Candy Shopper Insights
Repositioning candy to the highest traffic aisle in the store could significantly boost sales, according to the “Convenience, Candy & Profit” study conducted by Kit Dietz, of Dietz Consulting. Other key findings include:
The confectionery retail market has grown across all trade channels but convenience stores have outpaced the overall retail market, followed by club stores, dollar stores and chain drug stores, according to the National Confectioners Association (NCA) 2009 State of the Industry report.
Convenience store candy sales had the highest increase of any retail channel in 2008, jumping 4.3% to $4.4 billion, trailing only supermarkets, which tallied an estimated $4.7 billion in sales in 2008.
By channel, c-stores sold 15.2% of all candy sold in the U.S. in 2008, NCA reported.
In terms of dollar share, chocolate candy (58%) by far accounts for the lion’s share of candy sales, followed by non-chocolate (33%) and gum (9%), according to NCA.
According to the 2009 NACS State of the Industry report (SOI), the confections category in a typical convenience store contributes $44,820 to sales and $21,336 in gross margin dollars, for an average gross margin of 47.6%. It is the eighth-largest category based on sales, but ranks sixth in gross margin contribution.
If manufacturers, distributors and convenience store retailers would embrace some basic changes and work more closely together, they could realize hundreds of millions of dollars in new profit, according to the “Convenience, Candy & Profit,” study developed by industry expert Kit Dietz, of Dietz Consulting, under the joint sponsorship of NACS, NCA and the American Wholesale Marketers Association (AWMA).
According to the year-long study, if the nation’s 146,000 convenience stores and their distributors worked together to make sure the top 50 SKUs in candy, gum and mints—the “core brands”— were always in stock, as much as $358.8 million in new candy sales could be generated.
According to the study, if all 50 core brand items achieved 90% in distribution and in-stock status, the channel would realize $192.7 million in increased sales. A 95% level would boost sales by $269.2 million, and if the 100% level could be achieved, the result would be increased sales of an extraordinary $358.8 million.
“Even though we are struggling with a tough economy with huge problems, consumers are still buying candy,” Dietz said. “Our research shows consumers are still turning to these simple treats and trading partners could capitalize even further on this highly recession-resistant category, if they are willing to adjust some important business practices.”
Having the proper balance of focus on core brands and new items is an important component of effective category management, according to Dietz, who said distributors can help retailers develop and execute the most profitable candy planogram for their stores instead of relying on manufacturers, whose natural bias is to promote their own brands.