A top indulgent impulse purchase from the candy category, chocolate continues to sweeten basket sales for c-stores.
By Anne Baye Ericksen, Contributing Editor
The first quarter of 2018 ended on a sweet note for chocolate candy in convenience stores and other retail channels.
The period started on the heels of the holiday season, carrying that celebratory momentum into Super Bowl snacking, accentuated with a commercial featuring legendary comedian Danny DeVito dressed as an M&M. That spirit then bounced right into Valentine’s Day, and the quarter closed out with an Easter bump. In fact, Easter, not Halloween, is the No. 1 holiday season for chocolate sales.
“For Easter and Valentine’s Day, there was a 200% increase in Lindt [chocolate sales]. We never did Valentine’s Day promotions in convenience stores before, but now with Lindt, we did and it was good for us,” said Larry Hill, category sales manager for Holiday Stationstores Inc., Circle K Northern Tier Division. Based in Bloomington, Minn., the c-store chain and fuel retailer with more than 500 sites was acquired last year by Couche-Tard.
Seasonal sales, including Halloween, only represent 24% of the $22 billion U.S. chocolate candy market. The majority of purchases are spread throughout the year, which is why c-store owners and operators traditionally focus more on persuading consumers to indulge year-round rather than bank too heavily on limited promotions.
As an impulse item, chocolate doesn’t typically generate the same level of profits as fuel, foodservice and tobacco, which remain the three biggest revenue drivers for c-stores per the preliminary numbers from this year’s National Association of Convenience Stores’ State of the Industry report. According to Packaged Facts, convenience stores contribute 12% of all chocolate sales, equaling $2.6 billion in 2017.
Analysts point to the expanding trend of consumers preferring better-for-you (BFY) snacks and treats, and leaning away from sugar as a major contributing factor. Chocolate manufacturers are capturing the interest of chocolate lovers who desire BFY options with a variety of premium products. Brookside, now owned by Hershey, was one of the first to profit from the BFY attitude by coating fruit in dark chocolate. Other suppliers have jumped on the bandwagon.
“Non-chocolate manufacturers figured out the Millennials before the chocolate manufacturers did, but they’re making strides now,” said Hill. “We just rolled out Tru Fru, a freeze-dried fruit dipped in chocolate. It has a more intense flavor.”
Tru Fru flavors include raspberries, cherries, strawberries, bananas and cranberries.
Other companies are pairing chocolate with herbs and spices, such as chile and cinnamon, or enhancing it with umami flavors such as smoke and ash. Snickers, for example, is infusing its iconic nougat with a spicy hot pepper flavor as part of its “hunger bar” promotion slated to begin next month. The Fiery bar will be joined by Espresso and Salty and Sweet versions, also featuring enhanced nougat flavors.
The strategy appears to be paying off. Earlier this year, Information Resources Inc. (IRI) reported sales of premium chocolate were up 10% from the previous 52 weeks, marking the fourth consecutive year of double-digit gains for this sub-segment.
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Exploring different textures is another notable trend in chocolate. Paul Kissin reported for the Sweets & Snacks Expo that chocolate with peanuts recently noted 2.4% growth in dollar sales and 4.5% in unit gains.
But texture highlights aren’t limited to nuts. This month, Reese’s Outrageous will debut, a concoction of creamy peanut butter center, coated with caramel and Reese’s Pieces, dipped in chocolate.
Mars also is experimenting with textures. Last month it launched a new Flavor Vote campaign asking customers to choose between Crunchy Espresso, Crunchy Raspberry and Crunchy Mint M&M’s. Voting ends May 25 with the winning flavor announced in August.
“Our top-selling bars are still the classics we all know, but I do think customers are willing to try new innovations, especially if it still has a classic brand name on the package,” said David Hendrix Jr., merchandising manager for Summerwood Partners LLC. The company, headquartered in Bryant, Ark, owns and operates 36 Big Red Stores.
“Hershey has really made a push adding a cookie-crunch texture to several of their items, including the Hershey Cookie Layer Crunch bars and the Reese’s Crunchy Cookie Cup,” he added. “Another trend appears to be a move to get more involved in the salty snack category. Mars is looking to enter the category with M&M Snack Mixes and Dove Chocolate Covered Dusted Nuts.”
Other new items expected to hit shelves this year are the Milky Way Fudge bar and king-sized dark chocolate Kit Kat.
One of the biggest developments to hit the category in recent months doesn’t even contain chocolate. Hershey’s Gold was introduced last December, and is the first brand-new recipe from the legendary candy maker in more than 20 years. The caramelized crème with salty peanuts and pretzel bits has received a positive welcome, thanks in part to an advertising campaign tied to the Winter Olympics.
Of course, smaller confectioners are coming up with creative and unexpected chocolate formulations, including spicy options. Many of these will be on display at the 2018 Sweets & Snacks Expo, held May 22–24 in Chicago. A sampling of new products for this year’s event include Alli & Rose Coconut Rolls with Milk Chocolate, Divine Chocolate’s Dark Chocolate with Chili & Toffee Pieces Topped Bar, Bixby & Co. Dark Chocolate Maine Sea Salt Caramels, and Natierra Chocolate Covered Freeze-Dried Fruit Slices.
“I want to see what the ma-and-pop people are doing and how we can get their products in our stores,” Hill said. “Sometimes the smaller producers just want to get into Target or Walmart, but I want to get them to believe that working in convenience stores is a viable channel.”
While consumers and retailers may appreciate fresh flavor and texture profiles, highlighting them on already crowded candy shelves and displays can be challenging. Hendrix kicks off new product promotions by positioning them in high-profile real estate, such as check stands, and calling out discounted prices with vibrant signage. Additionally, he’s dedicated a section on the top shelf of candy sets to premium and uniquely flavored products.
“This helps in two ways: it gives customers a chance to notice new offerings and allows us flexibility to put these items into the sets as they are launched throughout the year,” said Hendrix.
He also enrolls in manufacturers’ promotional campaigns.
“We like to be on programs like Hershey’s ‘First to Street’ and Mars’ ‘Speed to Market’ plans in order to be one of the first chains in our market with the latest innovations,” he stated.
Hill also leans on the resources vendors offer, oftentimes working with them to create targeted efforts.
“Our marketing groups work together to produce radio ads and signage. Right now, we are working with Reese’s. It’s their 90th anniversary and Holiday’s 90th anniversary, so we’re working in conjunction to put out a strong promotion behind Reese’s,” he said. “It’s the most fun I have at work.”