Candy buyers search for big values - Food Merchandising

Discount Store News, March 7, 1994 by Shari Weiss

Although Warehouse Clus and Other Formats Are Asking for Bigger Packages, It's Better Buys That Shoppers Are Really Going After

Is bigger better in the Value Decade? The growth and success of the warehouse club class of trade is one sign that consumers equate increased size with getting more for their money.

So the assumption is that bigger packaging and larger pack sizes are in demand, as well. How true is this conclusion, expecially when we're looking for trends in the candy category?

Candy manufacturers agree that warehouse clubs have been and will be the "talk of the trade" for years to come. With 28 million club memberships already sold, and consolidations building up the strongest players, the Sam's Clubs and Price/Costcos of the world will be calling the shots for a while. With their marketing philosophy built on volume and cost-plus pricing, these outlets must continually seek ways to trim more expenses for their suppliers, and packaging is one very effective way.

"If you eliminate as much packaging material as you can, then the manufacturer can deliver the greatest value," explained one confectionery supplier. "The clubs haven't been asking for fancier packs, just plain bags with more product. Price point is important." he said.

Capitalizing on the impulse nature of candy, the clubs stock the category up front in their stores, and the amount of space devoted to these snack products has increased. But this doesn't mean that candy is only for the consumer members at clubs. Rather the opposite is true, according to some industry suppliers, who point out that only 30% of their candy sales are to consumers, while 70% go to those who resell the products.

"The clubs are a fact of life causing concern on a number of fronts," said one candy broker. "On the one hand, the traditional candy and tobacco wholesaler is losing his retail customers who can buy products cheaper at the club than from him, and on the other are the retailers whose customers are stocking up with three- and four-week supplies instead of coming into smaller stores on a weekly basis."

Warehouse clubs don't really know who their customers are, according to many product suppliers. They have no way of knowing for certain if the purchase made by a business member is for resale or personal use. Their main concern is increasing the register ring.

"They like to say that the average ring is $600 to $800, but that's just not the case," said one manufacturer. "They are chasing after the business customer by instituting delivery services and requesting larger pack sizes, but they keep on attracting the customer off the street. They've shown us that the way to succeed is to stay in the gray area: they haven't made black and white choices."

Another supplier, who feels that a lot of people are over-reacting to the clubs, says that "companies can not be design houses for clubs." Several years ago, many companies did design the 172-bucket, and tubs of candies for the clubs' consumer customers, but not a lot of special packaging requests are being made now.

Many of the "bigger" pack requests are coming from drug groups, and they're not asking for much, just a couple more ounces. Drugstores have always been good merchandisers of candy. Candy gets "shopped" at drugstores. That's why chains such as Walgreens want manufacturers to increase pack size without upping the price. Walgreens likes "value packaging." If a manufacturer's normal size bag is 10-oz., the drug chain wants to offer a 12-oz. package for the price of a 10-oz.

The biggest trend in candy packaging is probably the growth in the popularity of hanging bags.

"People think candy displayed on peg boards is a whole lot more attractive than bags laying flat on shelves," said one supplier. "Branded items are moving up a price point in hanging bags. But the two-for-$1 non-chocolate, non-branded segment is particularly fast-moving," he said. "We are seeing the same volume with half the distribution as the name brand selections at higher prices with full distribution.

Although good sellers, the two-for-$1 price point isn't very popular with retailers, who look for higher margins than are available on these value packs. Those retailers will be happy to note that many suppliers see future growth in lines advertising two for $3.

So is bigger really better in the candy line?

The answer lies in perception, not size. If the buyer thinks he's getting a deal, he'll buy. But size really has little to do with the final purchase decision.