Chew on This

Convenience retailers should expect some volatility when it comes to famously unpredictable categories like tobacco and gasoline. But candy? Sweet, innocent candy?

In the past year, candy and gum manufacturers seemed hellbent on destroying planograms and driving category managers batty by the way they’ve marched an army of new products into the market.

“The question about new items is, ‘Where do you put them?'” says Marshall Dujka, marketing director of Timewise Food Stores (Houston, TX).

“How do you put 20 or more new SKUs into a category where space is already maxed out? The big challenge is placing ‘new item display shippers’ [from manufacturer partners] in the stores. We ask for a shipper or some other display vehicle that allows us to bring the new item in and determine if it’s going to sell. Then, we pick and choose which items we need to work into our core candy section. I usually try to make major changes to sets only once every six months, so if anything is introduced between changes it has to be displayed in a shipper.”

Manufacturer innovations, while creating somewhat of a burden for space-challenged category managers, have proven profitable because candy consumers have shown a consistent willingness to try new products.

“Nine of our top 20 selling standard chocolate bars were not even on the list a year ago,” says Scott McKinnon, director of marketing for SSG Corp. (Hudson,WI), operator of 10 Auto Stop and 30 Holiday Station stores. “That’s a pretty significant number. Hershey’s Take Five—a new product—was our top SKU.”

McKinnon makes one major change—and three tune-ups—to his stores’candy set each year. New products are introduced via the “Counter Attack” program,which consists of a two-week stay in a point-of-purchase shipper. If space is required for other new items, the items are placed on the proverbial “GoldenPath.”

“It’s the path of opportunity,” McKinnon says. “Our candy is required to be positioned in an area where customers from the deli/coffee area, beverage/cold vault area and the checkout area—we call it the ‘Three Cs’: coffee, cooler and counter—all have to pass. We design the stores to make sure our highest-margin impulse items are set in those areas.”

Still delivering
The one thing that hasn’t changed in the candy category is the fact that it still delivers good margins. Both McKinnon and Dujka say their overall candy margins are holding firm at the 45% mark.

“Gum has a lot to do with that,” Dujka says. “Chocolate bars have dropped slightly, but gum is doing well. Everyone is moving toward gum—especially the whitening and the sugar-free gums. The whitening gums were slow at first, but they’re picking up. Trident White Peppermint Gum is our No. 6 top-selling gum. We move about two to three boxes per month at each store.”

Whitening and sugar-free gums may be in the driver’s seat right now, but their stay in the pole position could be a short one. Fruit flavors seem poised to take control.

“It seems that the fruit flavors are what they’re coming out with now,” McKinnon says. “Altoids Sour Apple Gum, Mentos Green Apple, Hubba Bubba Cherry Lemonade—it’s more of the fruit flavors versus the traditional peppermint, cool mint and wintergreen, but it’s considered the same category. Of course, we’re going to adjust to what the manufacturers are doing.”

Still extreme?
All the news in the gum and mint category isn’t freshly whitened, however.

“The ‘extreme mint’ category is definitely going through a decline,” Dujka says. “Altoids stands out the most because it was the most predominant product, but Certs just discontinued its Power Mints, too.”

While retailers report that some customers might be “trading down” to lower-priced brands in key categories like cigarettes and beer, the same may hold true for the gum and mint category. McKinnon has witnessed his customers shying away from the more expensive mints.

“When you’re talking about the extreme mint category, it’s really flat to declining,” he says. “Altoids are not ruling the roost like they used to. Now, the value brands are driving the mint category. The BreathSavers roll mint is our top SKU. If you had gone back two years ago, it would have been Altoids, Altoids and Altoids. I think it’s because consumer spending is down and ancillary items like expensive breath mints are too much, so people are trading down. They still need mints. I’m sure there is a demo that still wants [premium-priced mints], but our core demo wants the ‘under $1’ mint item.”

At Timewise Food Stores, Dujka says his customers aren’t moving toward lower-priced mints. In fact, they’re moving away from mints in general. Customers, it seems, appear to be seeking added value in their purchases.

“They’re leaving mints and moving to the whitening gums and the sugar-free gums,” he says. “There’s also a move toward pellet gums. There’s been a tremendous amount of line extensions in that category, and they seem to be taking over from the stick gum.”

To keep volume up throughout the gum category, McKinnon instituted a “2 for $2” deal on Wrigley’s Orbit gum and the traditional PlenTPaks.

“When we did that, sales popped right up,” McKinnon says. “The margins camedown, but the overall unit movement and category profit went up. And, at theend of the day, we made more money.”
Dave Scopinich, Contributing Editor