Novelties
September/October 2002

Sweet Inspirations

C

hildren can be a bonus for the smart C-Store owner. Chances are they will head into the store with their parent. Chances are they will leave with a special treat - if they're properly catered for. Ö

Without exception, the experts suggest novelty confectionery is a winner. While the cynic might say 'of course they do', the truth is that it's not only the confectionery maker who'll benefit from the sale of their products, it's the retailer too.

Margins on most products would encourage the average retailer to keep a selection in stock. However, it's wise to remember that children can be fickle. The smart operator needs to keep a close eye on the new trends as well as the old favourites and make sure that the designated area is always full of a combination of stock and not empty boxes.

"Our refreshment range of Life Savers offers a very good margin to retailers and industry data shows that confectionery in general delivers the fourth highest Gross Profit percentage in convenience stores," says Martin Brown, Marketing Manager - Confectionery, for Nestle.

"Retailers should stock the full range of Wonka products so they have the variety and choice that kids demand from confectionery novelties. MilkyBar and Smarties allow parents to buy something on the way home, and our Killer Pythons have always been a favourite for kids," Mr Brown says.

As Group Brand Manager for The Wrigley Company, Damien Timmins is well aware of how attractive his company's products can be, for the customer and for the retailer. The company's products include Extra, PK, Eclipse, Airwaves, Juicy Fruit, X.Cite and Hubba Bubba.

"There's simply no argument that gum is an impulse buy and it's important to stock the market leader. Australians are very brand-loyal and Extra has a very high percentage of the market and that's indicative of consumer preference.

"There can be a tendency for retailers to stock several types of confectionery but that's not really good in terms of return. It's better to go with the market leader for guaranteed returns - and naturally it makes sense to stock chewing gum near the checkout.

"The non-grocery channels are almost half of our volume with retail margins of around 30-35 per cent. Our products are simple no-nonsense impulse buys that move fast and are worth keeping in stock," Mr Timmins says.

"Route is now about 25 per cent of our business. Two years ago we were doing very little with the sector. Now we're servicing 100 wholesalers around the country," says Mike Wolper, director of Mike and Jack, an import company specialising in children's novelty confectionery products such as Bubble Tape, licensed jelly pops such as The Simpsons and Disney, and Mr Mallow.

"The biggest problem, for us, is that the reps have a huge range to offer, way above what you might consider the 'staple' products. But the market can grow, will grow, as we introduce new products.

Potential for Growth
"The margins are from 25-40 per cent, GP, so that can make the products an attractive proposition, but it's worth thinking about your price points. Two dollars would be the maximum price but very few people would want the trouble of anything under 20 cents. However it is important to have a good range and if you do, the kids will remember and drive the purchase."

Nestle's Martin Brown agrees that there's potential growth in the sector. "The route market does have good potential for growth in confectionery, particularly with kids' novelties. We certainly see a significant opportunity for the kids' market within convenience stores.

"We're seeing a decline in terms of the number of traditional-style route stores such as milk bars and corner stores which historically have been the heartland of kids' confectionery. This is translating into a shift in business to convenience stores."

Aiming at a wider market, Wrigley's Mr Timmins agrees there is potential to be had, suggesting that the whole market grew around 25 per cent last year in terms of the category, making it second to energy/sports drinks.

"The sugar-free segment has been growing strongly for the last couple of years, and from our perspective there's also the fact that gum now has a dental positioning. It is good for your teeth to chew gum because it stimulates saliva which is a natural deterrent to plaque and tooth decay.

"Our Extra was a sponsor of National Dental Awareness month in August this year. There have been studies done around the world that show chewing gum helps clean and protect your teeth after eating.

"It also relieves boredom and stress, so smokers who are trying to give up will use it and there seems to be more of them so potentially more customers for these types of products," Mr Timmins says.

According to Ferrero Australia spokesman Alex Terrone, whose company produces the evergreen Kinder Surprise, sales of the chocolate-plus-novelty segment have slowed for the past few years across all channels.

He says Australia has reflected the same trend as other European markets where the brand is much larger. However, although the product still has a popular following year-round, there are some periods when it's vital to ensure you're well stocked.

"The key selling occasions for our product are primarily Easter, due to the obvious correlation of its egg design, and at Christmas as a stocking filler. The other key time in the Kinder Surprise calendar is the new toy launch every January.

"This always creates excitement and a lift in sales because there are so many avid Kinder Surprise toy collectors who look forward to this every year. Keeping these times in mind is crucial in terms of maximising sales and returns on the product," Mr Terrone says.

Allocating Space
An important consideration in the sales of any children's novelty product is where it is situated in the store and exactly how much space you're prepared to give them.

"The products, the range and the merchandise needs to reflect the level of traffic flow into the store," says Nestle's Mr Brown.

"For stores near schools or areas which would have more children's traffic, a larger range is needed and must reflect what children will buy for themselves, something like our Wonka range. And you need a 'destination' which will draw kids to that area.

"In contrast, mainstream convenience stores with little visitation by children are not targeting kids but rather the adults to make a purchase on the children's behalf. In these stores, retailers need brands that are perceived by adults to be acceptable for children, such as Smarties and MilkyBar.

"These sort of items need to be located in high traffic areas so the adults are reminded to buy them," Mr Brown says.

Bearing in mind its positioning as a niche product, Ferrero's Mr Terrone says his company also believes in highlighting the purchase possibility. "To capitalise on the occasions when Kinder Surprise has its greatest appeal, we have developed compact floor displays for the route trade which create impact and presence as well as providing increased stock holding capacity.

"Kinder Surprise's communication strategy has always been about speaking to both parents and children about enjoying a tasty treat, the quality of the milk chocolate and the excitement of a surprise toy. "For this reason, outside of those prime periods, the key to maximising impulse buys is to display the carton on the counter where the product is exposed to both children and adults," Mr Terrone says.

Mike and Jack's Mike Wolper says there's really no secret to maximising the return on children's products: keep them in stock. "Wherever our Bubble Tape is sold, it is always selling well but I keep seeing empty containers. I can spend a heap of money on advertising on TV and in magazines but the product just has to be out there, otherwise there's simply no point. The good items have to be in stock, every day.

"We have various types of stands and shelves available, depending on what people need for their particular store, and the point-of-sale material to go with them. The best advice is to talk to your local wholesaler, find out about the really popular lines and make sure you're never without them. As long as you have things like Bubble Tape, they will constantly walk off the shelves - which is exactly what you want!"

While there's no doubt most of us would have a fair idea of what could be called the 'classics', it's not enough to simply stock those lines. A little bit of lateral thinking, daring to try something different, is important too.

"We are very active in bringing out new products and new flavours," says Wrigley's Mr Timmins. "We have a new flavour in Hubba Bubba coming out in September, and that's Sour Apple, and sour is very big with kids at the moment. We work very hard in terms of monitoring consumer trends and behaviour, and making sure that we are providing an offering to the retailer which will help take advantage of that."

"Kids love and expect new and exciting products that provide them with 'eating challenges'," says Nestle's Mr Brown. "Variety in confectionery is something that Wonka is renowned for providing. It's known and trusted due to the heritage behind the movie. Wonka is a brand that actively delivers to the demands for variety and excitement in kids' novelty confectionery.

"The Wonka tag line 'What will he think of next?' is extremely relevant to children who are always eager to trial anything new from Wonka, indeed anything new," Mr Brown says.