Is Bulk Candy Marketing Right for You?

While single packs of gum and candy get the most attention in the candy aisle, retailers often report strong margins from bulk packages and multi packs, which carry a higher price and typically offer a greater value for consumers. But will that greater value translate into consistently stronger sales?

The answer appears to be yes…sometimes, but also no, more often then not.

The reason is that larger-scale purchases aren’t really what convenience stores are about, nor what their customers are generally seeking. Changing the nature of the offering can result in a blurring of lines with retail channels like supermarkets, mass merchandisers and drug stores, an ambiguity that might, but then again, might not, benefit the c-store.

Traditional convenience stores "certainly are not engaged in marketing those items," said Jim Corcoran, executive director of the National Confectioners Association (NCA) in Vienna, Va. "There might be one here or there," but such instances remain the exception.

"The convenience store consumer, when you’re talking about confectionary products, is really, for the most part, looking at instant-consumption products, or products that he can take with him after stopping at a store located along a highway somewhere," Corcoran said.

The challenge you have with bulk candy and the like, "is that you can only have so many square feet, and you only have so many SKUs that you can carry," reasoned John Matthews, CEO of Gray Cat Enterprises Inc. in North Barrington, Ill, a strategic planning and marketing services company. "The guy who’s walking into the convenience store is generally looking for the impromptu purchase, not necessarily to buy value in the way of bulk packaging. They’re generally doing that more from a destination standpoint."

How and why consumers buy candy is no small question. As previously reported by CSD (March 2008, p. 17), the domestic retail confectionery category reached $29 billion in 2007 sales, with a lusty profit margin of about 35%. C-stores continued to account for 15% ($4.5 billion) of total candy sales in 2007, an increase of 6.2% over 2006. While chocolate led the way (up 2.9%, to $16.3 billion), non-chocolate sales increased by 3.8% to $9.4 billion. Gum notched the greatest rise, 4.1%, to $3.2 billion. Chocolate continues to account for the lion’s share (56%) of candy sales, followed by non-chocolate (33%) and gum (11%).

 

In This Channel

"When you speak about multi-pack (candy) bars, you really don’t even see them in this channel," says Steve Montgomery, president of b2bSolutions LLC, in Lake Forest, Ill., a c-store consulting firm. "The closest you come is in the bagged lines, and there again that’s more likely to be someone taking them home or to the office than to their car for immediate consumption. Being that we’re in the immediate-consumption business there is somewhat of a disconnect. I believe that the branded bagged candy is much more prevalent as a part of the marketplace than it had been previously."

That said, Montgomery does not believe c-store operators are wasting their time trying to impress customers with the inherent value in multi packs and bulk product. "Everybody has their own strategy, whether it’s candy or beverages," he said. "With candy, when it comes to multi packs, which, as I said, is really the bagged candy in this market, you don’t see a lot of promotion. You are more apt to see operators trying to drive multiple purchases, like a two-fer, on a single or king size."

The convenience store channel "has gone from being something that was in the replenishment goods business to the refreshment business," said Montgomery. Along the way the most popular package has gone from something that someone took home to something that someone took to his car.

"While we do not say there is not a reason to have more than just single-size bars and king-size bars," Corcoran noted, "what we would see as the best option is to have bagged packaging, which provides consumers with portion control. For instance, that seven-ounce hanging bag of Almond Joy or Hershey’s or Snicker’s: it is individually wrapped fun-size or snack-size product in a hanging bag."

Packaging like that is ideal for sharing, Corcoran pointed out, "whether it’s in the office or on the family vacation where they’re driving down the road with the product, or if it’s something they just want to have left in the car that they can nibble on from time to time."

Candies packaged this way, he continued, "work extremely well there, and you can really offer a much larger variety of product in less space with the hanging bag product offering than you would with the multi-packs, which tend to take up a lot more shelf space. We know that shelf space is at a real premium in convenience store operations."

Corcoran does not believe that multi packs in the candy aisle of a convenience store will blur the boundary between it and a supermarket or drug store "because, to be honest with you, whatever kind of candy that you have space for merchandising in the c-store will be well received by the consumer. What I’m looking at here is a situation of, ‘Where do you get the best return for the amount of space that you want to devote to the section?’"

Corcoran recalled being in a BP convenience store in Los Angeles not too long ago. "I walked in there and they had a very nice bulk candy set up. I was intrigued enough to go over and buy a variety of their candy," he said. "Having said that, I do think there is an opportunity in convenience stores; in fact, I think there are opportunities for bulk candy in every kind of retail outlet."

The problem, again, is "how much space do you need to devote to it?" Corcoran asked. "Also, in a convenience store, do they have a system for weighing the product? Or are they selling it by the container: ‘Fill the cup for 79 cents,’ or ‘Here’s a bucket, fill it for $3?’"

Typically, Corcoran said, when retailers carry bulk product they need "some kind of weights-and-measures capability. When you see it in the supermarket they have it all right there; consumers are used to weighing produce and so forth."

 

Seeing Health

Convenience remains the key, according to Gary Augustine, vice president of Jones and Thomas Marketing Communications Inc., a marketing communications company based in Decatur Ill. "I think that’s probably the second most valuable consumer purchase decision trigger, next to flavor." He sees consumers desiring multi packs and bulk purchases, at least in part, for their wellness value.

"Sometimes multi packs will come in smaller portions so there can be portion control," Augustine said. "We see the advent of the hundred-calorie packs emerging as the king of marketing at this point. Portion and calorie control are other variables that consumers are very much tuned in to." Snack brands like Cheetos, Oreo, Butterfinger, Hershey’s, Honey Maid, Keebler, Pringles, Reese’s, Ritz, Sun Chips, Trader Joe’s, Entenmann’s and Wheat Thins have all pleased consumers with 100-calorie offerings.

"Kraft was probably the inventor of those," said Augustine. "You also see them in yogurts, as well. They are very popular there. I haven’t seen a lot on the candy side, but I can’t envision that there couldn’t be an opportunity to go that particular route."

Consumers, particularly on the confection side, are "very tuned into sugar content," Augustine said. "Of course sugar and calorie content are connected to each other because sugar is four calories per gram, so there is a connection there." He added that there is an opportunity to sell both the convenience factor and the ability to control portions "in order to allow people to indulge yet know that what they are getting is only a certain number of calories."

 

Train Consumers?

"When you look at the overall candy category in convenience stores, we’ve been seeing nearly 10% growth per year over the last five years," Corcoran said. "It’s one of the top five to seven categories with c-stores, depending on which categories you count." Candy is a "real healthy opportunity for sales and profits at this point."

There are "tremendous opportunities" in candy throughout the c-store channel, Corcoran concludes, "but in good conscience I really don’t know if I can recommend devoting the space to bulk and multi packs as compared to other packs that have an even bigger opportunity."

"It’s convenience, that’s why (consumers are) there," Matthews concluded. "When they’re thinking about buying bulk packages they’re generally thinking about it a little bit further ahead, and they can time it around a trip to Dominick’s, Safeway, Wal-Mart or what have you."

Can expanding candy offerings to include multi packs and bulk product train consumers to expect such things in c-stores? Augustine believes it can, noting that "there is a lot of single-pack stuff out there." Convenience store operators are "getting a larger and larger audience that is more mainstream and as they get used to shopping in a c-store for a variety of needs, like going to the corner market, the opportunities to broaden a consumers’ purchasing behavior and habits is certainly greater."

Convenience consumers, he said, are becoming "broader" as far as what they will and won’t buy at c-stores. Operators in many areas are also finding "more and more frequency. I think the consumer is much more in tune to purchasing products in that environment than they ever have been before. The main trigger is going to be, is that ongoing behavior? But I think the opportunity has never been more ripe, or broader, than it is today."

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