Confectionery calling

The sweetest category of all is well worth a closer look

Chocolate King Size & Medium Bars

Top 15 SKUs (ranked) = 54.2% of unit sales & 55.9% of value sales *excludes Private Label

	Manufacturer	Brand
Mars Bar 36g X 2	Mars Snackfood Aust	Mars
Snickers Bar 36g X 2	Mars Snackfood Aust	Snickers
Cherry Ripe Bar 80g	Cadbury Ltd	Cherry Ripe
Mars Bar 53g	Mars Snackfood Aust	Mars
Kit Kat Bar 45g	Nestle	Kit Kat
Cherry Ripe Bar 52g	Cadbury Ltd	Cherry Ripe
Snickers Bar 53g	Mars Snackfood Aust	Snickers
Twirl Bar 58g	Cadbury Ltd	Twirl
Twix Caramel Bar 72g	Mars Snackfood Aust	Twix Caramel
Boost Bar 60g	Cadbury Ltd	Boost
Kit Kat Bar K/Sz 65g	Nestle	Kit Kat
Fry's Turkish Delight 2x38g	Cadbury Ltd	Fry's
Twirl Bar 39g	Cadbury Ltd	Twirl
Boost Bar 77g	Cadbury Ltd	Boost
Cadbury Bubbly Mint 40g	Cadbury Ltd	Cadbury Bubbly

Gums

Top 10 SKUs (ranked) = 66.0% of unit sales & 64.5% of value sales *excludes Private Label

	Manufacturer	Brand
Extra Reg Spearmint Env 14s 1pk 27g	The Wrigley Co	Extra Reg
Extra White Gum Pellet 10s 1pk 14g	The Wrigley Co	Extra White
Extra Reg Peppermint Env 14s 1pk 27g	The Wrigley Co	Extra Reg
Pk Gold 10s 1pk 14g	The Wrigley Co	Pk
5 Cobalt Env 12s 1pk 32g	The Wrigley Co	5
5 Electro Env 12s 1pk 32g	The Wrigley Co	5
5 Pulse Env 12s 1pk 32g	The Wrigley Co	5
Juicy Fruit Original 10s 1pk 14g	The Wrigley Co	Juicy Fruit
Extra Reg Strawberry Env 14s 1pk 27g	The Wrigley Co	Extra Reg
5 Tempest Env 12s 1pk 32g	The Wrigley Co	5

Sugar Confectionery (excluding Gums & Medicated)

Top 15 SKUs (ranked) = 49.0% of unit sales & 37.9% of value sales *excludes Private Label

	Manufacturer	Brand
Chupa Chup Original 12g	Cadbury Ltd	Chupa Chup
Starburst Sucks Pop 13g	The Wrigley Co	Starburst Sucks
Eclipse Mints Spearmint 50s 34g	The Wrigley Co	Eclipse Mints
Eclipse Mints Peppermint 50s 34g	The Wrigley Co	Eclipse Mints
Mentos Reg Mints 37.5g	Stuart Alexander	Mentos Reg
Chupa Chup Mega Tin 1000s	Cadbury Ltd	Chupa Chup
Mentos Reg Mixed Fruit 37.5g	Stuart Alexander	Mentos Reg
Allora Mixed Lollies 190g	Allora Springs P/L	Allora
Allens Frogs Alive 25g	Nestle	Allens Frogs
Natural Confec Snakes 200g	Cadbury Ltd	Natural Confec
Allens Snakes Alive Jelly 200g	Nestle	Allens Snakes Alive
Mentos Reg Spearmint 37.5g	Stuart Alexander	Mentos Reg
Allens Other Killer Pythons Wrp 43g	Nestle	Allens Other
Mentos Reg Berry Blast 37.5g	Stuart Alexander	Mentos Reg
Wonka Frt Ting Single 34g	Nestle	Wonka

A few short seconds inside the average convenience and impulse outlet is all it would take the uninitiated visitor to realise that confectionery is absolutely critical to the success of that business.

The wide range available and its prominent display can only mean one thing ... the category is a proven profit maker! Nonetheless, it is not one that can be taken for granted.

The economic climate means that, in general, Australians have less money to spend on non-essential items but, more encouragingly, confectionery can sometimes be seen by consumers as an affordable pick-me-up … a fact that can help it ride out the rough times better than some categories.

According to the most recent AACS state of the industry report, 60% of customers who come in to a convenience and impulse outlet store seeking a treat end up buying confectionery. The same report reveals that 12% of people who go into a store to buy a drink will also buy confectionery. Clearly then, as with all highly impulsive categories, effective merchandising and strong stock control are crucial.

The challenge: understand consumer appeal

"The challenge for both retailers and suppliers is the impulsiveness of each category which over the past year has reduced," said the AACS report.

"Nearly 80% of all shoppers knew exactly what they were purchasing in store and for the first time actual spend was in line with intended spend, perhaps suggesting that shoppers are more planned and value conscious due to the economic uncertainty."

According to Nielsen ScanTrack Convenience data current to the start of this year, confectionery as a whole represents 8.4% of shop sales, with sugar and mints combined representing about 28% of that, and bars/impulse some 24%, with blocks, chewing gum, children's confectionery, medicated and occasion also contributing.

Confectionery then is a complex beast and a thorough understanding of all of the segments and their differing consumer appeal is vital for C&I operators seeking to maximise profit potential.

Bars though are the biggest segment within convenience and overall growth here is being driven by medium bars. Nestlé, Masterfoods and Cadbury, the three biggest manufacturers in medium bars, are all in growth, with Mars 2packs and Kit Kat 4 Finger performing especially strongly.

"New product development typically drives this segment forward and over the past year we have seen successful entrants like Chokito," said a Nestlé spokesperson.

"Despite the latest quarter showing strong growth on established SKUs in Mars and Snickers 2packs, continued success is purely dependent on the evolution of new products."

Grasp the trends: offer tailored solutions

Nestlé says that manufacturers therefore need to grasp consumer trends and offer tailored product solutions.

Gum is certainly the strongest growing segment in convenience at the moment and market leader Wrigley is playing its part in that. Success stories such as Wrigley 5, which has been given wide market acceptance and has given a massive lift to gum, is proof of the positive effect product innovation can have.

Chocolate blocks is, of course, a much smaller segment in convenience than it is through other channels and is in decline overall. However, the largest SKU – Cadbury Dairy Milk 200g – is still performing well and is growing strongly.

Medicated is another segment which has been having its struggles of late, despite the growth shown by its largest SKU, Butter Menthol. Of course, within convenience outlets, medicated shares a precious amount of counter real estate with two other very aggressive segments in chocolate bars and gum, both of which, as we have already seen, are growing strongly.

"The space for the medicated range has consequently been eroded at each range review, leading to massive declines in ranging and, inevitably, sales," said a Nestlé spokesperson. "Butter Menthol though has been fortunate in that it has been able to maintain ranging due to its strong and consistent sales ... this can be attributed to targeted activation plans and over-arching above-the-line campaigns, maintaining Butter Menthol's relevance for its consumers."

The Candy Rolls segment has been relatively flat through convenience but leading seller Eclipse Mints Spearmint remains in growth.

The crucially important sugar confectionery area is dominated by four major manufacturers – Wrigley, Nestlé, Cadbury and Stuart Alexander – who, between them, make up more than 84% of sales. Worryingly, sugar has been in decline and companies such as Wrigley readily acknowledge that returning the category to growth is the biggest immediate challenge, with new product development a vital tool in driving future demand.

"Wrigley is leading the way in reigniting growth in this category," said Andrew Leakey, Marketing Director for Wrigley. "All the recent activity that Wrigley has been undertaking – new packaging, new formulation and product mixes and revising bag sizes, has been to drive new growth for sugar confectionery within the C&I channel."

According to Wrigley's Sales Director, Shane Bonello, one of the biggest differences between how consumers buy sugar confectionery in grocery, compared to how they do so in convenience, is that convenience consumers are a lot more likely to be buying products for immediate consumption or 'for me for now'.

This difference is reflected in the packaging sizes that are popular within each channel. Not surprisingly, smaller sized packages account for a larger portion of sales in convenience than they do in grocery.

"Single serve confectionery offerings achieve high sales rates in the convenience channel and Wrigley has two particularly strong performers in this area: Starburst Sucks 13g and Skittles Fruit 55g," said Mr Bonello. "Both of these products are unique offerings that target shoppers seeking something 'for me for now'."

One of sugar confectionery's great strengths, of course, is that its appeal is universal and spans all life stages. Nonetheless, families and larger households (+5) are the most developed with the highest penetration and spend within the category.

Wrigley's core Starburst brand is targeted largely at the youth segment and teenage family households.

"Wrigley is investing heavily in Starburst, both in packaging to generate pick up at point of sale and in television advertising to build brand awareness," said Mr Bonello. "This will ensure that Starburst continues to drive growth in the jellies segment."

Nestlé's best-selling products within sugar confectionery are Allen's Bags which are bought predominantly to share ... nonetheless convenience is still a crucial outlet for the company.

"The channel plays an integral role in trial, visibility and depth of distribution for our products," said John Broome, Nestlé's Head of Marketing – Confectionery and Snacks. "We over-index in male shoppers within the channel and in most cases products are bought for immediate self consumption."

He says that, given the shopper mission of the convenience consumer is predominantly to 'top up' (89% of shoppers purchase less than five items in convenience stores), it is implicit that smaller sizes are more suited to the channel.

"Gold coin purchases and lower expense items are likely to be smaller formats than what is available in grocery and so they lend themselves to the convenience area," he said. "Convenience is generating the awareness and trial of the product, where grocery is increasing average weight of purchase and frequency."

Allen's Snakes Alive 200g and Party Mix 190g are Nestlé's leading products and both are currently in growth. The company has an above-the-line campaign in progress around the total Allen's Bag range which is being supported with in-store visibility and promotions.

Cadbury, which boasts leading brands such as The Natural Confectionery Company, Chupa Chups and Pascall, says its shopper research confirms that occasions for candy purchases differ by channel.

"Grocery purchases are much more planned and habitual, both in terms of the frequency of purchase, as well as brands or products that are purchased," said Rachel Estlin, Senior Brand Manager, Cadbury. "Convenience is much more spontaneous and sporadic… the main reason for visiting convenience stores is to purchase fuel and purchasing an additional snack or treat while there often occurs but is not pre-planned."

Range: the right selection is critical

She says that once the decision to purchase a confectionery item has been made, the most important factor influencing this decision is the product type, and that comes before brand, pack type, manufacturer, pack size etcetera even enter the decision frame.

"Candy is generally selected as an option when purchasing to share with others and to be consumed straight away," Ms Estlin said. "Shoppers purchasing for this occasion also visit the take away food section and slurpee machine – stocking up for in the car consumption."

Range selection could then hardly be more critical in attracting these big-spending customers.

According to Wrigley's Sales Director, Shane Bonello, the best way for operators to decide on their sugar confectionery range is to ensure that the top selling formats, segments, brands and SKUs are all represented in appropriate amounts.

"For example, 64% of sales come from hangsell items," he said. "Jellies is by far the biggest segment within hangsell sugar, accounting for 85% of dollar sales, and within hangsell jellies the top three brands, including Starburst, account for 87% of dollar sales."

The key to success then is displaying the right mix product at the right time in the right place in store.

"The front end really is the best opportunity to capture consumer attention and encourage an impulse sale for products that are not destination purchases," said Mr Bonello. "We work with all retailers to develop effective front end strategies to enhance the shopping experience and most importantly take advantage of that last opportunity to increase basket size with an impulse sale."

Impulse purchases: the hot spots

Wrigley says gondola ends are 'hot spots' for generating more exposure for products in-store and are particularly effective for impulse purchases.

"By the very nature and positioning of these displays they interrupt even 'non shoppers' of the category to slow down as they pass the end of the aisle," said Mr Bonello. "They create the best opportunity to visually stimulate and draw the shopper into the product and promotional offer."

Nestlé heartily agrees that in-store visibility is integral to purchase conversion within convenience outlets.

"Due to the unplanned nature of convenience purchasing, particularly for confectionery, we locate towers, dump bins and other free standing displays near the front of store and high traffic areas to prompt purchase," said Nestlé's John Broome. "With 60% of confectionery purchases made at counter we must play here and, as a result, all of our campaigns in some form or another have a counter unit in display."

Nestlé says that merchandising products across the store that have strong synergies can drive full price purchases.

"Larger format carbonated beverages and salty snacks are two in particular that combine well with Allen's lollies," said Mr Broome. "On promotion, merchandise lollies close to the register and high traffic areas of the store to prompt unplanned purchase."

With just over a quarter of convenience total dollar sales coming from just 20 SKUs, Nestlé says there are always ways to prioritise the range to suit the available space, without compromising on sales potential.

Packaging at point of purchase is the final prompter for the shopper to purchase. It is therefore vital that the packaging stands out and provides clear communication of the product offering in order to capture the attention of the target shopper/consumer.

Nonetheless, with some 43% of shoppers stating the main factor influencing their purchase decision in convenience was the fact it was near the counter, Cadbury says visibility and accessibility of the product is definitely the key influencer on sales in the channel.

"Location in convenience is key … placement and visibility around the counter is the biggest influencer on shoppers deciding to make a purchase," said Cadbury's Rachel Estlin. "Shoppers are looking for brands and flavours that they know when deciding on the actual product selection."

She says that new, innovative product offers are also highly desirable to stimulate the impulse purchase. And certainly Cadbury has not been idle in the innovation department. The Natural Confectionery Company's Berry Bliss & Tropical 140g varieties were launched in May and have already proved very popular with consumers. So too have the new Pascall Family sharing packs: the 140g Pineapple Lumps & 200g Hard Mints. Cadbury has also relaunched the Pascall Handy pack range 100g – 130g.

For its part, Wrigley is very pleased with its recent launch of a new look Starburst range. The new design features a clear window and greater differentiation between variants to help to simplify the shopping experience for consumers. As part of the launch, it says it has also improved the formulation of the product to give consumers a softer, fresher texture and added some new flavours to its Party Mix, Snakes and Babies products.

Innovation: the key to success

If innovation is the key to success in confectionery as whole, then it is doubly so in the children's/novelty segment.

"In many ways, we are a bit like the fashion industry in that there are huge shifts and you constantly have innovations and new products coming in," said Rodney Heath, Marketing Manager at kids' confectionery/novelty distributor, Funtastic. "And, of course, that means other products dropping off the back as it becomes apparent they have had their day."

Mr Heath says Funtastic sales have been lapping ahead of last year's sales in large grocery outlets such as Woolworth's and Coles, but performing less well in outlets such as Big W, Target and Kmart where SKU rationalisation has been taking place.

However, he says it is through petrol and convenience and route where Funtastic's products have gone through the roof, enjoying 12% growth on last year ... and he says that strong performance looks set to continue.

"We have found that there are less players wanting to occupy the same space as us and we have gained more preference because of the global brands we represent," said Mr Heath. "Licences like Toy Story obviously help, particularly since the recent release of the movie, and they tie in well with our global brands like Pez and Surprise Eggs."

Funtastic believes that understanding consumer motivation is very important and that the company offers products that can cater to different sorts of purchase. For example, it says that a child wishing to spend his or her own money may be tempted by Warheads, Fizzer, Chupa Chups, or Pez, while confectionery loving kids may also pester their parents for treats such as Surprise Egg, Fizzer, Pez or Xtreme.

And Mr Heath says parents always want to approve of purchases and for their children to be consuming brands that they know and that they trust.

"Parents also want to appease their children, particularly in transit, and although there are sugar confectionery and chocolate options, they sometimes want more, something that will give a more enduring purchase that the kids can keep playing with," said Mr Heath. "Products such as the Surprise Egg, or the Chupa Chups novelty can fit the bill and parents are prepared to spend the extra for that novelty value."

He says that although Funtastic products have a toy element it is still important they are ranged with the overall suite of confectionery.

"However, if the kids' confectionery segment is scattered throughout general confectionery then something is lost," he said. "When you gather them altogether a child can stare in wonderment at what is on offer."

And the result is, of course, better sales.

Mr Heath says Funtastic products offer C&I customers variety and choice and give the operators higher margins than normal confectionery.

As with everything in store, these products must then battle for the limited space available to C&I outlets. If something has earned its place on the shelf, then operators have to see where it fits in and what might have to move to make space for it.

It is a difficult job in an ever-changing, ever-evolving world but, with disciplined, thoughtful and responsive management, C&I operators can help this highly profitable category to realise its very considerable potential.