Bite-size? Shareable? What about products that morph into something new? These are all factors that play a role in the world of confection today.
According to the National Confectioners Association (NCA), brand and mood lead the candy decision tree, making variety, including new item introductions, very important. In 2013, retailers added seven new items across channels that generated $890 million in new item sales.
“In 2013, business was big, growing and profitable,” says Larry Wilson, NCA’s vice president of customer relations. “The total confectionery market reached $33.6 billion in 2013—marking the sixth consecutive year of sales growth. Chocolate is the biggest segment and grew the fastest at 3.6% vs. 2012. Additionally, the outlook for 2014 and beyond is very positive.”
However, some traditional candy brands need some excitement to revive flat performances, and new entries could provide that lift. The migration into new brand formulations is something that is “important for reasons beyond sales,” says Susan Viamari, editor of Chicago-based research firm IRI’s Times & Trends. “It’s motivated by the need to create excitement and buzz factor, which seems to be equally important [to sales].”
Think M&M’s and M&M’s Chocolate Bar, Jolly Rancher Hard Candy and Jolly Rancher Bites, and the classic Butterfinger Candy Bar and breakthrough Butterfinger Peanut Butter Cups.
While there are certainly bona fide examples of brands that branch out into all new product categories—Special K comes to mind—the process naturally has its share of short-term upside coupled with uncertainty about longevity. None of the decisions regarding product line extensions are embarked upon lightly. At The Hershey Co., the approach is methodical.
“Our category and consumer knowledge and insights is embedded in all of our business decisions. ... Hershey has a team dedicated to uncovering the necessary data, trends and insights to successfully shape future innovations and line extensions,” says Brandy Woolford, associate manager of brand public relations for The Hershey Co., Hershey, Pa. “This detailed research allows us to discover new and innovative opportunities in the candy and snack aisles such as Ice Breakers Cool Blast Chews and Hershey’s Spreads.”
That doesn’t mean the new products are obvious additions to a set, either.
When Randy Adams caught wind of the launch of Butterfinger Peanut Butter Cups earlier this year, he sensed opportunity—but with a caveat. He shuddered when thinking about the category-management challenge of properly calibrating his confection department all over again.
“You have mixed feeling,” says Adams, center-store category manager for the 113- unit Huck’s Convenience Stores, Carmi, Ill. “I’ve been doing this a long time, and these line extensions are often temporary blips on the radar that don’t sustain momentum. I’m a bit jaded by the hype that accompanies a new offer that fails to live up to its promise. I remember ‘sure things’ where we gave it a lot of play in the stores, and it ultimately failed.”
Adams believes brand cannibalization is always possible for brands that make a radical turn in package and formulation characteristics, but he cites one example in which past is prologue. “Years ago, Werther’s Original USA launched a soft-chew line extension, and the two versions were able to coexist nicely. I think it’s a case of two different consumers—someone with a dry mouth opts for the hard Werther’s, while the soft candy is for a different occasion. That same idea would apply to Jolly Rancher’s [new Bites soft chews].”
As for the Butterfinger Peanut Butter Cups two-cup single pack and four-cup shareable king pack, Adams says so far it has not cannibalized the flagship Butterfinger. Moreover, he says that it has not eaten into his sales of Reese’s Peanut Butter Cups, which has a loyal following of its own. It’s all incremental.
Indeed, from Hershey’s perspective, line extensions definitely bring in new users. “These types of line extensions generate incremental sales and provide opportunities to gain new consumers to grow the category,” Woolford says.
Single-Bar Boosters
Impulse combined with product-positioning strategies are crucial for getting strong returns on line extensions such as these, because 31% of all confection purchases are made in secondary locations, according to McLane Co., Temple, Texas. Convenience stores account for $5.3 billion in sales and possess a 23% share of total U.S. confectionery sales.
And according to recently released data from Nielsen, tied to preliminary results from the NACS State of the Industry Survey of 2013 Data, c-stores own the second spot in a four-industry race in the candy game. Food comes out on top of syndicated candy sales at $5.6 billion, c-stores are second with $3.9 billion (up 2.8% over last year), drug comes in at $3.1 billion and mass comes in at $1.6 billion. According to the NACS report, bite-size, king-size and bagged candy add value and variety, and therefore fuel growth.
In considering the state of traditional bars, Viamari says, “It makes sense over the years to try and prop up this segment. The price point of traditional bars doesn’t seem to hold the same level of value as the reshareable bags or the king sizes.”
One prevailing value of the 1.5-ounce bar is that it’s the most powerful for immediate-consumption purposes, and 53% of candy sales are bought on impulse, according to McLane. Minis and kings can be immediate, but they also run on a parallel track as a take-home candy.
Value is key. Adams says that while standard-size-bar sales are flat, king sizes and peg bags are “just phenomenal. The economy being down is a reason the king and peg bag grew. It’s not that people don’t have money for a candy bar, but they look more for value, and those two sizes are perceived as value.
“I think the innovation in standard-size packages has helped to keep sales flat for that size: Innovation is not going to turn it into a powerhouse,” he continues. Huck’s offers an everyday candy discount, typically in the form of two-fors, he says.
An isolated, seasonal example of value driving sales is Easter candy. In data from the National Confectioners Association (NCA), last year proved to be a challenging one for Easter candy sales. Chocolate Easter candy, which owns 47% of Easter candy sales, fell 8.6%; gift-box chocolates, which represent only 3% of Easter sales, fell 20.7%. What these items lost in sales, box/bag/bar types greater than 3.5 ounces made up. Part of that is due to better merchandising, says Jenn Ellek of NCA. NACS SOI data also reveals that bagged, repacked peg candy comes in just behind chocolate bars, at $948 on average per store per month.
How do marketers know which brands to ride into new territory? Viamari believes “it’s both an art and science. The marketing and R&D people might look at trends that are working elsewhere, but it might also be a shot in the dark on the decision making.”
The transition to multiple categories such as what Special K has done—and even Jolly Rancher with its Freeze Pops—opens up brand users to a trove of opportunities across day-parts. Just look at Greek yogurt, which began as a simple trend in the dairy aisle and has morphed into cereals, snack bars, frozen treats, sauces, dips and packaged beverages.
The Hershey Co. entered a new category this year with the introduction of Hershey’s Spreads. The spreads are available in Chocolate, Chocolate with Almond and Chocolate with Hazelnut. Pairing suggestions from the company include graham crackers, strawberries and bananas, or more adventurous pairings such as celery, pineapple and pickles. According to Woolford, it was developed to “deliver on the consumer demand for the unique taste of Hershey’s chocolate flavor beyond the confection aisle. Hershey’s Spreads allows consumers to transform everyday snacks into delicious treats.”
LTO Lowdown
Larry Lupo, vice president of sales for the convenience and drug channels, Mars Chocolate North America, Hackettstown, N.J., says that limited-edition offerings provide an automatic buzz, and cited Snickers Rockin’ Nut Road Bar as a variety that was “such a popular limited edition a few years ago that we just brought it back in January.”
Limited editions provide a sense of urgency, but what about when LTOs become permanent? A hit during the holidays, M&M’s Brand Milk Chocolate Mint Candies have been permanently added to the lineup.
“Research shows that consumers are willing to try new flavors from brands they already know. We’ve had tremendous success with brand extensions,” says Lupo.
In September, Hershey will launch Ice Breakers Cool Blast Chews, an extension of the popular Ice Breakers Mints line. “Grounded in consumer insight, it is a product that chews like a gum but dissolves like a mint and provides a cool blast of instant freshness,” says Woolford.
Confection category managers know that the top 10 candy brands rarely change positions, demonstrating a great deal of solid entrenchment for longtime favorites. Thus, morphing into a new formulation such as M&M’s Chocolate Bar and Butterfinger Peanut Butter Cups requires empirical findings from a brand team, as well as outreach to consumers through focus groups and more.
A crucial element of Hershey’s product development process is not stopping the analysis once the product rolls out. “Hershey is dedicated to ensuring all product launches, whether brand new items such as Lancaster Soft Crémes and Ice Breakers Cool Blast Chews or line extensions like Jolly Rancher Bites, are successful. Through extensive R&D, Hershey ensures that our product developments are executed with discipline while still meeting the consumer demands,” says Woolford. “R&D plays a significant role from start to finish in all phases of our product developments, including creation, refinement and perfecting.”
Will candy brands that morph into new forms continue to see additional opportunities? Lupo says that seasonal confectionery is an area in which Mars looks to extend its brands “with great success.” Singles in seasonal shapes are growing, so Mars is expanding its line this year with Twix in shapes including hearts, eggs and ghosts.
Retailers such as Adams of Huck’s like limited-edition confection for just that value—consumers have an urgency to buy and look forward to them when they return. As for permanent extensions, success is found a la Werther’s: when the new iteration meets a different consumer need.
—Additional reporting by Abbey Lewis
Driving Front-End Sales
A recent Mars/Wrigley Front End Study found that price and value are important to front-end shoppers, so offering value options helps increase conversion. “Value can mean different things to different consumers, and in confections, it can include change makers and single bars,” says Larry Lupo, vice president of sales for the convenience and drug channels, Mars Chocolate North America.
The study also shows the importance of secondary displays. The majority of consumer gaze time is between the register and card swipe, making this an ideal spot for a confectionery counter displays, Lupo says.
Another opportunity is capitalizing on dwell time. “Nearly one-third of c-store shoppers wait in line to check out, and retailers can take advantage of this dwell time by encouraging consumers to shop while they wait,” he says. “Floor displays— such as those advertising promotions and seasonal confections—perform well in this location.
Additional displays in high-traffic areas like the coffee rack and the cooler vault also can stimulate sales.”
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