Encourage Them to Indulge
Despite all the anti-sugar sentiment in recent years, confectionery remains big business for U.S. retailers. According to the National Confectioners Association, Washington, D.C., the segment accounted for $34.5 billion at retail in 2014. Chocolate sales rose 2.9 percent from 2013 to reach $21.1 billion, while non-chocolate confectionery sales (excluding gum) grew 2.1 percent to reach $10.4 billion in sales.
Modest growth for chocolate
The United States is a chocolate-loving nation. In an April press release, global market research firm Mintel notes that more than half of American consumers (53 percent) consume chocolate at least once a week. And chocolate-related innovation has been on the upswing within the United States — the world’s largest chocolate market — with new product launches increasing 18 percent between 2013 and 2014. In general, innovation has been focused on seasonal products, which accounted for 42 percent of new product launches in 2014.
Chocolate’s pace of growth, however, slowed a bit in 2014, Mintel notes, following a pattern seen over the past few years. Dollar sales were up just 3 percent over 2013.
“The price of sugar was higher in the U.S. in 2014, with domestic growers selling sugar at prices 50 to 100 percent higher than in global markets,” Mintel explains. But “only 3 percent of consumers have stopped buying chocolate altogether due to price increases.”
Non-chocolate gets small
A lot has been written in recent years about consumers’ desire for small indulgences, and candy and chocolate marketers seem to be paying close attention. According to “Sugar Confectionery in the US,” a November 2014 report from London-based market research firm Euromonitor, 2013 and 2014 brought with them a sizable influx of miniaturized sugar confectionery (non-chocolate candy), following a similar trend on the chocolate side that began in 2012. For example, the Jolly Rancher and Twizzler brands released miniature-sized products in mid-2013, and Just Born introduced a non-holiday mini version of its Peep brand marshmallow confectionery in 2014.
Euromonitor expects non-chocolate candy to continue to grow by 7 percent in value sales at constant 2014 prices to reach sales of $11.2 billion by 2019. Growth is likely to be led by pastilles, gums, jellies and chews, the market research firm says, which present a “broad product range and consistent influx of innovation.”
Think heath and indulgence
The good news for retailers is that the demand for private label candy and chocolate products is growing faster than that for branded items, according to Euromonitor. And retailers will want to pay close attention to the growth drivers when it comes to new product development here.
“Product innovation and greater demand for indulgence and fun and enjoyment activities will grow the confectionery market,” the market research firm adds. “A greater number of consumers in the U.S. are turning to luxury chocolate in order to indulge.”
Barry Rosenbaum, president of Hicksville, N.Y.-based Nassau Candy, sees indulgence as a major trend across both chocolate and candy, but notes that “better for you” is the overarching trend.
“The consumer wants to indulge in products that are positioned as better for you,” he says.
Other major trends retailers should consider in new product development include rising consumer interest in candy and chocolate products billed as natural, non-GMO and/or fair trade, Rosenbaum states.
Mike Swiatkowski, vice president of sales for Akron, Ohio-based Hickory Harvest Foods, agrees, noting that consumers are paying more attention not only to the ingredients in candy and chocolate, but also to how such products are produced.
The macro snacking trend that sees consumers replacing traditional meals with smaller snacks also is wielding an influence within the category, says Carl Hornberger, director, marketing and product development for Wolfgang Candy Co., York, Pa.
“We are seeing traditional salty snacks such as pretzels pairing with chocolate to create indulgent snacks,” he says.
Spur impulse sales
Consumer-centric packaging and thoughtful merchandising and marketing also are critical to future store brand growth in the candy and chocolate segment.
On the packaging front, today’s consumers increasingly want a convenient grab-and-go format, Rosenbaum notes. Tubs and resealable standup pouches — which could also be peggable — have been attracting positive attention in the last couple of years, too.
And Hornberger points to a trend toward the refinement of designs applied to the candy or chocolate package.
“Package designs are focusing on conveying authenticity, quality and freshness of the ingredients,” he says. “Oftentimes, it is the ‘less is more’ approach — very simple, straightforward packaging designs.”
One thing that retailers could do to improve the packaging for store brand candy and chocolate, Swiatkowski adds, is to call out any relevant health benefits right on the pack.
When it comes to merchandising, retailers need to keep in mind that candy and chocolate are impulse items, so it’s important to position those items in the perimeter of the store and other locations that receive high traffic, Rosenbaum says. They also have to ensure that store brand items don’t get lost in a sea of national brand items.
“So there has to be a commitment to the products — it can’t be a few SKUs; you’ve got to make a statement,” he adds.
Swiatkowski agrees, encouraging retailers to have a greater presence when it comes to inline pegged items. Retailers also would benefit by taking the time to remove slow-selling items.
Logical areas to merchandise store brand items outside of the candy and chocolate aisle, meanwhile, include near the front-end registers, within seasonal or specialty end caps and other unexpected areas, he says.
Do consider the trends toward indulgence and better-for-you formulations in new product development.
Don’t limit placement of candy and chocolate to the standard aisle.
Do innovate in new areas such as indulgent snacks.
Don’t forget to call out health positives on candy or chocolate packaging.