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Confectionery
September/October 2003

Lolly from Lollies

Category	Sugar Confectionery
Market Breakup All Route	38.1%
All Grocery	57.9%
Major Convenience Stores	4%

Your customer are sweet-tooths, promotions work like a treat and there are more and more packs to display. The only place to put them is on or near the counter, so the challenge is to ensure the best possible return (aka lolly) from your valuable retail space.

Suckers for sweets
Sugar confectionery comes in at number 8 in the top ten categories, according to the ACNielsen C*Track data for MAT March 2003. That means lollies account for $50m per year or 2.5% of total sales in 1,850 major franchised convenience stores and major franchised service stations (tier 1 & tier 2). Although over half these stores are branded Shell or Caltex, the data gives us some insight into the sweet tooth types among your customers.

The most important segment is mints, followed by jellies and gums.

Segment Shares
Mints	24.0%
Jelly/Gum	23.4%
Chocolate	17.0%
Toffee/Nougat/Caramel	10.2%
Medicated	9.3%
Hard Candy	7.0%
Lollipops	4.0%
Other Sugar	5.1%

The top three manufacturers account for over 75% of sales.

Manufacturer Shares
Nestle	34.7%
Master Foods	28.6%
Stuart Alexander	13.4%
Cadbury	9.5%
Ferrero	4.1%
Other	9.7%

Even though the ACNielsen data includes sugar-free products, this is really a separate category. Sugar-free products are functional, appealing to concerns about fresh breath, diet and dental health. Sugar sweets are just the opposite - indulgent and bought for a treat. Moreover, sugar products account for 85% of pocket pack sales.

Promotions - if it works, keep doing it
The key brands are maintained over time with significant spending on advertising and marketing. Shares also vary month to month, driven by the latest promotions. The recent Mentos promotion through all the major oil company networks over June and July is a good example of this. A two for $2 in-store offer accompanied on-pack instant wins. The major prizes were an MG car and a share in $40,000 cash.

"Cars are a popular prize," says Karen Sterling-Levis, brand manager Mentos, with Stuart Alexander, "and last year's competition for a MR2 Spyder received over 168,000 entries."

"Promotions are important in the category. We have found the combination of media, on-pack promotions and two for $2 offers, works like magic."

In 2002, only Shell outlets participated and Mentos' market share of pocket packs peaked at 56% in Shell stores; 34% overall. This year with all networks involved and the added incentive of 10 fly buy points at Shell, share in C-Stores peaked at 49%, and in Shell stores, at a staggering 74%.

Master Foods attribute Starburst's success to the focused promotional activity around a music theme that has taken Starburst's share of petrol and convenience sugar confectionery sales from 2% in 1999 to 15% in 2003. John Tripodi, senior brand manager with Master Foods, argues that as the category becomes more commoditised, only those brands that can establish a brand personality will rise above the clutter and stay there.

"TV advertising is not enough any more," says John Tripodi. "You need to be outdoors, on radio, on the internet and in-store because consumers are no longer sitting in front of the TV. In the third quarter of 2002, we launched a song, "Get your juices going", that went into the Australian music charts. Not only did it do well in the charts, it won advertising awards. More importantly it lifted sales to a high level that has been sustained."

Master Foods will be staying with the music as the core component of this year's promotion when it launches Starburst Sucks lollipops supported by a multi-million dollar media campaign.

What's new Ö and varied?
To make the best of the brand premium, manufacturers are expanding their core ranges using different pack sizes and different flavours.

"Manufacturers are making the most of their successful brands and introducing variants and extensions," says Karen Sterling-Levis, "because it generates a better return on the advertising spend than a new product."

Historically the most popular pack sizes in the convenience and route channels have been pocket packs, rolls, trays and stick packs. However, a key trend is the growing importance of medium-sized (approximately 200g) bags. This is particularly so in the top brands. Everybody recognises bags of Allens lollies. Now, other key brands are taking advantage of the brand premium and making the smaller bags available to the channel. As recently as June this year, Mentos introduced a range of 200g bags in both grocery and convenience. In locations serving tourists and other travelers, the Cavendish & Harvey tins - that fit neatly in a glove box, sell well. For customers looking for a lower-priced alternative, the Beacon range of hang bags and the Mr Mallow marshmallows range are options. At the other end of the spectrum, premium Jelly Belly jelly beans in the 50g pocket packs that sell for just under $2 are selling in Mobil Quix, 7-Eleven and Caltex outlets.

Despite the dominance of a few brands, the category is fragmented into a large number of stock control units (SKUs), and that number is increasing.

Mentos' core product range is 4-roll packs, but it also brings out limited edition flavours - this year it's Strawberry. Mentos has also relaunching Cool Chews with a new flavour, Lime Mint, and in new packaging.

"Adding SKUs to the range does expand total sales," says Karen Sterling-Levis, "but not as effectively in the short-term as promotions. The Cool Chews launch includes this year's on-pack promotion, supported by $0.5m in radio advertising."

On a grander scale, Nestle is relaunching its flagship Allen's range over the second half of this year. The relaunch will include two new TV commercials costing approximately $5m, new designs, new point-of-sale material and major sponsorship of Australian Idol. The convenience channel has not been forgotten, with specific promotional material around the question: "Do you love Allen's lollies lots?".

What's new ... and different?
This time last year, who'd have thought Ginger Bears were on the way. Based on the success of test marketing in Queensland through the route channel, Buderim Ginger will be distributing Ginger Bears nationally through late 2003 and early 2004. Even though Buderim Ginger is new to the sugar confectionery category, it is also leveraging off an established brand.

"Given the popularity of ginger and our success in ginger products for cooking, we decided to produce a retail product with broader appeal," says Craig Todd, retail marketing manager with Buderim Ginger. "Ginger is eaten every day in stir-fries and ginger beer, and chocolate gingers account for 17% of domestic ginger consumption. ACNielsen research found 48% of adults love ginger, and Ginger Bears taste like ginger beer."

Unlike other sweets, Ginger Bears are marketed as promoting health benefits to adults.

"Ginger has the added appeal of being healthy and beneficial in the management of travel sickness, therefore it should do well in service stations," adds Craig Todd. "Rather than supermarkets we are targeting the route channel - pharmacies, milk bars, petrol stations, news agencies and the like."

Marketing - where do you put them
Sugar confectionery is an impulse purchase. This message comes out loud and clear from suppliers. They all want to be on your counter and alongside the high-traffic footways in your store. It's not only sugar confectionery making claim to these spaces. Chocolate needs to be there too, and chocolate bar suppliers are pursuing the same brand extension strategy.

"This year in confectionery, the focus is on maximizing sales of existing lines rather than introducing new products," says John Tripodi, "but the range of variants is a bit out of control."

There are only so many variants that can be sustained as it reaches the point where there is just no more space on the shelf. You also need to get the best return from the valuable counter space that is increasingly being wooed by other impulse products such as breath freshening strips and body refreshers.

So, put the pressure on suppliers. They know the value of premium locations.

"Counter space is limited and valuable," says Karen Sterling-Levis, "so choose the leading brands that get the return and put them under their nose where they sell - particularly the 2 for $2."

"Retailers should ask what is the return from the space allocation," says John Tripodi.

"Although the overall return per kilo is lower for sugar than for chocolate, gross margin is only part of the package. Choose products that are advertised. Consumers are already aware of them before they come into the store. Look for supplier support with promotions and point-of-sale material."

Nestle agrees: "Call-to-action point-of-sale materials help catch the consumers' attention and encourage them to purchase confectionery."

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