Sweet Sales Don't Necessarily Mean Easy Access

With worldwide sales of more than $100 billion and U.S. sales of $26.3 billion, the candy and gum category ranked third among food categories in 2004, according to Information Resources Inc., Chicago. Yet some believe that beyond the please-mom-can't-I-have-one impulse assortment at the checkout aisle, the in-store potential behind these numbers is not hitting the sweet spot.Candy and gum companies should work together with industry sales barometers like IRI to stress the importance of in-store marketing, says Nathan Wood, vice president of sales for Kahler-Senders Group Inc., Portland, OR, which works with a variety of confectionery firms. "We don't do a good job of grouping together and showing retailers what an impact candy has," he says. "Candy doesn't get its fair share of space. It has been more and more difficult with clean-floor policies at retailers."Some confectioners believe retailers are beginning to recognize the potential. "My retailers are asking me, 'How can we promote this?' " says Armand Hammer, CEO of Atlanta-based Innovative Candy Concepts, which emphasizes healthier candies."The traditional thought process, that you just stack stuff on the shelves and let the consumer sort it out, those days are gone," he says. "There's a marvelous op-portunity for companies to use point-of-purchase. The willingness of the retailer to display [candy] is stronger than it's ever been. The retailer is now asking, 'How can we let our customer know that these products have certain features?' "Big Sky Brands, Toronto, which makes breath mints, sour candy and hard candies, has found success with smaller-sized items, says Steve Yacht, director of sales and marketing. "It becomes a great strategic advantage to be able to offer smaller-pack formats," he says. "It gives the retailer the ability to fit more in a limited space. We've made great efforts to accommo-date them on that. When you can put three, four items into the space of a Hershey bar, it works for everybody."The issues are no different for an upscale-oriented firm like Godiva Chocolatier, New York, which in addition to its branded stores aims for placement in department stores, Barnes & Noble, and "a select group of high-end grocery stores like Whole Foods," says Jose Padron, global visual merchandising manager for the company. "It's a competitive space issue. It's a real estate issue," he says. "They've got a lot of players, and they're trying to find some differentiation points. They're trying to find a niche for their customers."Chocolate Leads CategoryChocolate comprises the majority of the candy and gum category's sales, with $15.1 billion out of the $26.3 billion rung up in 2004, while non-chocolate candy sold $7.8 billion and gum $3.3 billion, according to the National Confectioners Association.Supermarkets sold the most of any retailer category, with $4.2 billion, although convenience stores showed the strongest growth, at 7.5% over 2003, according to IRI. Overall sales grew at a 3.3% clip over the previous year.Sales of diet candy and chocolate shot up 34.4% in 2004, making that sub-category by far the fastest-growing tracked by IRI, although sugarless gum (up 5.7%), chocolate boxes, bags and bars (12%), and licorice (5%) also performed well. A report by Packaged Facts, a division of Rockville, MD-based MarketResearch.com, said consumers bought $495 million in diet candy in 2004, quadrupling the $118 million purchased four years earlier."If a consumer can buy a product that tastes good, and the price isn't ridiculous, that's where they're going," says Hammer, whose company will be rolling out its first "gummy" product this fall, made with fruit juice and honey. "You will continue to see that trend grow as products get better and better and consumers get more and more concerned about the whole health issue."Wood says sugar-free candy has done well, but the health benefits of dark chocolate have propelled that sub-category even farther. "Sugar-free is showing some of the largest increases on a percentage basis, but it's a small base," he says. "The largest increase in growth is the premium chocolate. There are lots of diets talking about dark chocolate and anti-oxidants. People are splurging on the good stuff.""We see more and more of the candy going to the health side," agrees Doug Bushong, president and CEO of The Jay Group, Ronks, PA, which provides services to Lindt Chocolates and Just Born Candies (maker of Peeps). "The high-end chocolates are marketing to the South Beach diet because the dark chocolate is part of that. They've developed campaigns to support that."Padron says Godiva has benefited from that trend. "In our own sphere of high-end luxury chocolate, what we see is a bigger customer base, a bigger opportunity in people trading up to more expensive chocolates," he says. "We see a customer's willingness to pay more for fresher ingredients, more exotic ingredients."Russell Stover has co-branded a line of Weight Watchers chocolate with its Whitman's division, says Todd Buss, marketing coordinator, who sees more of an emphasis on sugar-free products in the market. "That's our huge, new product for Whitman's this year," he says.Energy KickThe Jelly Belly Candy Co., Fairfield, CA, is focusing heavily on its new Sport Beans product, aimed at the health and fitness market, says Pete Healy, vice president of marketing. "We developed Sport Beans as a way to capture some of the benefits of fitness products in a portable form; namely, jelly beans," he says. "Tri-athletes use jelly beans as a boost. We thought, why not go one step further and add the vitamins and the electrolytes?""Last year there was a major move into the low-carb. Now that's calmed down in the market," says Big Sky's Yacht. "You're seeing quite a bit of energy candy, energy gum, some products that are geared to help prevent colds or get some vitamins through."Another product trend in the candy and gum category has been interactive candy like the Malibu Toys' Flashin' Lix gel pops, candy rings and necklaces, says Steven Style of The Steven Style Group, New York, which has worked with Malibu to market the line."We're seeing a lot more light-up candy products, a lot more interactive candy products," he says. "I think kids are looking in their daily life to not only be flavor satisfied but to be a bit entertained. These become fashion accessories, as well. It's affordable bling-bling that has some great flavor and taste for the younger set."Albanese Confectionery Group, Merrillville, IN, has tasted the interactive trend with its Gummi Army Guys and Gummi Jet Fighters, says Larry Albanese, vice president and national sales manager. "The popularity of these pieces has just been off the charts. In a time of war, there's always a lot of companies who jump in on the toy guns, toy plastic soldiers," he says, dubbing them "candy on a mission."Line extensions have been a heavy focus of larger companies like Hershey's, Nestle, Wrigley and Mars, Yacht says. "Some of it's limited-time items; some of it's permanent; some of it's replacing stuff that's tired," he says. "That's not something we do [at Big Sky Brands]. As a smaller company, the only way we can survive is to continually innovate. We can't get away with a cherry version, or a larger version."Jelly Belly's Healy sees new trends in flavor, with sour candies and ethnic tastes, particularly those of Hispanics, more noticeably represented. "I guess it just reflects the fact that, with global transportation, it's now possible for people to become familiar with what were once very exotic flavors," he says.Stephanie Moritz, spokeswoman for Hershey's, Hershey, PA, says the chocolate category has experienced the same phenomenon. "We're seeing increases in products with flavors such as Dulce de Leche, tamarind [and] spices, as well as bilingual packaging," she says.Bolder P-O-PDisplays themselves have evolved on a variety of fronts, marketers say, typically showing bolder graphics, a greater level of interactivity, and some shift in materials away from the traditional temporary corrugate. Some even believe that trend needs to accelerate. Kahler-Senders'' Wood believes the emergence of self-checkout lanes, which reduce the potential for impulse purchases, should encourage candy marketers to get creative."I think they're just in a funk because they've been doing it so long," he says of temporary corrugate. "They need to get more permanent. They'd achieve some savings." And without more permanent displays elsewhere in the store, candy and gum makers could lose 20% to 30% of their current space, Wood says. "The corrugated display [at checkout] isn't going to do it," he says.Yacht says Big Sky Brands does mostly counter displays, explaining that the investment required for more permanent P-O-P represents a risk. "A lot of vendors are hesitant to put a huge investment into new displays. When they're putting out 10 or 15 new items a year, you don't know which ones are going to stick," he says. "We just can't rely on the stuff staying there. We have to make it as simple and as no-assembly-required as possible, be it counter displays, or floor displays, or whatever."Albanese, who has "dabbled in a little bit of everything" when it comes to materials, says the price of the product drives the level of the investment, particularly for smaller candy companies. "To have two LEDs in the corner is just great, but we're not selling Rolexes here, we're selling candy," he says. "So it's a little hard for us to get too creative and think too out of the box because we're conscious on cost. We have to be more creative than the Krafts and the Wrigleys and the World Confections. The smaller guys don't have the marketing dollars to throw at [permanent P-O-P]."On the upscale end, Padron says Godiva has upgraded its fixtures from what often had been wire racks to dark stained wood. "We're trying to get our retailers to buy into the idea of a home fixture," he says. "We're looking to gain some permanent real estate and have them commit to a Godiva home. We've upgraded the look and quality, and come up with larger fixtures that are not so easily uprooted."Bushong points to subtler upgrades like combinations of corrugate with plastic header cards, as a less drastic change that improves the look of displays. "It gives a better image," he says. "The graphics, they're bolder now. The biggest thing we see is the promotion of the product itself in a very graphic display with a fairly large header on it, so you catch consumers' attention."Interactive, 3-D Malibu Toys' Flashin' Lix displays combine extroverted graphics with interactive elements aimed at attracting the attention of children, Style says. "It piques people's curiosity. It makes them want to check it out," he says. "When it comes to our target audience, the kids' candy marketplace, the trend is very bold, colorful graphics that kind of jump out at you and grab you." Russell Stover's dedicated fixtures in 30,000 to 40,000 Wal-Mart stores were spruced up this spring with stronger, more seasonal photography, Buss says. "We've spent a lot of time redesigning the panels," he says.Hammer, whose company recently unveiled a store-within-a-store concept, says he has noticed more use of 3-D signage with greater depth of background. "The pearlized look, that's coming into effect with a lot of the signage that's coming in today," he says. "I think you're going to see a lot of companies investing in it."Jelly Belly brought displays with sound boxes to attract consumers' attention and give them more information about the new Sport Beans, Healy says."We've been working with our vendors to capture, in terms of the graphics, a lot of the excitement and color of Jelly Belly," he says. "There seems to be some movement toward greater interactivity of P-O-P, whether it's sound or actually engaging the customer at point-of-sale. It might be an FAQ type of system where the consumer has a chance to learn more about that product or that category." Hershey's sees the same thing, Moritz says. "An interactive piece can help to grab a consumer's attention," she says. "Consumers are looking for more than infor-mation. They are seeking an opportunity to experience the brand."Yacht says more companies have put together displays that cut across multiple brands. "Where in the past, you would normally see, if it was a particular line of mints, or chocolate, it would all be within one brand family. [Now] it's almost like a mini-candy store for that one company."But he adds that in general, displays that grab the most attention in the least space are desirable. "If you can pull it off, what works for everybody is to minimize your space requirement on the shelf and maximize your impact, by using accessory items -- postering, floor graphics, stickers on the doors, anything of that nature -- to get a first impression, and draw people over to the shelf, and not take up all the space."Retailers' varying needs and requirements mean that candy and gum companies are creating more and more account-specific displays, especially for larger accounts, Wood says. "What I've seen is that a lot of these manufacturers are going to go after the big guys. They're going to create these displays that work best with Wal-Mart," he says. "That trickles down to the Targets and Kmarts and Fred Meyers. That works for most of it." Convenience stores, he adds, tend to need counter units."We have a better chance of selling the product with a customized box for that particular retailer, instead of being everything to everyone," Albanese says. "Which is a lot more labor-intensive, a lot more costly up front, especially when you're dealing with prototypes. You pull your hair out a lot more often because the same box I sell to Costco, Sam's doesn't want. The same five-pound bag of Gummi Bears that Costco loves, Sam's can't stand. You're always trying, especially on the larger guys that warrant it, to meet their needs."Jelly Belly makes account-specific displays for larger accounts, Healy says. "We do have a number of key accounts, in which the volume of traffic warrants us working with them on custom displays," he says. "Generally speaking, we're careful to work with our vendors to design fixtures that will work across several channels and a whole range of retail formats or decor."Big Sky Brands customizes for 25% of its accounts, Yacht says. "The trend in the convenience and grocery has been toward smaller is better with respect to planograms and rack placement, to try and squeeze in as many products as they can," he says. "The larger-format stores obviously can accommodate floor displays and power wings. As a smaller player, we try to be flexible."Star PowerAnother issue of growing importance to the candy and gum category -- which affects both products and P-O-P -- is licensing tied to movie characters and top stars in the sports and pop music worlds.Wood points to everything from basketball star LeBron James' sponsorship of Lightning Lemonade Bubblicious to candies tied to characters ranging from "Bob the Builder" to "Star Wars." "If you look at the toy industry, 35% of sales are licensed [products]. If it's that important to the toy industry, it should be that important to the candy industry," he says.Jelly Belly has been exploring heavier use of licensing, Healy says. "That does seem to be a greater part of the landscape now, at retail," he says. "In past years, we have not done all that much. We're trying to pick it up now, but it takes a lot of time and effort to evaluate the opportunities and go after the best ones. We're lucky to have quite a high-profile brand. We're constantly approached with proposals. It takes some time to pick out the best fit."Bushong says licensing is another way to capture the attention of fast-moving consumers. "It's all trying to keep that differentiation," he says. "You see more and more of the [licensed] displays, and companies patenting their displays."Not everyone sees licensing as a growth area. Malibu Toys has one licensed Flashin' Lix holiday product, tied to the claymation annual special "Rudolph and the Island of Misfits," but has done less recently than in past years, Style says. "That [holiday license] is very successful for us," he says. "In other areas, in most instances the licenses haven't really added much value to our product."