Planograms adapt to a changing consumer sweet tooth

Drug Store News, June 22, 1998

Article contributed by Gladson and Associates based in Lisle, Ill.

Candy facts

* The United States is the largest chocolate market in the world and ranks 10th in per-capita consumption. On average, each American ate 11.5 pounds of chocolate in 1995, and, in that year, the approximate manufacturer value of chocolate was $7.2 billion. The retail chocolate industry in the United States is worth $13 billion per year.

* Much of the rise in confectionery sales is driven by launches of

low-and no-fat products.

* Nonchocolate sales are growing faster than chocolate sales. This is thanks in large part to the popularity of licorice and gummy products.

* There's also been a jolt in gum and mint flavors targeted to aging baby boomers. The American Diabetes Association reports consumers 50 and older tend to start losing their sense of taste and smell, and these people may prefer stronger flavors.

* Sugar-free products appeal to consumers with diabetes and hypoglycemia-this is a base of approximately 20 million consumers.

Source: Chocolate Manufacturers Association of America

Shifts in consumer consumption of candy are dictating the way retailers scrutinize their mix and how they merchandise candy. Now, more than ever, the implementation of category management principles is needed to present candy planograms that represent consumer preferences.

According to Chicago-based Information Resources Inc., the biggest deviation has been the 6.1 percent decline in unit sales of nonseasonal chocolates in drug stores. Nonchocolate items are also down in drug stores, but only by 2.5 percent. "There's been a switch from chocolates to nonchocolates, and retailers need to make sure they are carrying the right mix of candy SKUs," said Sharon Madziarek, senior analyst for Gladson and Associates in Lisle, Ill.

The trend toward nonchocolate entries was illustrated during last year's All Candy Expo in Chicago, with excitement being generated by nonchocolate launches, such as Twislett real fruit licorice from American Licorice Co. and Brach & Brock's Batman and Robin Fruit Snacks.

Retailers can't count chocolate out yet, however. Chocolate could enjoy a resurgence thanks to a campaign called "Choose Chocolate," sponsored by more than 40 manufacturers of boxed chocolates.

The industry public relations campaign--similar to the milk moustache efforts from the Fluid Milk Council--includes magazine ads, media tours, promotions, local radio advertising and point-of-purchase shelf tags aimed at sweetening chocolate sales. Until the effort kicks in, however, retailers need to keep a close watch on chocolate sales movement, especially during the summer months.

On a positive note for drug stores is the emergence of healthier candy, including those items getting an infusion of vitamins. This trend dovetails with the overall image of pharmacies. Examples include Ragold, which just added vitamin C to its Juiceful candy. Honey Acres Co. has Honey Gummys, which are all natural and fat-free, and Brach & Brock is unveiling ReaLEMON Lemon Drops.

Another trend Madziarek has observed that can also boost drug store volume is the emergence of seasonal events. Although candy has always been driven by seasons, many manufacturers shied away from special holiday packaging. Their fear was that if the seasonal candy didn't sell, it would be returned to the manufacturer.

That's changing, Madziarek said, because consumers are embracing special candy for holidays, such as black and orange M&Ms or Hershey's Kisses. These efforts have paid off.

Halloween is now the biggest candy-selling holiday season, with sales of $900 million in 1996, up 8 percent over 1995, according to the Chocolate Manufacturers Association of America. Household participation is high, with 78 percent of households saying they gave out trick-or-treat candies last year.

Madziarek recommended retailers start early and plan for seasonal events. Displays should be constructed early to get shoppers in the mood. "Make sure candy is still in stock when the holiday arrives, though, because 75 percent of purchases are made within two days of the holiday," Madziarek added. Merchandising seasonal candy with other seasonal merchandise can also inspire multiple sales.

Drug store retailers have also noticed a trend of consumers moving toward better chocolates and candies. Russell Stover has always been a big boxed brand for drug chains, and it is being joined by companies such as Perugina, Barricini and Swissbar, which are developing mass market offerings.

All of these consumer changes in candy shopping patterns are driving new merchandising approaches.

Category management is emerging as a very important development in the candy industry. A study conducted by the Center for Retail Management at Northwestern University's Kellogg Graduate School of Management uncovered that retailers that apply category management to candy boost their profit. Osco Drug has seen sales soar as much as 80 percent following category management implementation. That's because category management can result in more consumer-friendly planograms. One way to focus on customer satisfaction, said Madziarek, is to zero in on the impulse nature of the category.