Keeping it sweet

Sugar confectionery just keeps coming up with the goods

Sugar confectionery is one of those products, those affordable treats, which traditionally withstand tough economic times better than most. And, considering its importance to the bottom line of all convenience and impulse outlets, that really is just as well.

Sugar confectionery is the largest sub-segment of confectionery, accounting for 30% of total confectionery within the national measured market. The segment has seen positive growth nationally and is up 2.7% over the latest year to date. However, the fact that the growth has been slightly slower in convenience (+1.4%) suggests also there is potential for further sugar confectionery growth within the channel.

Total channel split of candy confectionery is 76% through grocery, 14% through route and 10% through convenience. So how can C&I outlets grab a larger slice of the sugar confectionery pie?

As usual, the key to improving sales is to understand the customer. While the heaviest buyers of lolly bags are families with young children, a mix of shoppers from teenagers and young adults to older shoppers enjoy pocket packs and mints.

John Broome, Nestlé's Head of Marketing – Confectionery and Snacks, says while sugar confectionery consumers are the same regardless of channel, they have different needs depending on where they are shopping.

"People will choose between a supermarket and a convenience store based on their shopping mission, location of store, and also their needs," he said. "The primary shopping missions for the convenience channel are fuel, top-up, and distress, so we offer products in this channel to meet that mission and consumer need."

Typically, therefore, in the impulse channels there is a focus on smaller, more portable pack types.

Top five brands in Convenience

The top five brands in sugar confectionery are Allen's, Eclipse, The Natural Confectionery Company, Mentos and Starburst, and these all offer shoppers a mix of formats, lolly bags, mints and pocket packs.

Nestlé, responsible for top brands like Allen's and Lifesavers, believes that having the optimum assortment for your shopper profile is key to success and will maximise the Return on Investment on your fixture.

"Too wide a product assortment creates a 'misery of choice' for shoppers so it's important to maintain a balance between offering variety and making the fixture easy to shop," said Mr Broome. "Signage at the shelf can both aid navigation and highlight feature products, and various types of secondary display units are already available and could be used more systematically and widely to interrupt and engage with the shopper."

Not surprisingly, Cadbury – which owns the Natural Confectionery Company, Pascall and Chupa Chups brands – agrees.

"It is always good to have wider variety in store aisles, as consumers today are very particular about what they want," said Cadbury's Senior Brand manager, Alastair McCausland. "Gondola ends are good places to display promotional activity, and it is recommended to display top selling SKUs so that the gondola, which is typically smaller than section, is not cluttered."

Cadbury says that most shoppers will shop the 'aisle', and the gondola will bring promotions to attention and having the most popular SKUs on the gondola will maximise conversion rates.

"C&I are lucky enough to have large 'register' sections to display confectionery," said Mr McCausland. "We have created a merchandising solution that houses both Chupa Chups and Freddo, ideal for placement on counter, and this point of buying unit has driven a large percentage of the growth we are experiencing across these brands."

Cadbury says this success highlights the importance of ranging the correct SKU's (highly impulsive categories) closest to the point of purchase. It says that, given the growth of sugar confectionery, it would be interesting to see if they play a greater role on registers in the near future.

"It is recommended to ensure that offers are easily accessible and correctly blocked," Mr McCausland said. "Impulse purchases are all about making sure the product is easily accessible and visible, with appropriate stock weight."

As sugar confectionery is an impulsive buy, ranging a wide variety is clearly one way to increase conversion into unplanned purchases, particularly if a company has different offers to satisfy different needs.

For example, Cadbury says stocking The Natural Confectionery for 'jelly' offering, Pascall as a candy/choc sharing offering, and Chupa Chups 'for me' offer, is quite differentiated and therefore minimises cannibalisation of each other and maximises potential sales.

Wrigley, which produces a wide range of products including the highly popular Eclipse mints, agrees that the need for choice on shelf is paramount.

"Retailers should range a broad mix of pack types and brands to ensure sales are not missed in-store," said Virginia Marsh, Wrigley's Retail Activation manager. "Some 30% of sugar confectionery buyers would not purchase a product at all if their preferred SKU was missing."

Wrigley says that sugar confectionery growth is currently being driven within grocery by consumers purchasing larger packs and says the segment is well placed to grow 4-5% over the next few years.

Promotions & visibility drive sales

While Ms Marsh acknowledges that in P&C, The Natural Confectionery Company, Allen's, Starburst and Skittles are the dominant players, she says market share fluctuates based on deep promotional activity.

"In any given week, at least one sugar confectionery brand is on promotion," she said. "Market leadership is generally dictated by which brand is on promotion in most accounts for the period."

Certainly, promotions are becoming increasingly important in P&C. 70-80% of confectionery sales in major P&C accounts are on promotion and the vast majority of P&C promotions are multi-buys or combos, and consumers are now trained to expect to buy at least two of a product to get a good price. Therefore promotions are great volume drivers.

"Outside of price, visibility can be used to drive sales of this category harder," Nestlé's Mr Broome said. "HIM! tells us that the number one reason people giving for buying confectionery is because 'they saw it in store' which is often a challenge for lollies as lolly bags are commonly merchandised in the aisle where shoppers don't often go."

At a minimum, Nestlé recommends placing the Top 10 Lolly Bags in the express lane / window run to maximise impulse purchases.

"Sugar confectionery is a category, with strong emotional appeal and high expandability," Mr Broome said. "It is driven by impulse purchase so significant sales increases will result if confectionery is made unmissable via creative, engaging and appropriate presentation at all possible points of interaction in a store."

Another of the big sugar confectionery players, Stuart Alexander, operates in three segments within sugar confectionery: Candy/mints; Gum; and Medicated.

Mentos rolls account for approximately 70% of its sales in P&C, with the rest of its portfolio, including Mentos Gum, Fisherman's Friend and Werthers making up the other 30%. The company says Mentos Gum is also gaining more and more traction.

"Sugar confectionery is a growing category which lends itself to impulse purchase and, as such, retailers will experience the best outcomes from focusing on merchandising the most popular products and well known brands on or very near the counter and adjacent to the walk through to counter from front door," said Paddy Bryans, Stuart Alexander's Marketing Manager, Confectionery. "And by continuing to support new lines and innovation which keep the category exciting and often help drive up dollar-per-kilo pricing, margins and sales rates."

Innovation maintains the excitement

Mr Bryans says innovation has kept both consumers and retailers excited about the Mentos brand, which operates in both candy and gum segments.

"Mentos has been very successful in driving consumer excitement through its new flavour introductions, groundbreaking advertising campaigns, eye-catching display materials in store to help drive retail sales and brand sponsorships such as Australian Idol," he said. "In addition, stand-out new products such as Mentos Aqua Kiss gum have captured consumers' imaginations and helped to drive category growth."

The full scale roll-out of Mentos Aqua Kiss is being supported by a massive marketing investment, and products such as Mentos Blast Gum the release of new Mentos Candy Roll flavours will also help to keep things interesting in the segment.

Stuart Alexander is also very excited about its innovative new Mentos Duo, which it says delivers two fruity flavours in one candy in a fabulous looking, tactile bottle.

For its part, Nestlé is also planning a big 12 months, starting with the new consumer promotion 'Win $50 instantly' which is currently being run across the entire Nestlé confectionery range. Lifesavers will also be supported with above the line media for the first time since 2002.

"Our challenge is to communicate the nostalgia and retro heritage of the Lifesavers brand in a modern, relevant way," said Nestlé's John Broome. "Most people remember the Lifesavers ads from the '80s and early '90s – and many can still sing the jingle."

Similarly, Cadbury has a lot of activity planned this year.

"Recently we've experienced success with The Natural Confectionery Co. 'Party Mix' and new Chupa Chup sherbet-filled Magics, and this is just a small taste of what is to come," said Cadbury's Alastair McCausland. "As always, we continue to support our brands with a high share of voice spend versus competitors."

Despite all the innovation and excitement in sugar confectionery, there are likely to be substantial challenges ahead. For example, Stuart Alexander says Medicated is in substantial decline and has suffered more than most segments from shrinking product ranges in P&C outlets. Also, confectionery space is being threatened by the emergence of energy shots, and to a lesser extent, mini personal care products which are taking up counter space in P&C that was previously the sole domain of confectionery.

Stuart Alexander's Paddy Bryans says people are also making fewer trips to convenience stores, as driving habits change, but they are spending more per trip and this needs to continue to increase if store visits continue to decrease. But there are other reasons to be optimistic.

"P&C are focussing more and more on meal solutions and coffee in order to provide a more attractive offer to the consumer and a better 'reason to visit'," Mr Bryans said. "Sugar confectionery brands definitely have the opportunity to grow further by 'piggy-backing' on these growth driver categories."

Of course, if sugar confectionery is continue to thrive it will also have to continue to be remain aware of, and react to, the public's growing awareness of health issues.

"With a background of increasing obesity/diabetes/heart disease and media campaigns increasing consumer awareness of these issues, health and nutrition concerns have become top of mind," says Nestlé's John Brome. "Sugar confectionery is well placed to offer choice to these consumers as it is portionable and most often shared amongst family and friends."

Packaging is critical

As well as portion sizes, packaging itself is crucial for sales. It offers the last opportunity for a brand has to showcase the product before the shopper passes it by in the store.

"Ensuring our packs have strong stand-out and clear communication is a key component to our overall marketing mix," said Mr Broome. "This year Allen's reintroduced windows on the Jelly Bag range so consumers can see their favourites."

Cadbury also believes that, as consumers become increasingly savvy, they expect quality packaging which is appealing, but environmentally friendly, and that does not overstate any promises of the product.

"At the same time, it must be suitable for the retailer to appropriately merchandise. TNCC has a natural feel and transparent for consumers who like to see what they are buying," said Mr McCausland from Cadbury. "Pascall is retro and nostalgic, reminiscent of classic treats, while Chupa packaging is iconic and a unique selling point with displays that make an impact which consumers remember and love."

Stuart Alexander is equally adamant that packaging is absolutely critical.

"The product must be able to sell itself on shelf just through its packaging if it is going to work as a successful Impulse line," said the company's Paddy Bryans. "Packaging is one of the most important tools we have to grab and hold consumer attention, it's as much an image statement about the consumer as it is wrapping for the product!"

With major manufacturers pouring so much energy, marketing power and creativity into sugar confectionery, there is clearly every reason for C&I outlets to remain optimistic that the segment will continue to deliver the sales and profits it always has.

Of course, one of the things that makes the Australian market unique is the variation of temperature through the country. Rankings of the most popular skus and overall category sales by region reveal significant differences which should be addressed in category space plans. Indeed, sugar outperforms chocolate in some of the warmer regions.

But wherever in the country a C&I outlet is located, the fact remains that sugar confectionery is most likely to be eaten out of home when people are out and about and that means the convenience channel will remain the ideal spot to pick it up. And that is sweet news, indeed.