CACAO CRUNCH

Barbara Murray

Specialty chocolate candy, like other categories of gourmet foods, offers special opportunities as well as special challenges to Center Store managers.

It can make the store a destination, but that takes a lot of work. It means the merchandise must turn frequently and, therefore, must be kept fresh. With high truffle prices, this isn't going to happen everywhere.

"We carry very little in a few stores," said Ross Nixon, executive vice president and chief operating officer for Dahl's Foods, Des Moines, Iowa.

"For some reason, the high-end chocolate lovers tend to go to specialty places to purchase it. It's a niche, and you can't be everything to everybody."

In St. Louis, for example, Dierberg's supermarkets don't carry it at all, but Straub's, a small specialty chain, does, and is expanding.

In larger markets, such as Minneapolis-St. Paul, where Lunds Food Holdings and Byerly's stores are, it's a different story. Byerly's St. Louis Park store has a separate chocolate shop featuring a local chocolatier, B.T. McElrath, which has become a signature item for the stores. The product has won awards from the National Association for the Specialty Food Trade, at the last two Summer Fancy Food Shows, for its Epicurean Truffle line. The shop-within-a-store also carries homemade fudge and high-end candies like Joseph Schmidt's, which are often found in department stores. Still, even Byerly's doesn't stock it in the Center Store, but in the bakery, as the Europeans do.

Paul Supplee, director of bakery for the chain, said sales of specialty chocolates are growing because the category appeals to people who are seeking something extra or new, especially if they plan to give it as a gift.

"In our bakeries we sell an artisan chocolate, by which I mean made by hand in small batches. We outsource, and we have some exclusive vendors," he said. Natural ingredients and elegant packaging with a clear top so shoppers can see the candies inside help move the product, which can cost $12 to $20 a box.

Christmas is probably the biggest single season, and it was very good in 2002, said Supplee, guessing that perhaps customers bought special chocolates in his stores rather than in department stores so they could pay a little less and have the advantage of a one-stop shop at the same time.

Byerly's doesn't carry a lot of different specialty chocolates but some really specialized ones, he said, such as Charbonelle, from England, "that no one else has." It's the Queen's own chocolate, and it "has won all sorts of awards," he said.

Even though he finds specialty chocolate to be a natural fit with the bakery, Supplee said Center Store is still a good place to sell candy. "I'm all for lots of candy in a store," he said, diplomatically. His chain gets about a 50% margin on specialty chocolate without cross-promoting it with anything, although the retailer does demo it.

Other retailers agreed that holidays are when the chocolate business excels.

Tom Yarrows, grocery category manager for Big Y, based in Springfield, Mass., said the chain sells some specialty chocolate during holiday periods as in-and-out products in the Center Store, but not in any special shops within the store. Formerly, Big Y carried Hebert chocolate on islands in some stores, but no longer.

"We saw growth every holiday on the in-and-out specialty chocolates that we brought in. This season it flattened out some. The rules of the past recessions, where chocolate continued to grow, seem to not apply to this recession," Yarrows said, sounding a gloomy note.

Big Y does cross-promote chocolates, which he said works best by tying in with the floral departments. "You have to have specialty chocolates out at the right time of year, the holidays," he said.

Nationally, this is true, according to statistics from the National Confectionary Association, Vienna, Va. Most of the sales occur from mid-November through Valentine's Day, with the Christmas season accounting for most of it, although the two single highest days for sales are Valentine's Day and the day before.

Jim Corcoran, vice president of trade relations for the NCA, estimates that this category is in the neighborhood of $750 million in annual sales. The overall confectionary industry, composed of chocolate, non-chocolate, mints and gum, is around $23 billion. Therefore, the gourmet segment represents less than 5% of the total candy category, or close to 8% of the total chocolate category. These numbers are estimated because there is not much, if any, syndicated data on gourmet chocolates, he said.

Some brands, like Godiva, Fanny Mae and See's Candies, sell almost all products through their own retail outlets. See's Candies, of South San Francisco, Calif., sold primarily in Western states, "almost has a cult following of people in the East, where they set up kiosks in malls during holidays," Corcoran said.

In specialty chocolate, Scott Silverman, vice president of specialty food and wine for Rice Epicurean Markets, Houston, carries only See's Candies, one of the products said to make Rice Epicurean stores a destination. And by donating the candies at charity events, he has raised the profile of not only the product but of the supermarket.

"We've been doing that for years. We're the only ones in town that carries See's," Silverman said.

For upscale chocolate, the NCA's Corcoran said, people may spend $50 to $100 per pound, such as for Belgian chocolate on Fifth Avenue, New York. Corcoran said the return on investment is excellent, with margins ranging from 40% to 100%.

"How profitable it is depends very much on the retail outlet. If you go into a gourmet store on Fifth Avenue, you're probably looking at 60% to 100% margins. In a mass outlet, you're probably looking at the 40% markup area," Corcoran told SN.

In the Baltimore-Washington, D.C., area, he said the No. 1 chain is Giant, a division of Ahold USA.

"In your typical Giant store you will see limited gourmet candies, but if you do want to get a boxed chocolate, you will be able to find it," he said, and in at least one store, it is merchandised in the floral area.

In one 26,000-square-foot specialty store operated by Giant for more than 20 years, called Something Special, McLean, Va., shoppers can find a selection of American- or Belgian-made chocolates, both high end, in boxes or loose, so that customers can make up their own selection.

Brands include Naron's, which is regional, and Sweet Shop. Giant's gourmet store and other stores like Rodman's and Sutton Place Gourmet sell "as fine a chocolate as you can buy anywhere," according to Corcoran, who added that, "those stores tend to be in higher-income neighborhoods, and also sell a lot of fresh products and wines.

Kosher chocolate should not be neglected in a discussion of specialty candy. Joe Plueger, director of kosher for Kehe Food Distributing, Romeoville, Ill., said there are some great ones.

Simcha brand has a milk chocolate that does very well, as does its chocolate-covered raisins, chocolate malt balls, chocolate-covered almonds and chocolate-covered gems. An Israeli company, Elite, makes a "fantastic" bittersweet bar and a milk chocolate bar, he said, "and on top of that, they have sugar-free." These are growing and being carried more and more in supermarkets, he said.

The gross margin is approximately the same for kosher as for regular chocolate, Plueger said, although kosher chocolate costs a little bit more, for the supervision and the certification, but not a lot.

Graul's Market, an independent in Annapolis, Md., carries Lindt candy bars and a few other boxed chocolates, like Naron's, made in Baltimore, and Moore's chocolates, according to Bob Fitzpatrick, store manager. Retail price varies from $6.99 to $12.99, depending on size and variety.

Fitzpatrick said growth will be in the upscale chocolate bar area. "People like the grab-and-go; they'll pick up a $2 bar," he said. Graul's has a lot of specialty foods throughout the stores, but its four stores are mainstream, he said.

Graul's does no cross promotions of specialty chocolate, but it will advertise the Lindt bars and the sport bars from Belgium, which did well on sale as Christmas stocking stuffers, Fitzpatrick said.

"Being a one-stop shop helps. If you can have it around your front end, it helps. It's a lot of impulse. You want to make sure people see it as they walk by," he said.

"At each holiday we put up fancier signs, to let people think about it as a gift. We hand-write the signs, since one or two of my employees are very good at that."

Trip Straub, an owner of Straub's St. Louis-based chain of four specialty stores, said bars or seasonal specialty chocolates are sold in Center Store and are doing very well. Specialty chocolates are displayed on Metro racks, and there is a separate section for bars. Soon, the stores will be reset, and when they are, Straub plans to put all the chocolate together, including baking chocolate, chocolate chunks and chocolate powder for drinks.

"We have expanded it quite a bit lately," he said, moving to a higher quality and looking to be more selective. "Lindt bars [are] a premium chocolate, but [they're] also in every store, every supermarket in the country, so we're trying to take the next notch up, with [French] brands like Valrhona or Michel Cluizel, and Fran's Chocolates," Straub said. Brands like these pick specific plantations to source their cacao, and more and more companies are putting the percentage of cacao on their labels. The higher the percentage, the more bittersweet.

Fran's does shaved chocolate for drinking -- little chunks of chocolate to mix in any sort of drink, Straub said, that recalls the days centuries ago when chocolate first made its appearance as a drink in European high society.

The more things change, the more they remain the same. The "Outstanding Beverage" winner at last summer's Fancy Food Show was a chocolate drinking powder, from France, called Les Confitures a l'Ancienne Powdered Chocolate.