Though candy continues to perform in c-stores, study shows room for improvement
SAN ANTONIO -- It's been the rumor for months now, but according to a study presented at CSP's annual Snack & Candy Category Review meeting, confections are confirmed recession resistant. "These are tough times," consultant Kit Dietz confirmed in his presentation, but despite that, the candy market is growing. "Every convenience store in the country has an opportunity with this category."
Certainly, 98% penetration in U.S. households as well as the natural impulsivity of the category (49% of confection purchases are unplanned) doesn't hurt, but according to Dietz, it's [image-nocss] candy's core brands that do most of the heavy lifting. "If we take some of the complexity out, we're going to perform better across the category," he said.
The top 50 SKUs alone (representing about 0.7% of the entire category) earned $337.5 million (32.8% of the category's earnings) for the 12 weeks ending Dec. 27, 2008, according to AC Nielsen and Dietz Consulting LLC. The top 100 earned $486 million. The trick at this point, Dietz said, is getting that product into the store. "It comes up over and over again that we have to increase our speed on this," he said. "We have complexity issues that other channels don't have. There's simply too much channel variability."
According to Dietz, gaining distribution of and keeping the core brands in stock offers a 10% net incremental growth opportunity of $410.1 million. To drive his point home, Dietz looked at one core chocolate product and compared its sales potential in a typical c-store distribution situation with the same product as it performed with the distribution capabilities of a drug-store chain. That one product alone, from October 2007 to July 2008, represented $7 million in lost c-store sales.
"Some of those numbers are relatively alarming," said retailer Mike Scarpelli, vice president of marketing for Alon Brands, a 7-Eleven licensee. With new product launches, he said he could see how this would make sense. "We get the information last."
Other seminar attendants took the numbers with a grain of salt. Considering the high number of independent retailers in the c-store channel, the numbers might not be representative of all convenience retailers. "Chains outperform the independent on a lot of things," said Hal Adams, vice president, retail merchandising for Valero Retail Holdings.
Dietz responded with the possibility that the numbers could represent vast opportunity for the c-store industry. "We have to look at this as a migrationeveryone needs to be repositioned around the opportunity," he said.
For more from CSP's Snack & Candy Category Review meeting, watch for the July issue of CSP magazine.