Australian Convenience Store News - Confectionery - Sugar Free

Sugar free - sweet profit

By Geoff Coy, Certified Practising Accountant

In the sugar-free confectionery category, products attract premium prices and don't take up much space on the counter. With many innovative products now on the market, it is worth giving them a try.

Cadbury Schweppes' launch of its Trebor 24-7 range of gums and mints in March typifies the trend in sugar-free confectionery. Targeting the young demographic, new products are expanding the customer base by offering functional and trendy products in innovative packaging.

"The product was developed in response to greater consumer demand for the functional potential of products. This is most prevalent in the chewing gum market which has broadened its consumer base from child to adult with the development of "functional" mouth freshening, teeth whitening type products. The mint sector has also benefited from this trend with new and stronger flavours to appeal to a wider audience." Tim Stanford, Marketing Director, Cadbury Confectionery.

"With 24-7, we are targeting younger consumers, particularly 18-24 year old women who value style and convenience. The range is packaged in a slick and fashionable dispenser that fits neatly in the palm of a hand," added Tim Stanford.

A Growth Category
Manufacturers and suppliers all agree that Australia lags the world in this category. Internationally, growth in sugar-free confectionery is double-digit.

"International trends such as the power mints segment in the UK are based on intense flavours as relief from spicy foods and strong coffee, and new alternatives to cigarettes, gum, and other refreshment confectionery. They can be kept in a pocket and offered around socially." Martin Brown, Marketing Manager, Nestle Confectionery.

Nationally, sales of sugar-free confectionery are growing three times faster than sugar-based. To date, most of the action has been in the supermarkets, where half the pocket packs and rolls units are sugar-free. National grocery volume of gum sales increased 20% in 4 years, sugar-free increased 30%. Four of the top 10 rolls and pocket packs are sugar-free.

"Ferndale specializes in sugar-free confectionery. Our product range includes sugar-free gum - Jila, Glean (dental brand) and Acton (vapour release), Jols pastilles in mandarine, strawberry, and blackcurrant flavours, and Licorette. Total sales of Ferndale products have grown 20-30% pa in recent years," added Bruce Edwards.

"Sales volume of sugar-free gum has grown five-fold since 1990. This has mainly been driven by the national grocery segment, but also the convenience and route trade in recent years," said Jeff Dhu, Sales and Marketing Director for The Wrigley Co.

Gum Set The Pace
Over 75% of gum sales are "sugar-free" products, in both grocery and C-Stores. In grocery the market is shared between Ferndale with 19% and Wrigley, 81%. "The entry of Ferndale as a second player has resulted in an increase in new product activity, advertising and promotional activity, resulting in the chewing gum segment delivering 20%+ growth each year," said Bruce Edwards.

In C-stores, Wrigley's leads the category, with the three top product groups.

Eight of the top 10 packs are sugar-free, and all are Wrigley products.

"Since 1987, all new product launches have been sugar-free. We attribute its success to the research and development effort that resulted in using a blend of sweeteners and new technology to extend and smooth flavour duration. People progress from bubblegum to "adult" products because everyone likes to chew gum. Another important consumer group is people giving up smoking", said Jeff Dhu, explaining Extra's success.

"Taste is the main driver - if it does not taste good, consumers will not buy. Sugar-free is an extra benefit for consumers that are conscious of what they eat. New products have focused on functionality - Extra (dental), Extra white (teeth cleaning), and airwaves (vapour release). Wrigley has driven gum to be the fastest growing category in confectionery. Our latest new product, X-cite, is the next generation." Jeff Dhu.

X-cite moves Wrigley out of the strict "gum" category with a hybrid product - a gum with a crunchy shell in a mint shape. The global product launch, simultaneously in the UK, Australia and New Zealand (followed by the rest of the world), is intended to boost the gum business with premium-priced innovative products. It is intended to deliver value and profit for retailers with the Wrigley range. In a move away from functionality, X-cite is being marketed as 'a powerfully exhilarating experience for people who love extreme sensations in their everyday life'.

The product with its new dispenser-style packaging is aimed at the 18-24 age-group, and the target mindset is young, independent, and experimental. The X-cite campaign is supported by a significant marketing spend through TV, radio, cinema, sampling, outdoor, public relations, competitions, promotions, street press and the internet.

Mints Are Following
Of the top 10 packs of mints, two are now sugar-free, and 16% of sales of mints in C-Stores are "sugar-free" products. The market is shared by various packs of Smint and Zones. The Zones 20g Fresh Mint pack is the sugar-free market leader in C-Stores with nearly 7% market share.

"Smint was released globally by the Chupa Chup company in 1994, following four years and $3 million of research and development. Retailers were initially apprehensive of sugar-free products but the premium positioning has worked and Smint has grown this category. We are already the number one sugar-free mint in C-Stores, and our target is to become the number one mini-mint in the world by 2004." Felix Wong, General Manager Operations, Network Foods.

Smint has enjoyed strong and balanced growth in both grocery and route channels (March quarter 2002 up 18% on 2001). The product is aimed at younger adults who are economically independent, image-conscious, and willing to pay a premium price. Smint buyers actively seek sugar-free, low-calorie products, with additional benefits such as "tooth-friendliness", but the main criteria is taste. Flavours are fresh mint, x-tra fresh peppermint (with green tea extract to help neutralize bad breath), lemon and peach (both with added vitamins). A new flavour, wild berry, will be launched in June 2002.

Packaging is important and part of the image. Smint introduced a new dispenser in January which is in the shape of a pen. The dispenser is popular with young professionals who want to freshen up before a meeting, after dinner, or during social occasions. "It has the same attributes as the classic pack dispenser - stylish, easy to carry, practical, hygienic, and one at a time - but research shows that it is attracting new users to the brand," said Felix Wong.

"Zones, launched in 1997, is an Australian product for the Australian market. It targets mouth freshening and contains Vivazol - a blend of natural plant extracts (parsley oil, mint oil, chlorophyll). Recent research by Colmar Brunton confirms its property of lasting mouth freshness and this will now be shown on packs," said Martin Brown.

Zones is positioned within the market trends - unique dispensers, strong flavours, stylish image, and sugar-free for health. This is maintained in the new Spearmint flavour launched this year. "Spearheading the relaunch of the Zones Mints is the launch of a refreshing new Spearmint Flavour. The product will also change to a smoother disc-shaped sweet with a refreshed pack design and a new television commercial," said Martin Brown. "These initiatives are designed to add real growth to the brand and set it on a course to be consumers' number one choice for mini-mints within the category. Zones Mints already hold a unique position in the market and this is demonstrated by strong results in loyalty measured by BHM Syndicated Studies."

"The route channel is ideal to grow the category - these are premium-priced, impulse products designed for the 18-35 demographic. New displays for convenience stores reflect this." Martin Brown.

The Case For Space
Sugar-free confectionery is premium-priced and comes in small packages, generating high revenue per cubic centimetre.

"This makes a "case for space". We offer single packs of gravity feed with two channels suited to a pole. We have also launched a pre-pack - small shelf unit which is popular with convenience channel and includes four bonus packs," said Martin Brown.

Gum is a high impulse item and the closer it is to the cash register the more sales made," added Jeff Dhu. Quoting AC Nielsen data, Wrigley show profit per 1000 cubic centimetres is about $45, compared to about $20 for candy mints and about $30 for chocolate bars.

"Smint is the highest priced mint in the market, but we have found that consumers are willing to pay for premium products in this category. This year, we are offering convenience retailers a special "Red and Blue" promotion combo pack to introduce the Wild Berry packs and pens. It will contain two outers of mint packs (12s), two outers of wild berry packs (12), one outer of the mint pen dispenser (24s), and one outer of the wild berry pen dispenser (24s). At RRP, total retail value is $120. It will be available to convenience retailers in June and July for around $70." said Felix Wong.

How Far Will the Trend Go?
"Buyers love confectionery and buy for pleasure. They want a sugar-free product due to concern over calories and tooth decay, but they will not sacrifice taste," said Bruce Edwards. "After the recent relaunch of Jols to include 100% natural fruit juice, wholesale sales increased 40%. All of Ferndale's sugar-free products are 'tooth friendly'." Australia lags Europe in 'tooth friendly' branding. In Europe the logo is widely recognized, and it is only placed on products that are otherwise considered to cause tooth decay. Smint and Zones also carry the logo.

"There is scope to replace sugar in other lines, but sugar-free suits functional products such as Soothers. A product has to achieve its primary purpose to be successful, sugar-free is secondary." Martin Brown.

Network Foods also supplies sugar-free Fishermen's Friend lozenges, and is introducing Sweet 'n' Low hard candy in a range of four flavours in hanging bags. "We have carried out a lot of sampling, and the products rate well in terms of taste and value," said Felix Wong, "The brands are well-regarded, and appeal to consumers looking for healthier alternatives."