’ve seen dollar sales increase by nearly 7%, and the number of units sold by almost 10%,” said Bishop. The pusher systems “are not currently widely used, but most of the progressive retailers focused on improving the shopping experience are in the early stages of testing or have implemented those in their stores.”
Whether it’s pusher systems or under-shelf LED lighting to improve product appearance— another innovation Bishop said has been shown to improve confectionery sales—the result is an edge for progressive retailers in capturing just a bit more of the share of wallet.
“Candy is something of a commodity item, in that all these brands are available in many stores,” Bishop said. “So the competitive advantage doesn’t rest with offering Brand A versus Brand B. The competitive advantage lies in how the retailer showcases these items. And that is merchandising in a nutshell.”
SOUR SALES SWEETEN
C-store retailers confirm that sours are among the public’s favorite confections.
Among those retailers is West Bend, Wis.-based Mad Max Convenience Stores, with a dozen locations in the southeastern part of the Badger State. His customers crave “anything that is gummy, sour or tart,” said Steve Magestro, Mad Max president. His stores carry 100-160 different SKUs of non-chocolates and confections—depending on the size of which respective Mad Max. Moreover, non-chocolates and confectionery may comprise 25-50% of stores’ candy set.
Generally offered in the center of stores with other bagged candies, non-chocolates and confectionery when promoted are given a sales impetus through means of two-for-one deals, Magestro said. His advice to other retailers?
“Promote the items with two-for promotions and have the newest items,” said Magestro.
It remains true that confection makers place more marketing firepower behind chocolate than non-chocolate items. But that is changing, Cote said.
“This is still a problem, but a number of manufacturers are starting to loosen up a bit. Going forward I expect the trend toward more promotional availability to increase.”
In Oregon, what are Plain Pantry’s secret to success for grander candy sales?
“Carry plenty of assortment, get it off the shelf regularly, and get it priced not too much higher than grocery or mass,” Cote said.