Avoiding common pitfalls and developing a merchandising plan can boost convenience store confectionery sales.
By Heather Henstock, Contributing Editor.
Keeping shelves full of customers’ favorite candy, gum and mint brands may seem like an obvious practice for convenience store category mangers. However, controlling out-of-stocks continues to be the top challenge for c-stores managing the candy category.
Worse, out-of-stocks represent lost sales opportunities in a category that can yield high profit margins even in a down economy. By maintaining candy stocks, tracking new products and providing merchandising support, c-store operators can breathe new life into candy, a category often taken for granted.
Jenn Elleck, of the National Confectioners Association (NCA), said the biggest misconception about selling candy is that candy sells itself. “Retailers don’t think they need to worry about candy. But if they put in a little more effort, it becomes a real money maker.”
Candy not only generates high margins (typically 35-40% for c-stores, according to NCA), but it also maintains sales even under lackluster economic conditions. “I wouldn’t say we’re recession proof, but we are recession resistant,” Elleck said. “Candy is an affordable luxury. People still want to treat themselves.”
Candy Sales Dependable
Despite the continued economic doldrums, U.S. confectionery sales have grown at a pace of 4.2% annually and generate $29 billion in total sales, according to Symphony IRI, a Chicago-based research firm that reports scanner sales data from the food, drug, convenience and mass merchandiser channels, excluding Walmart.
C-store candy sales were up 2.7% for the 52 weeks ended July 10, 2011. More importantly, unit sales (down a nominal 0.2%) are keeping pace with dollar sales, so the sales gains are not just results from retail price increases.
C-stores are the third largest channel for candy sales after supermarkets and drug stores, but have shown the most growth year to year. “Supermarkets are the biggest channel for candy sales, but they kind of rest on their laurels,” Elleck said. “Whereas convenience stores always have to be thinking ahead and really merchandising because they have much smaller footprints.”
To get the most from the candy category, c-store operators target five key objectives:
• Avoid out-of-stocks. With limited retail merchandising space, c-store operators need to be diligent in tracking candy stocks by keeping core brands in stock at all times and eliminating slow movers. Maintaining stocks is a priority for Corpus Christi, Texas-based Stripes Convenience Stores, a division of Susser Holdings, where candy sales represent 3.5% of store sales.“The key to success is staying in stock on the items that your consumer wants and offering enough variety to cater to the majority of your customers,” said Chris Switzer, category manager for the more-than-500-unit chain. “We focus on staying in stock on core products and up-selling customers on high profit, high volume products.”
• Cater to consumer niches. Many top-selling candies will be consistent across all stores in a chain, but c-store companies also consider regional tastes and distinct consumer demographics of each store. The spectrum of candy, gum and mint varieties is vast, but stocking flavors, brands and packaging sizes that meet specific consumer demands can give your c-store the edge.
With stores located in Oklahoma and Texas, Stripes stocks candy varieties that appeal to a large Hispanic population. “We offer an array of authentic Hispanic candies to cater to our core customer,” Switzer said.
Some candy brands trigger a sense of nostalgia that varies by generation. Candies that are easy to share or have resealable packaging might appeal more to traveling families. Other confections, such as confections with dark chocolate or added functional ingredients, appeal to the health-conscious consumer. Whatever the consumer demographic, confectioners likely offer a product that can meet that niche.
• Plan for new products. In fact, new products are the lifeblood of the confection industry. During the past two years, 30% of confectionery sales came from new products, according to NCA. C-stores should take advantage of the marketing and merchandising support offered by candy distributors and manufacturers to promote new products, but many don’t.
“Convenience stores are the last channel to get new products onto the shelf,” Elleck said. “If they can speed up that process, they’d realize larger confection sales. That’s their biggest Achilles’ heel: getting that new product onto their shelf.”
Tedeschi Food Shops of Rockland, Mass., plans for new candy products by working with candy distributors to set an annual schedule of special events and marketing campaigns.
“Candy manufacturers are always introducing new items and putting a lot of marketing behind it,” said Dan Powers, the candy category manager for Tedeschi. “It’s important for us to make sure we get these new items out for sale in a timely manner. New items are definitely a driver of the category.”
• Merchandise around special events. Whether promoting a traditional holiday or a new movie release, candy lends itself to special event promotions. C-stores typically do not promote candy around the holidays as much as other channels, specifically drug stores. However, the big four candy holidays (Halloween, Christmas, Easter and Valentine’s Day) shouldn’t be dismissed, and candy promotions designed around other annual events (Independence Day, back to school, tax day) can boost sales during slower times of the year.
Tedeschi Food Shops times candy promotions with movie releases that have candy tie-ins. It stocks themed candy in a timely fashion, sets up floor displays and point-of-sale (POS) material, and often offers promotional pricing. “People see the marketing that’s going on and see the display when they come to our store. It just clicks,” Powers said.
• Position displays for impulse sales. Candy is an impulse sale, so position displays in high-traffic areas of the store. Tedeschi, like many c-store chains, positions a candy, gum and mint set at the checkout area. Depending on the store ‘s size, the check out display ranges from 12-18 feet. Tedeschi also merchandises a set of candy, primarily its Tedeschi Select private label candies and traditional core brands in larger sizes, in the aisle that leads shoppers to the check out. “We want to put it in the most impulsive area we can,” Powers said.
Positioning candy near the cold vault is another target area, according to “Convenience, Confections & Profit,” a joint study released by NCA, the National Association of Convenience Stores (NACS) and the American Wholesale Marketers Association. Since the cold vault is typically a primary destination category for consumers entering c-stores, candy should be merchandised in the aisle that is most often walked on the way to the cold vault. Hot spots can differ store to store, but category managers study customer traffic patterns and merchandise candy for maximum impulse sales.
While candy sales remain stable in the down economy, consumers are seeking more bang for their buck within the category. Larger portion sizes and value packs are selling strong. Other trends include unexpected flavor profiles and candy with added, healthful ingredients.
Manufacturers are creating candies with funky flavor combinations such as watermelon-apple and unusual ingredients like lemongrass and sea salt. Even health-conscious consumers can find a match with gummy candies fortified with vitamin C or chocolate bars with added super fruits. “The outlook for candy is very positive,” Switzer said. “Candy is a high profit, high volume category that will continue to see solid sales growth.”