CANDY MAKERS DISCUSS INDUSTRY CHALLENGES AT ROUNDTABLE

JAMES TENSER

PHOENIX -- "We don't charge a slotting fee," said Kenneth Fries, category manager for confectionery at the 7-Eleven convenience store chain.

"So many retailers ask manufacturers to pay for fixtures, et cetera," he added. "Long-term, those retailers who look at it objectively will have to say, 'I cannot survive on slotting fees. Eventually I'm going to have to sell something and make money on it.' "

Fries made his comments as part of a roundtable on category management here at the National Confectioners Association's Management Development Conference. The roundtable, held last month, drew about 40 executives of leading confectionery manufacturers.

Not surprisingly, Fries' remarks were greeted enthusiastically by the assembly, who represented many of the nation's large and small candy companies.

While 7-Eleven was one of just a handful of retailers represented at the three-day industry conference, its policies hold great weight with candy manufacturers, whose sales volume has been migrating toward the C-store channel at the expense of grocery.

Slotting fees, fixture fees and the like were of key concern to many at the roundtable, since these up-front costs were seen as barriers to category-management participation by smaller manufacturers.

"How can small candy manufacturers get in and play this game?" asked Mike Rainey, vice president of sales and marketing for Liberty Orchards Co., a manufacturer based in Cashmere, Wash.

Domenic Antonellis, president and chief executive officer of New England Confectionery Co., Cambridge, Mass., commented that "we could never afford slotting allowances. Most smaller companies haven't had the resources to do category management."

Mike Pasqual, president of Hershey Chocolate, North America, Hershey, Pa., expressed sympathy for the smaller manufacturers: "We [Hershey] have a role to play as a responsible leader in this category, and we take it seriously. We provide consumer data to bring consumers to the category, to grow it overall."

He continued, "There is no question that smaller confectionery companies can't come close to making the same investment."

Said Gino Marinelli, CEO of National Confectionery Brands, Chino, Calif., "As smaller manufacturers, we rely on you to do that."

John Kretchmer, vice president of American Licorice Co., Union City, Calif., suggested manufacturers must recognize that different retailers may expect different things from suppliers."First, you must find out what the retailer believes is category management," he said.

A concern, said John Molyneux, president of Callard & Bowser-Suchard, Elmsford, N.Y., a division of Kraft foods, is that manufacturers tend to become focused on the retailer rather than the consumer.

Said Molyneux, "What is the motive of the retailer? Is it really to benefit the consumer or to maximize revenues?

"Six months ago a major retailer offered me a front-end position at a price I told him I thought was unrealistic," he continued. "He said he'd sell it to someone else. I said my product would give him the best return. He responded that management wanted him to get the dollars."

Fries of 7-Eleven took retailers to task for such attitudes, saying, "True category management is not collecting slotting fees."

To gain retailers' attention in sales presentations, said David Klabunde, vice president of national accounts at Herman Goelitz Candy Co., Fairfield, Calif., "We try to focus on product innovation, not price."

Harris Rosen, president of E. Rosen Co., Pawtucket, R.I., added, "We, until recently, thought price was the objective, but it is really creativity."

Another approach was outlined by David Babiarz, chairman of Dae Julie, Des Plaines, Ill., a confectionery company that was acquired Jan. 27 by Favorite Brands. He said, "We have started emulating what the big guys have done -- we've come up with 12 different promotions for every month of the year. So far this has been well-received by grocery departments."

Fries of 7-Eleven said he believed the gap between large manufacturers and small ones is beginning to narrow when it comes to category management: "What tends to happen is retailers become better at understanding what they're doing. Better in-house data means the need to rely on suppliers becomes less and less.

"Also, some big companies can't react fast enough," Fries continued. "Small companies can react quicker and sometimes do things a Hershey, Mars, or Nestle cannot."

Fries said he periodically invites a group of smaller confectionery companies to a summit meeting in Dallas. "They're flexible, innovative and willing," he said. "Eventually there will be a lot more room for small players."'