Sharing the Kingdom?
Mars attempts to dethrone king size with a more health-conscious option to share.
At first glance, the move seems to demonstrate more than a bite size of dare. Mars, behemoth confectioner and creator of some of the country’s most popular chocolate bars, such as Snickers and M&M’s, says it’s doing away with “king” size chocolate bars.
Looking at the data, the shift is all the more startling. According to Nielsen, c-store sales of king-size climbed 18.1% at the end of 2011, and units were similarly impressive, with sales up more than 11%. This came as standard-size bars dropped 3% from 2010 to 2011, adding further testimony that consumers today are willing to shell out a few more pennies for more bar.
So why is Hackettstown, N.J.-based Mars Chocolate North America jettisoning the king with its pledge to discontinue all Mars products exceeding 250 calories per serving by the end of 2013?
“We have a responsibility to help our consumers lead healthy lives,” Mars says on its website, one echoed by many of its retail team during multiple interviews with CSP this year. “We are committed to making sure the products we offer, and the ingredients they contain, can fit into a balanced diet.”
“Obviously king-size are incredibly important to the candy category,” says David Bishop, managing partner of the Barrington, Ill.-based retail marketing and research firm Balvor LLC. “In the chocolate segment, Mars has been growing, so it’s not necessarily a tactic to recapture lost consumers.”
Even so, Mars’ move may resemble that of a skilled poker player. While the company is getting out of the king business, it is now offering “share size” bars split up into two or four serving-sized pieces to encourage customers to either share or consume in multiple sittings. To foster such sharing or portion control, the company has even developed a clever “twist” wrapper that allows chocolate lovers to safely store the remaining pieces without risk of staling.
With share options similar in size, price and calories to their larger predecessors, are they a threat to the all-powerful king? Or is it a king with a different name?
King of the Crop
To fully appreciate what Mars is risking with its pledge to off the king, it is wise to first examine the impressive growth of the pack size and the key role it plays in the candy category. After all, it’s one thing to promote health and wellness; to do so by discontinuing production on the fastest-growing, most retail- and consumer-friendly products ups the stakes on such a gamble.
While standard-sized bars still dominate c-store unit sales, king overtook standards in dollar sales in 2011, increasing by 3.2 points to make up 46.9% of sales, according to Chicago-based SymphonyIRI Group. During that period, dollar sales of singles fell 2.8 points to 44.1% of the market.
As vice president of global customer and industry affairs for The Hershey Co., Tom Joyce is well aware of the phenomenon: Hershey’s 2011 third-quarter earnings report showed the Hershey, Pa.-based company holding a 54% share of the segment.
“Hershey created the king-size segment in the ’80s when we introduced the ‘Big Block.’ Eventually the segment was called king size,” Joyce says. “The appeal of king size for retailers has been the same since it came out: it’s a larger size at a higher price point than standard bars. King size appeals to consumers because it offers value and another choice for how to enjoy confectionery. Our retailers are able to promote the segment at an attractive price point where the consumer is getting a value.”
That price point was all the more attractive when rising manufacturing costs pushed the standard-size retail price past the $1 barrier—something retailers and chocolate companies alike were hesitant to do. “From a supply side, market prices for cocoa doubled from 2006 to about 2010,” explains Bishop. “That increase in input cost has had a large impact on margin.”
The price increase on standard bars made upselling larger counterparts all the more tempting, giving retailers every reason to embrace the king—and they have.
“The king size is definitely the way to go because of its value,” says Kevin Hall, category manager of Warren, Pa.-based United Refining Co. “Standard sizes have really not been perceived as a value in the last two to three years. Our growth in king size has been phenomenal.”
“In the current economy, king size has grown tremendously,” Joyce says. “If you go into a c-store, you can see that king size is one of the preferred pack types that retailers promote.”
“Consumers see a lot of value in the king offering,” said Lance Smith, category manager for candy for Temple, Texas’ McLane Co., in this year’s CSP Category Management Handbook. “From a size-to-cost ratio, it’s not significantly greater [priced] than a standard bar; however, the consumer seems to perceive that the product size is significantly greater.”
Bishop has researched the specifics of that size-to-cost ratio and found that sometimes there’s no difference in what consumers pay per ounce between king and standard sizes—meaning an even more impressive return for the manufacturers and retailers selling the products.
“For Hershey Bars, the king size costs about 5% less per ounce,” says Bishop. “For Snickers, that’s not the case: It’s essentially the same price per ounce. You’re not getting more for your money—you’re just getting more.”
Real or not, customers perceive a value in king-size options—crucial in an era in which buyers crave more bang for their buck. “In addition to a great value, king size gives consumers the opportunity to enjoy and share their favorite brands with the people that they’re with,” says Joyce.
Sharing the Wealth
While Hershey may assume some people might choose to share the enlarged candy bars, Mars is taking that sentiment a significant step further by encouraging sharing and portion control.
First offered in 2008, these rebranded king bars are now labeled 2toGo, 4toGo and Sharing Size—sizes based on the standard packaging. For example, what used to be a king-size Snickers bar is now marketed in the 2toGo size, with two individually portioned servings. Because a standard Twix package already has two pieces, the larger share option comes as a 4toGo. And served in a pouch, all former king-sized M&M’s products are now sharing size, encouraging consumers to split the bag’s contents.
Mars further committed to promoting health and wellness when it signed the 2012 agreement with the first lady, joining the Healthy Weight Commitment Foundation. The foundation is made up of 16 manufacturers, all of whom have pledged to eliminate 1.5 trillion calories by the start of 2016 through lower-calorie options and reduced portion sizes.
To do its part, Mars has vowed to keep all chocolate products to 250 calories or less (per serving); remove 97% of trans fats from its chocolate products; and offer a wider range of options, including smaller portion sizes, multiple product pieces for larger products and resealable packaging.
“I personally think it was a home run,” says Bill Tencza, senior category manager for Quick Chek, Whitehouse Station, N.J., about the share sizes. “A lot of people are watching their weight. I think it’s going to help candy sales, especially [with] the female customer.”
According to Mars, Tencza is just one of many retailers applauding the move. “We’ve shared our 250-calorie commitment with retailers, and they support our efforts to promote health and wellness,” Lupo says. “We believe our health and wellness strategy will make our iconic brands even better.”
What’s in a Name?
While partnering with the first lady to fight obesity and promote wellness certainly paints Mars in a positive light, with the share sizes so similar in weight and cost to their king predecessors— many of which can easily be shared— are the new products merely king by another name?
“Hershey invented portion control when we introduced individually wrapped Hershey’s Kisses in 1907,” Joyce says. “In addition, we offer other brands that are sold as individually wrapped pieces of candy, including our Hershey’s Bliss and our newest offering, Hershey’s Simple Pleasures, which have 30% less fat.”
The company also offers shareable king-size options: a king-size package of Hershey’s Reese’s Peanut Butter Cups has four individual cups, which are very easy to share with others or save for later. Same with Hershey’s Kit Kat and Hershey bars.
So what differentiates Mars’ 2toGo, 4toGo and Sharing Sizes from products already on the market? For one, innovative packaging. “In 2009, we began incorporating a new wrapper with ‘memory’ that is unique to the chocolate category,” says Larry Lupo, Mars’ vice president of sales. “We call it ‘Twist Wrap,’ and it offers convenience, as the consumer can twist the wrapper closed, making it easier to save a piece for later. These formats generally represent more than a single portion and are clearly labeled as such.”
Retailers responded to this creative solution, which was the 2009 CSP Retailer Choice Best New Product Contest Winner for Best New Packaging.
“This type of packaging helps the industry combat the perception that convenience retailers and snack manufacturers promote overindulgence,” says Hal Adams, vice president of retail merchandising for Valero Retail Holdings Inc., San Antonio.
Mars’ new packaging also prominently features suggested serving sizes and Guideline Daily Amounts (GDA) information. According to Lupo, this helps consumers “make informed snacking decisions.”
While Mars’ share sizes display some nutritional info on the front of the package (and more on the back) to make it easier for consumers to find, Joyce cites Hershey’s practice of posting such data on the back of packaging, where the nutritional information for most foods can be found.
“Hershey puts all the ingredients and nutritional values on everything we sell,” he says. “Consumers have the information necessary to make an informed decision about the products they purchase. Confectionery is a treat, and the key is to provide a range of choices and options to enable consumers to decide how to best enjoy their treat.”
In terms of what’s actually in the products, the numbers show there’s not much of a difference between the caloric content of Mars’ share sizes and Hershey’s traditional king sizes. (See chart on p. 132.)
Even retailers who believe in the potential of share sizes don’t see a huge difference between shares and kings in terms of how they stock and price the products.
“We consider the share size to be king size (in terms of merchandizing),” says Tencza. “Wherever the king size were before, we put shares in the same place.”
Such similarities to king size could be viewed as a positive. In theory, what Mars has done is provide a product innovation without any drastic changes in price or manufacturing—and no need for retailers to change their merchandising practices. Will other confectioners follow suit?
“I think it’s a function of how these new sizes do in the market in terms of gaining share,” Bishop says. “If they do, it’s an indication that consumers like the change and others would follow suit. I think it would happen in candy forms that can easily be adjusted without drastically changing the product.”
Whether or not the share sizes gain market share, Joyce doesn’t envision Hershey emulating the share-size model any time soon. “We understand that consumers want a choice in what they purchase and consume,” he says. “We don’t find it necessary to tell consumers that they must share something. Our products are easy to share or eat individually.”
As for Mars, the company is quite pleased with its numbers since it started offering share sizes: Nielsen reports large-size versions (which includes both king and share size) of Snickers and M&M’s Peanut both saw double-digit growth in c-store sales and unit sales from 2010 to 2011, with Twix c-store sales up a whopping 44.5% and unit sales up 33.5%.
“Consumers continue to enjoy our iconic brands, and Mars continues to outpace the chocolate category growth,” Lupo says.
Whether such growth is a result of the share size and its packaging or is a sign of consumer preferences, Mars plans to continue with its goal to offer what it considers more responsible options. If the company continues to see such impressive growth with share sizes, other confectioners might just rethink their king-size strategies. Only time will tell.