Lifting the (chocolate) bar

Everyone loves chocolate and, in convenience, chocolate means chocolate bars. Some hunger for a king size bar and scoff the lot; others savour the flavour and treat it as a treat. This year, more of your customers will find what they are looking for with brand extensions and new formats for old favourites and the arrival of the new premium bars.

According to the 2004 ACNielsen Convenience Report, bars and other impulse chocolate items account for nearly 70% of chocolate sales in tier one and two C-Stores. That's a lot. Despite being a stalwart of the C-Store inventory, chocolate bar sales are still growing: nearly 4% in the year to March 2004.

Source: Australian Convenience Store News ACNielsen Report 2004

The segment is shared neatly between Cadbury (50%), Masterfoods (30%) and Nestle (20%). Not only does Cadbury enjoy half the share of value in the segment, its key brands - Cherry Ripe, Picnic, Turkish Delight, Twirl, Crunchie and Flake - account for eight of the top 18 bars (10 out of 20, including multi-packs). Of these, four are king size bars. In fact, eight of the top 18 are king size variants. When Australian Convenience Store News investigated the chocolate bar segment in early 2003, the (then) new king size variants were the trend. It seems now they are here to stay.

"King size bars tend to be mainly purchased by males and are still strong in petrol and convenience," says Troy McKinna, Category Manager, Masterfoods.

The chocolate bar is the ultimate impulse purchase in the convenience channel, and suppliers are always looking for new ways to be noticed. Brand extensions and promotional activities are still the most successful strategies for the major suppliers. Mars is the key brand in the Masterfoods range, and the recent launch of Mars Lava was accompanied by a major promotion.

"With bars, range extension is still one of the best ways to bring attention to the product and the category," says Troy McKinna. "People like to try something new, and different flavours appeal to different consumers."

Michele Phillips, Marketing Manager Chocolate with Nestlé, agrees. "Range extension is still an important driver," says Ms Phillips. "Mint Rush Kit Kat was launched in February this year, and you are likely to see continued innovation around core brands."

To keep the range manageable for supplier and retailer, new variants tend to replace other variants. For example, Mint Rush replaced White in the 4-finger Kit Kat bar. There is still a White Chunky bar though, because a white chocolate is also here to stay. When Mars Lava was launched, Mars Midnight was withdrawn for the same reason: not to overload the category.

New variants tend to be accompanied by big launches, and sales tend to peak in the first six months when TV advertising is creating the biggest impact. Mars Lava was launched earlier this year with the "Earth" campaign including extensive TV advertising and other promotional activities. To take advantage of this "free" marketing, you need to be selling Mars Lava in 2004.

Brand promotions across the variants provide similar opportunities.

"One of the biggest drivers in the bar market is promotional activity," says Michelle Phillips.

Nestlé is promoting its key brand, Kit Kat, in August, September and October of this year with the Kit Kat Kash promotion. The promotion will feature across most of the Kit Kat range through special wrappers that reveal a winning message and cash for lucky customers. Why cash?

"Chocolate bars overall and Kit Kat in particular have broad appeal," says Michelle Phillips. "The same is true for cash. People, particularly young people, like winning cash which gives them the freedom to spend as they choose."

As with promotion of new variants, it is important to take advantage of the brand promotions when they are at their peak.

"Sales of bars during a consumer promotion can double with the right display and stock weight in store," says Michelle Phillips.

Ms Phillips recommends an off-location display along the queue line as well as an inner on the counter and one on the chocolate bar shelf. With summer coming along, don't forget the fridge. Not only do Nestlé provide special fridge units, there are POS materials designed especially for the channel.

Similarly, Masterfoods supplies posters and wobblers, dump bins and towers for the entrance and the queue, and off-location display, including fridge units, to make sure all the traffic takes notice.

Some route and convenience retailers have the flexibility to experiment with other promotional strategies. The aim is to get the customer to take notice, and let impulse do the rest. Options include bundling two or three bars together at a special price.

"Even a small store can be successful with a multi-purchase promotion, especially during suppliers' promotions," says Michelle Phillips. "The retailer can use a deal to sell two or three bars at a time, rather than just one. This will deliver increased sales and profit."

"Small stores can also learn from the special deals suppliers are making with the networks," says Troy McKinna. "For example, when the console operators at Coles Express outlets were asking every customer if they would like a Mars bar, sales lifted significantly."

Changing shape

When is a bar not a bar in the bar market? From the consumer's perspective, a defining characteristic of a chocolate bar is the idea of "single consumption". In effect, chocolate bars compete with singles such as M&Ms and Maltesers, even though these products are not usually included in the chocolate category. In line with brand extension strategies, Cadbury introduced Chocettes and Nestlé introduced Bites. These are 60"75 gram bags of bite"sized pieces of chocolate bars. The aim is to widen the market.

"Bites are perfect products for eating over a longer time frame," says Michelle Phillips. "The launches of new Bites such as Nestl&e7-Eleven's Mint Slice and Violet Crumble were supported with TV advertising."

Lifting the bar

Until this year the old favourites had the category pretty much to themselves tending to concentrate on the core chocolate bar demographic which is biased towards younger males. But, nearly everybody likes chocolate, and some (males and females) want to eat lighter chocolate bars or smaller pieces less frequently. The international premium chocolate makers - Ferrero, Guylian and Lindt - are looking to fill these niches. This year, Lindt introduced two new bars - Nocciolatte and Wafer - and Ferrero introduced Bueno.

Bueno has a smooth and creamy hazelnut filling in a light crispy wafer covered in milk. The two fingers are wrapped individually which suits the premium chocolate buyer because you don't have to eat it all at once.

Nocciolatte is 3 whole hazelnuts in cocoa cream with dark then milk chocolate covers, and Wafer is, you guessed it, a wafer, with cocoa cream and milk chocolate cover. At 40g and 35 g respectively, they weigh in at the light end of the medium bar size range.

"Their appeal is their size and quality," says Roland zur Oven"Krockhaus, Group Product Manager, Lindt Australia. "Each is a small indulgence to spoil yourself; to enjoy on your own to relax. It is not for big hungry blokes. Overall, the Lindt demographic is more female and over 25, but we expect the bars to also appeal to younger females."

Bueno's target market is broader, aiming to be in the top five overall in chocolate bar sales.

Although new to Australia, the premium bars are well established in overseas markets. When Ferrero Australia was looking for ways to grow its portfolio in Australia, the chocolate bar market with particular emphasis on the convenience channel was the logical choice.

"Bueno has been in Europe for 16 years," says Nick Johnson, GM Impulse, Ferrero Australia. "It is Ferrero's third biggest selling brand after Rocher and Nutella, and Bueno is the top selling chocolate bar in France and Italy."

That did not mean they took this market for granted. Bueno was trialled in Queensland for two years before it was launched nationally. Lindt is introducing its bars through the route channel first.

It is difficult to establish and sustain a new product in this category. The premium chocolate bar suppliers are relying on their reputation as makers of quality chocolate. Ferrero Rocher is very well"known and Lindt enjoys 80% recognition, based on the Lindor balls products. Neither needs to build an image. They do have to let the consumer know about their new products and they need retailers to put their products on their shelves. Ferrero Australia is spending $2 million on TV advertising for Bueno from April 2004 to February 2005.

"With the launch of Bueno, we did a roadshow for wholesalers and major accounts," says Nick Johnson. "We want to communicate our long"term strategy. We only introduce products that we believe have a long"term future and we are committed to these products."

Both suppliers can provide counter and slim-line displays designed for the channel, as well as the usual POS material.

Sales of Nocciolatti and Wafer are double the level expected, and Lindt is considering introducing more bar lines in the future. Bueno has managed a staggering 10% market share in the major C-Stores according to ACNielsen data for June and July, and was the top selling bar in 7-Eleven and Coles Express stores. This can be partly attributed to the major convenience chains creating premium chocolate bar sections in their stores. The major suppliers are also tapping into this market with variants such as Cadbury's Luxury Flake.

Not too high

The new premium bars are relatively smaller, slightly higher priced, and broaden the chocolate bar market's appeal. However, they will not be attractive to the customer if they are priced too high. They must remain competitive. Recommended retail prices are at the top end of the bar price range but no more than slightly above other medium bars.

The same is true for the old favourites as well.

"One of the big issues this year is the price of chocolate bars in the convenience channel," says Troy McKinna. "They are getting too expensive relative to the grocery channel, with up to a 50% premium."

While this is great for profitability, customers will switch channel if they think they are being ripped off. They will still have their chocolate but you won't have the cream.