Customers Indulging in Chocolate

The Benefits of Chocolate

Once considered a “guilty pleasure,” researchers now say that chocolate offers health benefits—when consumed in moderation and provided the chocolate is the right kind.
International experiments show that dark chocolate has an impressive array of activities, according to the Harvard Health Newsletter. It’s an antioxidant that may improve cholesterol scores and lower blood pressure. Even though it’s sweet, chocolate may also lower blood sugar and could reduce chances of developing an artery-blocking clot. Dark chocolate appears beneficial, but milk chocolate, white chocolate, and other varieties do not.
Perhaps not coincidentally, dark chocolate is also the best sales gourmet chocolate performer, according to the National Confectioners Association’s (NCA) Director of Trade Communications and Marketing Jenn Ellek.
“Last year there were more than $402 million in chocolate sales excluding Wal-Mart,” Ellek said. “Of the three confectionery market segments, chocolate made up about 56% of all of the confectionery industry’s $29 billion annual U.S. sales.”

Though the number of premium chocolate products with exotic flavors like honey and chai are growing, c-store customers are ignoring them for the most part, opting instead for their old favorites thanks to a tanking economy.

“The category is slightly better than flat,” said Tim Cote, vice president of marketing for Beaverton, Ore.-based Plaid Pantries Inc., which operates 100 stores from Oregon to Washington. “Last year we had 20 lineal feet of shelf space devoted to gourmet candy and three high-end gourmet brands. This year, we have three lineal feet and only one gourmet chocolate brand.”

Cote noted that the stream of new products coming from major candy companies has now pretty much dried up. “Launching new items is pretty expensive,” he said. “And I think that when a lot of companies launched items in limited editions, they took their eyes off their core mix and now there’s an internal push to fix that.”

More Competitive Pricing Ahead
Jenn Ellek, director of trade communications and marketing for the National Confectioners Association (NCA), said that manufacturers are going to be much more competitive with their products because there’s only so much money in consumers’ pockets these days.

“Products need to stand out in flavor, taste, packaging and how much product it contains,” Ellek said. “Manufacturers are probably going to do fewer exotic flavors because they need to reach a broader audience in order to get the sales.”

Consumers are going to be more choosey, Ellek said, and funky combinations like blue cheese and chocolate or bacon and chocolate are probably going to go away. “Sticking with the tried and true means offering products consumers can already relate to and think, ‘This makes me feel better, so I’ll get it,’” she said.

Retailers tend to agree with this analysis. “Our mini premium section within our main confection planogram has been successful in the past,” said Andrew Baird, vice president of marketing and merchandising for BP’s ampm convenience retail business. Baird said his company also tested a higher end healthy premium set in some locations, but it didn’t seem to resonate with the value-minded customers. “Ampm is all about indulgence (See this month’s cover story on page 26 for more on ampm) and healthy premium doesn’t seem to say indulgence quite the way a king-sized Snickers or Milky Way does,” Baird observed.

New Flavors, Hard Times Coincided
Chocolate companies came out with a lot of new flavors about the same time the economy started to tank, observed Brandon Hofmann, category manager for The Parker Cos., a 20-store chain based in Savannah, Ga. “It’s actually a coincidence that the economic downturn started when these new flavors came out.”

Parker convenience stores and Parker’s Market urban shops had introduced several gourmet lines into its stores last fall, but they haven’t fared all that well. “It wasn’t the best time to put in something new and upscale,” Hofmann said. “We’re going to be cutting back starting this month.”

As a whole, confectionery is recession resistant, Ellek noted—and c-stores are one of the fastest growing sales channels for the confectionery industry, especially during the past couple of years. “Candy is a small purchase, so even when times are tough consumers feel okay about treating themselves to a small candy treat,” she said. “But when you get to the premium market, I think at the larger price points you’re going to see less variety and more value for your dollar.”

Consumers Stretching Candy Dollars
Ellek also expects stores will see a resurgence of coupons across every food category, candy included. “People are going to start buying more candy at warehouse stores and other discounted outlets in order to save a buck,” she explained. “That said, I think c-stores do have their own unique customer base, people who rely on the brands they know.”

Retailers should start seeing price points that are a little more competitive, and more cross-marketing efforts, like wine and chocolate, from chocolate manufacturers as well, Ellek added.

“The trend that we have really seen is that people want to stretch their dollars further and further,” Baird said, citing BP’s successful king size two for $2.22 candy promotions. “They still want to indulge, but at the right price.”

Limited edition shippers, on the other hand, haven’t been as successful, Baird said, causing ampm to move away from them except on a very limited basis. “We’re focusing on providing great value deals for longer duration our customers have said they appreciate as they seek to stretch their dollars more and more,” he explained.

Marketing Savvy
Psychologists tell us that in tough times, buying behavior changes as people return to what is familiar and feels “safe,” so retailers must consider the comfort food factor in candy, especially chocolate, when making product choices. “No one lost placement on Reese’s Peanut Butter Cups or Hershey’s milk bar, and what we’re seeing now from companies is a real push of what they consider to be core items back into the set, using promotions and other incentives to draw retailers,” Cote said.

Baird added that ampm introduced a limited selection of “mainstream premium” items over the last year a half within its main confection planogram because in today’s economy, customers aren’t necessarily drawn to premium chocolate products with an associated premium price. “What they are looking for is value,” he said.

Baird knows that new items are an integral component to building sales and staying innovative and fresh in the confection category. To that end, ampm has introduced a rolling fixture that features new items. Depending on the new item’s performance, he either adds it to the main confection set or removes it. “Overall, we try to maintain a consistent offer. However, we do allow some variation with new items depending on a site’s local demographic,” he said.

Considering customers’ current trend of “back to comfort” brands, fixing the mix is an excellent strategy for this economy, Cote said, adding that in a down economy customers really are in a position where they dislike taking risks. “Back to basics is the password now,” he said. “Today’s customers want to go back to well known and trusted brands.” CSD

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