sweet profits

There’s good news and bad news for conveniencestore marketers concerned that other retail channels arecannibalizing their candy sales. A Dechert-Hampe &Co. report on candy found that confectionery sales atnontraditional outlets are on the rise, but, unlike some recentreports, these sales are not coming at the expense of convenience stores sales.

Ray Jones, managing director of Dechert-Hampe inNorthbrook, Ill., said consumers tend to buy candy wherethey shop and that candy remains among the strongest impulse purchases in all retail segments. That means candy bought on impulse near the checkout at Home Depot, Bed Bath & Beyond or any other national big-box chain is not having any impact whatsoever on convenience store candy sales.Dechert-Hampe’s research suggests that the candy purchased at one of these nontraditional outlets is an incremental sale that can be captured from every customer entering the store. The same theory applies for convenience stores.

The bad news for the convenience store industry is that overall customervisits are down as consumers are fulfilling their convenience needs at outlets like drug stores, dollar stores andeven coffee houses. Candy is just one of those items customers purchase no matter where theyare.

“If there is one thing c-store retailers need to take awayfrom this research, it’s that they shouldn’t be focusing oncompeting dollar for dollar on candy sales with Wal-Mart ora pet super store, but defending the convenience store visit,”Jones said. “These other channels are not impacting candysales, they are cannibalizing store visits, which has fargreater implications.”

Capturing Sales
In addition to defending convenience store visits, c-storeoperators should be focused on maximizing the register ringper customer during every store visit. One of the most effective ways to build incremental sales is through high-impulsecategories like confectionery. Therefore, getting more shoppers focused on confectionery should be a key objective.Dechert-Hampe’s research found:

  • Only about 20-25% of shoppers go down the candy aisleon a shopping trip;
  • Conversion is high. When consumers shop the aisle, theyusually buy;
  • Over 35% of shoppers pick up a candy or snack duringthe shopping trip; and
  • Significant improvements are seen when candy is locatedin a higher traffic location.

To Jones’ point, convenience stores need to merchandisecandy at multiple points in the store. He suggested havingcandy in five or more locations in stores and offered that thetheory of the candy aisle as a destination is all but dead.

“The fact is, customers come into convenience stores fortobacco, beverages and foodservice, and convenience retailersthat are not marketing confectionery products at these pointsof interruption are losing sales. The more places you put it,the more people will be likely to buy it,” he said.

While many companies think theyare doing a good job with candy, Jonessaid, for the most part, everyone couldbe doing a better job managing the category. Retail interviews of confectionerycategory managers found low recognition of confectionery growth opportunities, specifically because:

  • Buyers are responsible for multiple categories; some have limited confectionery experience;
  • Retailer management is focused onother issues (strategy, labor, technology,etc.); and
  • Perception that growth opportunitiesare in other areas, such as bottled water.

However, confectionery is projectedto be a $10 billion category across allretail channels in the next 12 months, with aforecasted 8% sales increase in convenience stores.

Plus, candy delivers high profitability driven by a high grossmargin, Jones said. Confectionery margins are consistently 35% higher than other categories, according to DechertHampe’s analysis of retailer data.

“Clearly the message is that once people have chosen theirretail outlet, you can sell them candy. The battle is influencingwhere people decide to shop,” Jones said.

Did you know?

Consumables like confectionery have become key drivers of shopping trips for many retail segments. In Decert-Hampe’s interview of drug store customers, more consumers listed visiting a drug store primarily for candy (7%) than for non-prescription medicines (6%).

Interestingly, 9% of drug store customers interviewed said they shopped at their local drug store for their beverage purchases.

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