CHICAGO — A variety of occasion-based triggers drive candy category sales in the c-store—particularly as it relates to the hard-to-read Gen Z and millennial crowd. It has retailers working overtime to figure out their flavor of the day.
Consumers who are part of the Gen Z and millennial juggernaut—or anyone born between 1981 and 2010—are armed with buying power. For example, while Gen X and boomers are responsible for 70% of total candy sales, according to Chicago-based IRI, millennials grew their total candy purchases by 8%—and by 9% for nonchocolate—vs. a year ago.
That candy growth performance is two times more robust than that of the total population (3.5%), according to IRI data reflecting multioutlet plus convenience channel activity for the 52 weeks ending Dec. 29, 2019.
While younger consumers have a decided sweet tooth, they are discriminating in their tastes.
“Broadly, we know that millennials truly walk their talk when it comes to buying products aligned with values around sustainability,” said Sally Lyons Wyatt, executive and practice leader for IRI’s Client Insights division. They seek fulfillment around experiential and simplicity, or natural, clean and limited ingredients, she said.
And one candy segment in particular has proven its potential to deliver the experience these younger age groups are craving.
“Millennial and Gen Z consumers want dynamic flavors, engaging products and fun brands—and these days, new flavor profiles are off the charts with the nonchocolates segment,” said Lyons Wyatt. The timing is fortuitous: Cocoa prices spiked in 2019 and have pressured wholesale chocolate costs, with varying effects on retail prices. But there’s more to the motivation for nonchocolate.
“Exotic, hybrid flavors are gaining popularity [regardless of price spikes],” said Andrew Lee, senior category manager of center store for Irving, Texas-based 7-Eleven Inc. “Customers seek out-of-the box flavors, and this led 7-Eleven to collaborate with a brand like Hi-Chew to bring exclusive fruit combinations, such as passion fruit and mango, to our stores.”
Varieties such as soft fruit chews, sour gummies and others “continue to be a focus with Gen Z and millennial consumers,” said Spencer Webb, center-store category manager for Temple, Texas-based McLane Co.
“Retailers should think about highly visible merchandising solutions to complement inline and candy bag sets, such as endcaps and displays,” he said. They should also leverage four influential values: sharing, treating, fun and experiential.
C-stores can be a direct beneficiary of the trend, too: Across multiunit outlets, chocolate represents 55% of the category, with nonchocolate at 30%. But across convenience, chocolate shrinks to 46% of the category as nonchocolate varieties climb to 34%, according to IRI.
Research Driving Innovation
Research is driving innovation, and suppliers are reading the tea leaves to formulate strategies that resonate with younger consumers.
“We’re seeing a dramatic shift in snacking habits among Gen Z and millennial consumers, who demand more choice when it comes to flavors, textures, pack sizes and price points,” said James Dodge, vice president for convenience for Hackettstown, N.J.-based Mars Wrigley U.S.
Marrying up in-store activity with online engagement—all to meet demands of today’s on-the-go consumer—Mars Wrigley has rolled out several new products. One of these is Extra Refreshers, the brand’s first soft-chew format gum. Mars Wrigley introduced the item based on a recent Nielsen study indicating that soft-chew gum is the fastest-growing form with the under-25 age group, Dodge said.
Based on its own global research into consumer preferences, Mars Wrigley also debuted Skittles Dips—candy that combines a chewy texture with creamy yogurt-flavored coating—and Starburst Swirlers. On the chocolate side of the category, the company introduced M&M’s Fudge Brownie, which has a denser, creamier fudgy center than the original milk chocolate M&M’s.
Retailers are also testing and learning. 7-Eleven strives to be a destination for exclusive and limited-edition candy options. The retailer embarked on exclusive collaborations with Mondelez, Trolli and Hi-Chew, including social-media programs, augmented reality experiences, online games and giveaways, Lee said.
In the chocolate category, millennials have overindexed on purchasing small-batch, premium and artisan varieties that are organic and fair trade certified.
7-Eleven is bullish on a new high-quality Belgian chocolate item that joined the mix, touting “playful images and a highly approachable price point,” said Lee. “We know from recent tests that customers still enjoy indulgent treats. Because healthy confection is gaining popularity with customers, we continue to test new products and explore options that will cater to the customer’s needs.”
Newcomb Oil Co.’s Five Star Food Marts, Bardstown, Ky., is focusing on the sharing, treating, fun and experiential aspects of candy to help grow sales, said Tim Young, sales manager for the 82-store chain.
Five Star’s in-store merchandising program articulates these occasion-based need states, and peg bags, gummies, tubes and stand-up pouches garner top sales receipts across all pack formats—with younger consumers driving the lion’s share of volume, particularly for nonchocolate, said Young.
Five Star saw everyday candy at its 82 stores achieve double-digit sales increases throughout 2019. The result: no SKU cutbacks with its January 2020 reset.
“Usually a reset means eliminating something to make room for new arrivals, but this year we expanded in-store candy footprints to 12 feet from 8 feet without trimming,” said Young, who carved out additional space by vertically creating gondola space. The tactic yielded an additional 35 new SKUs.
Managing the candy category has gotten more challenging because Gen Z and millennials’ purchasing behavior can be a moving target.
“We’re in the beginning stages of diving into a higher degree of demographic data through exchanges with vendors and suppliers like Hershey’s and Mars Wrigley,” Young said. Five Star’s center-store team is examining how its stores are meeting the confection desires of this younger target audience.
“The broad idea to remember is that, as much as we are in the food business, we’re also in the entertainment business—to create an experience,” Young said.
Mars Wrigley is set to unveil its Innovative Merchandising Incubator, a national program to help retailers address tough merchandising challenges. The company sees the initiative as “a custom solution to drive in-store sales and ultimately grow the category,” Dodge of Mars Wrigley said.
CPG companies are eager to obtain deeper insights about Gen Z and millennials and optimize new product development. “The data is still early for purchasing impacts of Gen Z since many are still living at home,” said Erica Norton, senior director of consumer insights for Hershey, Pa.-based The Hershey Co.
Gen Z consumers in middle and high school identify with “the social dynamic of ‘treat time’ as [a phenomenon] having an impact on choices,” Norton said. “They are more likely to choose candy with extreme flavors or different flavor combinations with friends.”
In the meantime, millennials have increased their candy buying propensity by 30% or more since 2015, Norton said. “Millennials continue to join the workforce and are using this newfound financial independence to experience different kinds of chocolate and candies that are a reflection of their growing maturity. This is seen with bold combinations and exotic and international influences,” she said.
And now a new wave of young consumer—Generation Alpha—is emerging on retailer and CPG checklists, said Lee of 7-Eleven.
“Born after 2010, Gen Alpha represents our future customer, which has led us to expand novelty sets with a focus on ‘surprise and delight’ items like Kinder Joy and Yowie. To highlight our exclusive products, we use eye-catching display shippers to draw attention,” said Lee.
As the next generation begins shopping c-stores, retailers and manufacturers will be tasked with deciphering a new set of buying patterns. But some commonalities between age groups remain.
“Candy is known across all generations for treating and fun,” Lyons Wyatt said. “It’s paramount to most consumers and isn’t going to change.”