June 27, 2013
Sugar confectionery has faced significant challenges in recent years, particularly through convenience, yet the highly impulsive category has managed to maintain strong growth through the channel.
While effective management and ongoing manufacturer innovation have been the secrets of this success, C-Stores are having to work hard to fend off the sales threat posed by heavy supermarket discounting of sugar confectionery products.
Clearly, the sheer convenience it can offer treat-hungry, on-the-go consumers is the big advantage that the impulse channel has over grocery ... but there are others.
In comparison to supermarkets, for example, C&I store managers have a closer understanding of who their shoppers are and what they are looking for from their shopping experience. Operators need to look to leverage their close engagement and understanding of their shopper through value-add and eye-catching promotions.
Almost everyone buys sugar confectionery at a petrol or convenience outlet at some stage. It is one of those broad appealing categories that people love to eat regularly or dip in and out of as the mood and need takes them. Broadly speaking, the average store will get plenty of tradies in the mornings and afternoons, mums with kids after school, city workers at lunchtime, and adults looking for a top-up on the way home from work. These groups are all potential sugar confectionery customers.
According to him! data, the candy shopper in convenience skews to females (59%) who are busy providers (29%), or 18-34yo singles (21%). Candy shoppers in convenience are highly likely to consume their purchase themselves (82%), though they are also more likely to share it with others (33%) compared to shoppers of other confectionery types. In convenience, candy is predominantly bought with beverages (44%).
Confectionery penetration increases throughout the day in parallel with the impulsive nature of shopper purchasing behaviour. It means driving impulse purchase opportunities at and near checkout and other key hotspot locations is critical to capture every sale possible. Maximising confectionery on display allows store managers to build on the impulsivity of shoppers and increase the basket size.
Nestlé – which manufactures the Allen’s, Lifesavers and Wonka brands – says off locating product will drive a higher sales uplift. It says consumers see the product on their way to the counter, and any price promotion will act as the hook to encourage purchase. It says running a price promotion off shelf is not as effective as running the same price promotion off a gondola end or in dump bins / towers in the customer’s path throughout the store.
Mondelēz International, which manufactures and distributes The Natural Confectionery Company products including the popular Snakes and Party Mix, agrees that by increasing the focus and visibility of sugar products the category has enormous potential to grow. The company says that, according to Nielsen data, convenience accounts for 7% of total candy bags sales, and the candy segment is actually growing faster in this channel than it is in grocery. Mondelēz International recommends merchandising sugar confectionery in the walk-up between the entrance to the store and the counter to capture impulse sales.
Companies such as Wrigley, which is responsible for the fast-growing Starburst and Skittles brands, says point-of-purchase merchandising solutions are critical to maximise impulse selling and growth of basket size. It says permanent counter merchandising solutions are at the core of the Wrigley convenience business, ensuring the single-serve segment is always within arms’ reach to maximise impulse sales and incrementally grow transaction size.
Stuart Alexander, which distributes the Mentos brand, Fisherman’s Friend Lozenges, Werther’s Original Candies and Chupa Chups, says that while promotional pricing in convenience is clearly very important, it is the product innovation and channel support in terms of communication and visibility that really makes the difference. It also believes there is the opportunity for ‘channel exclusive’ products, that only convenience can service well, and it quotes Chupa Chups Crazy Dips as an example.
Another natural advantage that convenience has over grocery is its ability to offer shoppers a genuine breadth of offer. As grocery stores continue to streamline product offering, C-Store operators have the opportunity to be the platform where shoppers can find all their favourite products. They can try to make sure they always have a product consumers are looking for, or are excited enough to buy impulsively.
Wrigley says that it gets a huge number of requests from frustrated shoppers who can’t find its unique Skittles brand at their local store.
While grocery may drive greater volumes of sugar confectionery, convenience ensures consumers are able to purchase the product every day. It is also able to provide exposure for all brands, driving trial and repeat purchase.
Offering a wide variety of sugar confectionery, from stick products that are perfect for refreshment or a small treat on the run, through to lolly bags which are great for entertaining the family on a car journey is something the convenience shopper will respond to.
Companies such as Haribo are relatively new to the Australian market but believe they can bring greater differentiation to the category. Haribo, whose leading products include Goldbears, Starmix and Tangfastics, says greater variety builds brand loyalty and means stores have less need to rely on price reductions to drive sales. It believes that while consumers want value for money they understand value is not always represented by the cheapest product.
Similarly, Fino Premium Confections is starting to have a huge impact in the marketplace with its premium quality, individually wrapped fruit-flavoured jells. The company says the product – which is 100% natural, and is kosher, vegan and gluten‐free – offers a real point of difference. It uses pectin – a soluble fibre extracted from fruit and vegetables – as a gelling agent, rather gelatine which is derived from animal by-products. Having recently been ranged in Coles supermarkets, the product has also begun rolling out in the convenience channel and has been selling well.
While, the supermarkets have been placing the product in the gifting aisle with boxed chocolates, Fino says that – in convenience – it prefers to see its 120g bags sold in its small footprint pop stands, while the single-serve jells are very much a counterline product. With the bags, which contain 12 pieces, selling for $5.99, and the single serve selling at four for $2 or 60 cents each, they offer C-Stores an excellent dollar margin.
The sugar confectionery category can be broken down into a number of important segments which all demand unique treatment. Nestlé says candy rolls, such as Lifesavers or Mentos, should be at the front counter, in line of sight for the shopper. It says these products are impulsive and also often require only loose change for a purchase.
It says lolly bags should be in a clearly defined bags segment. Ideally this will be along the window on the path to the purchase as the customer approaches the checkout. Given the impulsive nature of confectionery, this is an ideal place to have the products rather than expecting a shopper to seek out bags in the aisle.
Locating small purchase products, which are often consumed by younger shoppers, together allows for consumers to enjoy a small treat and also to purchase different flavours and textures if they are buying more than one item. This area in store can create some fun and excitement for young shoppers
having the right range stocked in the right areas is obviously critical to sugar confectionery success, but promotional activity also has a part to play. It will be increasingly important for C&I channels to demonstrate creativity or offer superior value for its customers via effective cross-category or ‘2 for1’ promotional activity.
Combo deals can be very effective, and give the consumer the opportunity to choose a few different products that satisfy their mission. Offering a variety of products in a combo deal (i.e. drinks, salty snacks and confectionery) allows shoppers to choose a range of products that suits their needs. Placing them together in a shoppable location will assist the shopper in easily identifying their product choice and the saving that they will make.
Nestlé says that it has also had a great deal of success with key promotions such as two for $5.50 on lolly bags. It says consumers like this promotion because Allen’s offers a wide range of products from Jellies (Snakes) to beaten mix (i.e. Milkbottles) to chew mix (i.e. Minties) which offers them choice of flavours and textures.
Convenience stores should maximise any promotions they are offered with all Point of Sale material available. Put simply, if customers’ attention is drawn to special offers, they will buy. It is also very effective to remind customers at the till of the promotions. If they are buying a bag of a promoted line, for example, staff should let them know they can purchase two at a reduced rate and save.
Petrol and convenience also has other unique advantages over grocery including its ability to use forecourt communication to capture shopper attention whilst they are walking into the store or standing at the pump.
Nestlé has had a lot of success in tying a promotion to a fuel purchase. For example, Nestlé says offering any Allen’s Bag for $2.50 with a fuel purchase has proved highly fruitful.
Wrigley also sees the potential of a greater focus on fuel conversion, noting that close to 50% of all shoppers who frequent a P&C outlet only purchase fuel. It says Coles Express has been successful in utilising the fuel shopper mission to entice shoppers to convert to sugar confectionery sales. For example, by promoting Starburst Jellies for $2 with every purchase of fuel over $10, Coles Express grew its jellies business by 9.4% in the first quarter of the year.
However, Wrigey’s most eye-catchingly successful recent promotion has been its exclusive ‘Scratch & Win’ event across national Coles Express stores which combined Wrigley and Mars products with a 2 for $5 promotion.
Stuart Alexander has been bowled over by the response to its promotion in the independent trade offering consumers the chance to ‘Win a Cruise’ simply by purchasing Werther’s products. Similarly, a successful display driving promotion to ‘Win a Chupa Chups Megatin’ in independent grocery gave the brand a strong start to 2013. This has been backed up by the launch of the brand’s ‘One Direction Australia and New Zealand Tour partnership’.
Another way in which convenience has been able to fight off grocery’s sugar confectionery sales share assault is by offering channel appropriate pack sizes.
The on-the-go convenience consumer is naturally looking at self-consumption options. With growing levels of health consciousness, smaller packaging is becoming an ideal way of offering convenience customers portion control. Nestlé has recently launched a new Allen’s sub-brand, ‘Cheekies’. These 72g small portion lolly bags are designed for individual consumption by the on-the-go convenience consumer.
Wrigley also sees single-serve sugar confectionery as one of the key drivers for the strong growth being seen. It says that single-serve items, when merchandised in the correct front-end locations, are enjoying a significant share of the C&I confectionery shopper’s repertoire.
At the other end of the scale, larger lolly bags are also growing as consumers look for sharing bags suited to parties, barbecues and other social occasions. Caltex, for example, has launched larger pack sizes (1kg jellies bags) and despite concerns about the high price point, has achieved demonstrable success. This shows that if a retailer has a clear strategy for the category, supported by insight and strong execution they can achieve competitive advantage.
Sugar confectionery consumers are notoriously keen to try new products and ongoing innovation is also key to the category’s growth across all channels.
The introduction of Cheekies soft-centres jellies with a $2.5m advertising campaign, and the expansion of the flavour profile of Minties and jellybeans has certainly sparked good results for Nestlé.
Wrigley says its real innovation has focused on maximising the flavour profile of Skittles and its Starburst fruit flavoured jellies. Ultimately, it believes it is great taste and high product quality which keeps consumers coming back for more.
For its part, the Natural Confectionery Co. achieved +6.4% Value Sales growth in 2012, driven by successful innovation which included the launch of Jelly Joiners, Lolly Disguises, and Strawberries and Cream Bliss. More recently, the company has released new Smoothie Chews and Sour Chews, to build on the success of 180g Fruity Chews. These launches are being supported by a campaign encompassing television, outdoor, online advertising, and sampling, which focuses on the products bringing out the ‘Natural Born Chewer’ in consumers.
Stuart Alexander has also been thrilled with the way the new Mentos Strawberry roll has been received on the back of a massive multi-media marketing program. Similarly, Chupa Chups Surprise, a new candy and novelty toy offer, which was launched exclusively in the convenience channel this year has generated a lot of excitement.
As mentioned earlier, the arrival of Fino jells has shown that convenience customers are prepared to buy premium sugar confectionery products. Promising a genuine indulgence and a ‘real-fruit-melt-in-your-mouth’ texture and taste, the citrus or berry jells are aimed at treat-seeking adults, primarily women aged 25-55. The company, which originally sold its jells from a single upmarket shop in Melbourne, has plans to further expand into the convenience channel and has brought new excitement to sugar confectionery.
Haribo has only been trading in the Australian market for a short time, with its range of differentiated jelly skus. However, it says that as its brand develops in the market, it will evaluate consumer trends and introduce NPD and point of difference skus. The company has more than 300 skus in its global portfolio.
While the grocery channel is increasingly going after the same small basket shopper as convenience, it is clear all is not lost on battleground categories such as sugar confectionery.
The ongoing global financial pressures and intense competition between domestic grocery chains may have made shoppers increasingly price-savvy, but the convenience channel has some significant advantages over its supermarket competitors. Whether these are enough to deter customers from bypassing convenience in order to opt for the deep discounting available on sugar confectionery in grocery, will depend on how well convenience operators play their cards.
* Convenience and Impulse Retailing would like to thank Stuart Alexander, Mondelēz International, Wrigley, Nestlé, Fino, and Haribo for supplying information for this article.