Reilly Musser likes the customer approval rating that “hand-to-mouth” confection products—resealable, shareable pouches of unwrapped, bite-sized sweets—have received in the Rotten Robbie convenience stores she oversees in the San Francisco Bay Area.
There were big innovations in the confection segment this year, but not every retailer was able to ride the wave to strong sales. Musser, category manager for Santa Clara, Calif.-based Robinson Oil, which has 18 traditional c-stores and a few kiosk-type locations, likes the upside of the bite-sized trend. But the retailer needs more to stem volume declines in her stores this past year—losses in part due to a still-recovering economy. Oh, and the freefall that the gum category experienced didn’t help matters either.
“Our candy sales were down this year after a decade of annualized growth,” says Musser. “We’ve done the customer research and look forward to new offers in the nonchocolate segment in early 2014. Because our stores run smaller, peg-bag varieties in the nonchocolate segment is our sweet spot and offer customers good value. When we get it balanced, we can restore category growth.”
The silver lining for retailers such as Musser is that while a failing economy necessitated a cutback on indulgences, more people are consuming mini-meals throughout the day—and confection has landed squarely on their hunger radars. The third meal of the day is no longer dinner but the first snack after “lunch,” and offerings such as Kit Kat Minis or Snickers Bites are on the menu.
Innovation in the candy category is also reflected in the release of exotic flavors, novelty candy, nostalgic/retro sweets and rich and indulgent offers. Some of these niche flavor trends lack mainstream appeal, and that’s where bite-size resealables enter the scene—providing convenient, immediate consumption for our clockless society.
‘Inveterate Snackers’
Chicago-based research firm IRI painted the picture of the new snacking paradigm consumers have embarked upon by referencing a group of consumers called “Opportunists” who emphasize price, value, portability and convenience over nutrition. Sales of chocolate candy among Opportunists grew nearly 16% this past year, led by Reese’s Minis and Hershey’s Brookside Chocolate, which landed on IRI’s Pacesetters list of top-selling new products for confections.
“We are inveterate snackers, and confectioners have upped the ante on quicker consumption values. The facility to snack has been made far easier,” says Marcia Mogelonsky, director of insights, food & drink for Chicago-based Mintel.
Since 2008, 20% of total confection launches have been portable/sharable varieties. “It’s a trend that’s not going away,” says Jenn Ellek, director of trade marketing and communications for Washington, D.C.-based National Confectioners Association (NCA). “These products eliminate the chore of unwrapping, but also bite-size increments allow consumers to eat less per occasion.”
As part of its mission to stress true innovation over just another new flavor, several winning launches from The Hershey Co. include Kit Kat Minis and Jolly Rancher Bites, now offered in a soft and chewy formulation. The product creates a synergy with Jolly Rancher hard candy to expand frequency usage. Coming soon is Hershey’s York Minis.
Building on the successful introduction last spring of Snickers Bites and Milky Way Bites, Mars Chocolate North America plans to launch three new flavors of unwrapped, bite-sized treats in stand-up pouches: Twix Bites (launching next April), 3 Musketeers Bites (launching in January) and Milky Way Simply Caramel Bites (also launching in January).
Adding muscle to the indulgent-confection segment is the aforementioned Brookside, which adds a touch of wellness with dark-chocolate-covered superfruits such as pomegranate and açaí. While c-stores were not an immediate target for the Brookside brand, Hershey is in the process of rolling out new 3-ounce “impulse packs” to better fit the channel.
In fact, to optimize retail channel growth, including c-stores, Hershey’s uses its Global Customer Insights Center, where retailers can go to tour and discover customized merchandising solutions, as well as to collaborate with the company on category strategy.
It’s this scale of retailer collaboration that might have been instrumental in the impending launch of Lancaster, which will roll out in January, and represents Hershey’s first new brand launch in three decades.
Lancaster culminates a research initiative into consumer tastes and the global confectionery market. Individually wrapped, the soft candy comes in three flavors—caramel, vanilla and raspberry—and is perceived to fill a need for a quality caramel variety in the candy aisle, according to the company.
Overall in North America, Hershey’s emphasis appears to be grounded in strategic, incremental and what the confectioner calls “sticky” innovation to guide new product development. This is seen with hand-to-mouth through “Bites” (for non-chocolate products) and “Minis” (for chocolate lines), as well as seasonal offers, as seen with s’mores.
Meanwhile, consumers’ desires for out-of-the-ordinary and nostalgic flavors is evident with birthday-cake-flavored M&M’s. “Products like M&M’s Birthday Cake are a hot trend right now,” says Larry Lupo, vice president of sales, convenience and drug channels for Mars Chocolate North America, Hackettstown, N.J. “It offers what we call ‘colorful fun.’ We think it will be a big hit, and clearly people are excited about it.”
On the nonchocolate side, American Licorice “recognized” that Red Vines and Sour Punch candy “may not have been as convenient to drop in your mouth, so we developed more bite sizes to fill that need,” says Madalyn Friedman, director of marketing for the Union City, Calif.-based confectioner.
These bite-size versions will come with new Fruit Vines, in a 10-ounce resealable bag set to launch in January, as well as with a new 9-ounce standup resealable bag for Sour Punch Bites, also debuting next year. There is not yet a standup/resealable bag developed for Red Vines.
Echoing the consumer trend for nostalgic flavors in unexpected places, Ferrero USA showed off its Summer Ice Pop Tic Tacs in the Cool New Products room at the NACS Show. Featuring red, white and blue pellets, the fruit-flavored candies take on the flavor of the ice-cream-truck favorite. Summer Ice Pop comes after the relaunch of Cinnamon Tic Tacs to the marketplace.
Prudent Innovation
In 2010 more than 1,400 candy launches penetrated retail channels, but in 2012 that number dwindled to 765, according to Datamonitor. Chocolate led with 423 rollouts, while nonchocolate registered 302. Candy and snack items accounted for 26% of all new CPG introductions in 2012.
“As economic challenges continue, confectioners have become more thoughtful and conservative in their approach. Even with numbers down, we’ve seen a resurgence in sharable, resealable packages, and this trend is excelling due in part to the shift of consumer snacking habits,” says Ellek of NCA.
Tonnage declined due to the economy and “people focused on the staples,” says Friedman of American Licorice. “This is a relatively mature industry, and we must achieve true innovation—not just roll out new flavors to grow the business.”
“The U.S. innovation scale is tame compared to what confectioners offer in Japan and in the U.K., where they are pretty innovative with popping candy in the chocolate category,” says Mogelonsky of Mintel. “We are a lot more conservative, and you’ll notice that top brands do not switch positions very often.”
Industry experts stress that retailers must be careful not to overindulge in innovation lest they alienate customers who still want the tried-and-true products. “What candy brands people ate as kids still rule; it’s very evocative, so creating new brands is a challenge,” says Friedman. “The flipside is that there’s a lot of loyalty with evocative brands. We want to take our brands and continue building on them.”
Mogelonsky believes any type of new and exotic flavors that companies pursue probably won’t occur—or should not—in the resealable, sharable packages but rather smaller or traditional sizes that encourage trial. “The resealable pouches are meant to be shared by a group, and not everyone wants to share bacon and wasabi chocolate,” she says.
Musser of Rotten Robbie is just looking to breathe some new life into a category that needs a shot in the arm. She is eager for those new non-chocolate varieties, but cites other trends that could also contribute to growth. She says mobile apps could play a role, “where we can alert [customers] to candy couponing programs we offer. They get alerts on their phone and then come in to redeem them.”
At the store level, she says there will be more emphasis on mints and less on gum brands, which have suffered. Because of the drop in confection sales, the chain was forced to make some merchandising tweaks.
“We moved snack chips under the register in place of some gum and candy, and cut back on candy shippers,” says Musser. “We found that with candy at the counter, the turns were not as frequent, and it showed in dated product. With snack chips, the gross margin is lower than candy, but we see better turns.”
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.