CATEGORY MANAGEMENT KEY TO CANDY PROFIT

LISA SAXTON

NEW ORLEANS -- More sophisticated category management is the key for retailers who want candy to generate stronger profits.

The reason is that category management can drive purchase frequency and transaction size, according to Chris Fink, category management manager for Nabisco, Winston-Salem, N.C. Fink spoke at the American Wholesale Marketers Association's winter convention held here.

A boost in candy sales, he said, can result from better section management, such as the proper product mix and arrangement, and in-store merchandising with secondary displays. And, if done properly, it may also boost the sales of the entire store.

Fink said candy sales growth in 1994 for the four classes of trade stands at 5%, with varying degrees of growth among the groups. Mass merchandise leads with 9% growth, for example, followed by supermarkets at 4.2% and convenience stores at 3%. Drug store chain sales, on the other hand, decreased by 1%.

Average dollar transaction (or ring) varies as well among the trades, with mass merchandisers leading the way again, sporting an average ring of $3.95. Drug stores are next with $2.84, followed by supermarkets with $2.30 and convenience stores at $1.28.

The opportunity for supermarkets and convenience stores to increase these dollar transaction amounts is there, if these trades bring in the right variety to snag consumers. And these days, that is being found in the form of hanging bagged candy, he said.

Indeed, according to a recent consumer survey conducted by Nabisco, while single candy bars are consumed immediately, bags represent "a chance for us to get away-from-the-store consumption," explained Fink.

To back up this claim that consumers are buying pegged bags, Fink said in a controlled study of convenience stores where one set of outlets carried the bags and others did not, candy sales were 29% greater in the stores with bags. And total store sales rose 6%.

A critical requirement for candy category management is for a retailer to establish a core item selection, Fink said.

First, a retailer must define and segment, then sort the SKUs into these five groups: chocolate, gum, hard candy, mints and chew/ gummies. Next, a retailer must identify the points of duplication.

Fink suggested using "the 70% profit benchmark to optimize core item variety as the point of duplication." In other words items that don't contribute to the top 70% of profitability -- or that don't make up the top 70% of sales -- are generally duplicates, and a retailer may consider whether it's "in his best interest to keep them."

Also, if an item has low substitution or loyalty rates, it also may be a candidate for deletion.

Another important factor in candy category management is the use of secondary displays. "Candy is highly responsive to display," said Fink. "And secondary displays such as clip strips are highly profitable. High traffic locations really have the power to run up register rings."