Category feature: Sweet as, bro!

We are living in interesting times when it comes to sugar. The old Chinese curse seems to have come in full and strong, with a very vocal minority of people around the world protesting that sugar is some kind of poison. Well, we’ve always faced negative press when it comes to sugar. Last century a kid couldn’t get their hands on a Redskin without some smarmy grown-up insisting it would rot their teeth. 30 years later I still have all my teeth, so what was all the fuss about?

Now we face a trend of populism as pervasive as anti-vaxxing and 9/11 conspiracy theories combined: That sugar is a poison. Well, nuts to that. The British may have recently introduced a sugar tax on beverages (a move that makes as much sense as the notorious window tax of 1696, which simply resulted in people walling up their windows). A recent Confectionery News report stated there’s talk the UK sugar tax will be extended to confectionery as well, but that doesn’t mean Australia will blindly follow suit [we hope].

In a market leading response, Nestle has undertaken a raft of reformulation measures overseas, and in terms of the KitKat there was a huge backlash here in Australia in response to the news that the recipe would be tweaked from the original, however, Nestle Australia recently reassured C&I Retailing that those measures were not being brought in to Australia, and in fact, the Australian KitKat had already been reformulated to suit our own tastes long ago.

Nevertheless, the ball is rolling, and there are even efforts to remodel the very structure of sugar molecules in order to be able to use less sugar mass in products while achieving the same culinary results in recipes.

According to IRI MarketEdge, sugar confectionery is an established mainstay of both P&C retailing and snacking culture more generally.

“The product has broad appeal across dayparts and with a wide range of consumer cohorts (i.e. tradies, kids, professionals). And there is an important emotional hook too; consumers often turn to confectionery to sweeten their mood,” IRI analyst Daniel Bone said.

The market according to IRI MarketEdge

Sugar Confectionery accounts for a 28% dollar share of total Confectionery sold in the Australian Petrol and Convenience (P&C) channel. Dollar growth in the category was up 0.7% in the 52 weeks to 26/02/17, although units were down -1.9%. In 2016-17, Sugar Confectionery has lost over a percentage point on category share having been outperformed by Gum (+3.3%) and Chocolate (+3.0%). Accordingly, it is telling that Chocolate and Gum account for the 10 leading growth contributing SKUs across all Confectionery segments in Australian P&C, as well as 9 of the top 10 growth contributing brands.

Hang Sell and Mints are the two segments weighing down most significantly on Sugar Confectionery performance. Hang Sell dollar growth was down -1.7% in the 52 weeks to 26/02/17, and unit sales were down nearly 4%. Mints declined by -3.4% in value and unit sales were down -4.5% at a time when Gum sales – and larger pack in particular – have been stronger in the channel.

The Australian P&C offering

The recent release of the Australasian Association of Convenience Stores State of the Industry Report (using market research data from IRI MarketEdge and AACS member submissions) showed that Australians aren’t ready to hang up the sweet tooth yet. In fact, the confectionery segment of P&C (which includes chocolate and gum as well as sugar confectionery) recorded $18 million in growth in 2016. This takes the segment to $522 million in value, after 3.6% growth in 2016, and 3.1% growth in 2015. This acceleration of dollar value growth has been observed with the chocolate category growth slowing from 7.5% TO 4.8%.

Unfortunately sugar confectionary contributed little to that overall growth, with a very slight fall in value: 0.06% across its 28% share of the total confectionery segment. Although that sector was dominated by chocolate in the top 10 products of 2016, only one was sugar confectionery proper: Mentos.

Mentos’ growth in 2016 was boosted by innovation, the AACS report said. Mentos Pink Lemonade Roll and Mentos Choco, a caramel chew with a chocolate filling, represented the innovative underpinning of a 15.6% dollar value growth for Mentos in 2016. On top of that, the brand won a bronze award at the 2016 POPAI Marketing at Retail Awards for a permanent modular display, with adjustable height, which effectively ranges the full suite of Mentos SKUs.

The AACS report also named Starburst Fruit Chews as a leading growth driver in the segment.

Permissibility: A key category

Australians are desiring more permissible snacks and treats, having become more fixated on the nutritional characteristics of many products; 61% of IRI’s 10,000-plus Shopper panelists agree that nutritional labels impact what they buy. Australian P&C retailers have aptly modified store formats to included dedicated health zones that feature more contemporary sweet-treats like Bounce. As health mindful consumers gravitate to other sweet treats, Bounce posted triple-digit dollar growth in 2016 on the back of a protein-rich formulation and a new 30g format priced to compete overtly with more traditional Sugar Confectionery products. This kind of cross-segment competition will intensify as consumers wanting a sweet treat more likely opt for “real” food formats that more seamlessly incorporate trending and permissible ingredients

Sugar-free NPD will likely exert more influence on the segment as suppliers embrace natural sweeteners (like stevia) to drive permissibility. Sugar Confectionery is also likely to be influenced by what has worked in Chocolate Confectionery – i.e. the coming together of established brands in a co-branded proposition like Cadbury Oreo that cannot be replicated by private label. There are some examples of Mondelez pursuing this approach in the UK market where the Cadbury Oreo proved successful long before it reached Australia.

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