A NICHE FOR NOVELTIES

MIKE STERNMAN

The hot product trends in kids' novelty candy can burn out as fast as the batteries in a favorite Christmas toy come January.

But as a category, novelty candy is showing some staying power in supermarkets. Whether the latest craze at the American Wholesale Marketers Association convention in New Orleans this week is interactive play-value products or slimy shock sweets, retailers are realizing its time to get serious about kid stuff.

As momentum builds for the kids' novelty candy category, some grocery retailers and wholesalers are adjusting their strategies -- especially in light of the flat sales and margins they are getting from some mainstream candy segments.

For one thing, the revenue in kids' novelties isn't merely coming through in-and-out promotions anymore, said industry sources. Permanent novelty candy sets have been springing up in many big food stores.

The number of stores that have permanent novelty sets has zoomed from "very few" five years ago to an estimated 18,000 large supermarkets -- up to three-quarters of the chain stores and one-quarter of the independent stores in the United States at present, according to a leading novelty candy supplier.

But that trend toward a permanent presence begs the question: If stores decide to allot them a regular berth, then where do these kids' novelties belong, and what exactly should the stores be carrying?

Meanwhile, retailers are watching such questions grow bigger as more confection vendors scramble to expand the business from their end.

One major candy supplier said he's seen anywhere from 10 and 15 different vendors jump into the kids' end of the pool since 1993. "The selection of vendors has increased because it is a growth category," observed Cheryl Robertson, spokeswoman for Dominick's Finer Foods, Northlake, Ill.

As a result, Robertson said, Dominick's should have more than enough product resources from which to fill the 24 feet that it has allocated to novelties in each of its units during the past year.

Hughes Family Markets, Irwindale, Calif., was apparently an early subscriber to the trend toward more of a merchandising commitment.

"We were one of the first in our area to go ahead and put in a kids' novelty confection section," said Debra Romero, candy buyer at Hughes. "We noticed a lot of these children's items being presented, but really didn't have a place to highlight them."

Hughes had 4-foot sections installed in-line chainwide at the beginning of 1994. The chain found out soon enough how different kids' confectionery can be as a business, Romero noted.

"It's probably the only section that improves its perception with the customer when we put it on the bottom three shelves. It is quirky, a very strange little business, a category hard to understand when you're over 10 years old," Romero said.

"Those items have a short shelf life, because the kids' attention goes to something else pretty quick," she added.

To help the offering stay current -- an absolutely crucial element to success in this business -- Hughes has sought out close working relationships with service distributors and other middlemen.

Hughes is not alone. Sources at the retail and wholesale level said many chains would rather avoid replanogramming kids' sections themselves to keep pace with these frenetic shifts, and are not interested in juggling stocks in their warehouses.

The expertise of specialty wholesalers and brokers is invaluable in controlling and freshening inventories, they said. It also goes a long way to buffer the emerging category against kids' whimsical product preferences.

Specialty candy and tobacco wholesalers and brokers are playing an aggressive role in raising product visibility in the stores through placement of displays.

Hughes' juvenile candy set, for example, is handled through Holiday Candy Co., Los Angeles. Holiday's accounts also include California powerhouses Lucky Stores, Ralphs Grocery Co. and Vons Cos.

"We ourselves really just started setting up the sections in supermarkets. Up until probably the last year or so, you didn't find them in there," said Jim Middaugh, Holiday sales manager. "As we go along, we're getting more proficient at showing a need for better placement of kids' candy. We have done one or two stores at a time, and have been increasing it in all the chains. Now we

have put it in about 40 Ralphs stores."

What works for one operator may not excite another, and that can lead to wide diversity within a given market.

For example, a youngster who craves, say, bubble gum that squeezes out of an electronically animated wristwatch or comes in a flat checkbook shape is likely to find satisfaction in-line alongside regular candy at Hughes stores.

But at Ralphs or Vons, that kid should be looking for a wheeled display unit up front. Developed originally for checkstand closure alone, these lane blocker racks are increasingly doing double duty elsewhere in the store, merchandisers said.

The checkout, or nearby real estate, is especially popular for breaking in the category, or for maximizing sales within an established program.

Lucky's northern California division, for instance, runs kids' sweets on slanted wire shelving at every other checkout, alerting customers by means of a large header above the stock.

On the other side of the country, King Kullen Grocery Co., Westbury, N.Y., "is doing well" with a three-sided rolling rack by its express registers, noted Maura Kennedy, grocery buyer. The 60 SKUs on the rack have turned over six times during the half-year that the fixture has been on the sales floor, according to the chain's service distributor.

The New York and New Jersey outlets of Pathmark Stores, Woodbridge, N.J., started out with candy gondola locations for kids' novelties. "They were so pleased with the movement that they are now also giving us an endcap at the front register," said Tom Warner, vice president of sales at Amurol Confections, a key vendor for the category and a division of premier gum maker William J. Wrigley Jr. Co.

Kroger Co., Cincinnati, also prefers to cut the children's section into its regular candy sets. Its Columbus, Ohio, division, for example, is expecting to be resetting an 8-foot stretch of candy gondola during the first quarter to expand the space for kids' candy.

"In my opinion, the gondola is the way to go," said Tim O'Reilly, principal at Kaye & Silver Brokerage Co., Columbus, "because if you put [kids' candy] on a rack, some store managers might take it down or move it out of the way. People want to know where things are, and they'll naturally gravitate to the candy section to find it."

As part of the intense experimentation that is going on, supermarkets are trying tactics such as placing shippers and other displayers of kids' novelty candies in cereal aisles, next to children's books, near toys, on seasonal tables -- generally wherever they figured kids' and their adult shopping companions would go. "A lot of the novelty stuff is promoted as in-and-outs within different seasons," pointed out Barb Rybeck, nonfood merchandiser at American Seaway, Cleveland. "You see more novelty candies in shippers on the floor during the summertime. Kids are going shopping with mom more often then."

Of all the secondary spots, video sections have shaped up as the best location, said buyers.

"Our department pulls a lot of children because of the video," said Dorothy Jones, service center buyer at Randalls Food Markets, Houston. The fact that the service center and video segment are combined enables Randalls to more comfortably feature larger selections of the kiddie candy. These usually carry higher price points of around a dollar on three bottom shelves of an 8-foot candy, gum and mint section."

Randalls also carries candy telephones (an interactive candy toy from BerZerk CandyWerks, Memphis, Tenn., a subsidiary of Kraft Foods) and suckers that have little motors to spin them (Spin Pop from the Cap Candy division of Cap Toys, Bedford Heights, Ohio) at $2.99 as counter items. They are not put into Randalls' regular planogram, Jones said.

Describing a similar scenario, Andy Knoblauch, grocery buyer-supervisor at Coborn's Inc., St. Cloud, Minn., said: "We put in racks about a year ago from Amurol in our video departments, where we can control theft a lot more. In our Cash-Wise box stores, where we've increased video from 4,000 to 8,000 square feet, we've put novelty items on pop machine racks and chip racks as well as Amurol racks.

"Our best outlet for the stuff, though, is Little Dukes, the 10 convenience stores we also have," said Knoblauch, touching on a hot competitive issue that supermarkets have started to examine -- how they can compete against the appeal of convenience stores, drug stores and other retail channels such as gas station minimarts, all of which do impressive amounts of the kids' novelty candy business.

"Change drives sales; frequent promotions such as Candy Carnival in the spring and the use of shippers in high traffic areas seem to be the best tool against alternate-format retailers," said Judith Payne, spokeswoman for Schnuck Markets, St. Louis.

The scope of the challenge to wrest business away from other formats is outlined, in a unique way, by Carl Murphy, vice president of grocery at Busch's ValuLand, a six-unit supermarket chain in Ann Arbor, Mich., serviced by Spartan Stores, Grand Rapids, Mich.

"It's a heck of a market. I know. I have grandchildren and I'll personally buy novelty candy for them in a drug store, or give my 4-year-old grandson five bucks to go down to the neighborhood store," said Murphy. "But I would never consider carrying it. It is a niche area, and we just don't have the facility in our supermarkets to handle it."