Reaping Profits from Chocolate

Even though 20% of all chocolate sales come from convenience stores, a 32%
increase in year-over-year growth flowed from the convenience channel.

By Jeffrey Steele, Contributing Editor

When Americans get a yen for chocolate bars, they find no better source for their craving than convenience stores.

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In fact, recent sales data gathered from retail channels indicate convenience stores accounted for even a bigger share of chocolate candy sales in 2018.

Moreover, by adhering to popular trends toward bite-sized, premium and uniquely-flavored chocolates, convenience retailers have an opportunity to reap even sweeter profits from their sales of chocolate.

The growth in the overall candy sector is in non-chocolates, not chocolates, said Larry Levin, candy expert with IRI Worldwide in Chicago. But convenience retailing seems to be one area where chocolate candy is retaining a steady market.

“Look at the overall market,” said Levin, who noted the confections market in general is up 1.3% on a year-over-year basis. “The growth is coming from non-chocolates, but the c-store channel is doing better in delivering growth for chocolates than retailers in general.”

Chocolate sales in convenience stores rose 1.1% to $2.86 billion—part of a $11.2 billion basket attributed to all retail channels.

“So growth in chocolate is being sparked by c-stores,” Levin said.

It’s important to note that even though 20% of all chocolate sales come from convenience stores, 32% increase in year-over-year growth came from the c-store channel, Levin said.

“Trips to c-stores are rebounding,” he added.

“People are coming back to the channel. And as part of the passion for grab-and-go, chocolate is winning and non-chocolate is also winning in c-stores,” Levin said. “We’ve seen for a while chocolate candy is making a resurgence.”

At Boise, Idaho-based Stinker Stores, category and merchandising manager Shelley Coleman said king-sized candy bars are outselling regular single-serve sizes “hands down.” Customers are also displaying increased interest in discounted multiple-item offers.

In general, the store chain’s sales of chocolate benefit from its customer base being comprised of large numbers of chocolate-loving young male construction workers.
Stinker, which operates more than 100 locations in Idaho, Colorado and Wyoming, positions chocolate candy on the top shelf of low-profile shelving displays. The stores also  use counter units at the register to attract impulse purchases. Counter units and/or shippers are used for Hershey’s and Mars products. The chain runs two-for-one promotions a couple months at a time, leaving single prices unchanged.

The store contracts with major manufacturers to run a specified number of shippers. “So it’s driven a lot by contracts, where we’ll back-end money quarterly,” Coleman said.

BRANDS, TRENDS
Ferrero’s Kinder Joy has made the biggest splash in chocolate candies this past year.
Long sold in Europe under the Kinder Surprise banner, Kinder Joy is still new to the U.S. Prior to Kinder Joy’s launch, Levin said, U.S. household chocolate novelties penetration was 1.5%. With Kinder Joy on the market here for more than a year, penetration now stands at 15-16%. “It’s really turned the market on its ear,” he added.

Also faring well are such brands as Hershey Gold and M&M’S Caramel, Levin said. “These have been pretty well accepted across the market.”

Mintel research indicates that about 49% of U.S. chocolate buyers would like to find more mini-sized bars or bites of chocolate. That may go hand in hand with the 63% of chocolate buyers who believe limiting chocolate consumption is important, Mintel researchers observed. Three-quarters of U.S. consumers believe single-serving or bite-sized chocolate is a great way to limit consumption.

Another Mintel report revealed that 63% of buyers reach for the same chocolates they did in their youth, meaning nostalgia plays a part in brand popularity. Buyers also are willing to pay a bit more for premium chocolates, with more than three quarters (76%) willing to fork over additional cash for quality. Chocolate lovers would also like to see more chocolate products with unique sweet flavors (31%), savory flavors (29%) and functional benefits like added protein and good fats.

Also important to customers is transparency, according to John Downs, president and CEO of the National Confectioners Association. A five-year commitment to the Partnership for a Healthier America has resulted in the industry pledging 90% of its best-selling treats will include calorie information on package fronts, and half of individually-wrapped products will come in 200-calorie or fewer packages.

“Our member companies have analyzed and mapped their supply chains to better understand their social, environmental and economic footprints,” Downs said.

Part of that is Millennials in general prefer non-chocolates over chocolates. Non-chocolate has therefore become a formidable competitor to chocolate.

Levin said preferences by many consumers for non-chocolates have eroded shelf space given to chocolates, because retailers must stock what customers demand. “But both chocolate and non-chocolates are punching above their weights in c-stores,” he said.

If there’s a niche worth watching, it may be the category of sugar-free chocolate candy, Levin said. Sugar-free chocolates are up 14.4% year on year to $129.6 million in the U.S. The category is an exceptionally miniscule 92 basis points, “But it’s large in terms of growth,” he added.

CHOCOLATE LOVERS
Meantime, across the country in the Sunshine State, Live Oak, Fla.-based Busy Bee, which includes 18 stores and travel centers across Florida and Georgia, has found a niche in fresh chocolates.

“At Busy Bee, we are known for our fresh fudge made in house daily,” said Megan Forcey, director of advertising and e-commerce. “Our guests travel out of their way to pick some up. We always try to accommodate our guests. They know they can call ahead anytime [for] a specific flavor they are looking for.”

Busy Bee’s gourmet truffle cases also let guests build their own chocolate boxes, Forcey said.

The chain focuses on supporting local businesses, teaming with a local gourmet chocolate shop that hand dips and boxes chocolate candy for Busy Bee. “We find our guests love this sense of community, and it has built a real following,” Forcey said.

As for packaged chocolate bar offerings, Busy Bee promotes the newest flavors on the end caps and at registers, offering at them a special buy-one-get-one deal or packaged price.
Busy Bee’s Forcey works closely with its vendor team to ensure sets are constantly being refreshed to stay current and competitive.

“Our vendors are continually staying on top of the latest trends and as a company, we rely on these relationships to be as successful as possible,” she said.