CROSSING OVER 2005

Amanda Chater

With new products that blend candy and other food categories, candy makers hope to expand sales by capitalizing on their well-known brands.

Such products present retailers with questions, though: Who is buying these items? How should they merchandise a product that could belong in more than one section of the store?

The new products are diverse in category. Hershey's has launched SnackBarz (crispy rice and marshmallow with chocolate) and Hershey's Cookies (chocolate-covered). Russell Stover has created vitamin- and mineral-enriched Sugar-Free Cereal Bars (granola and three fruit-flavored bars) and Net Carb Breakfast Bars (four fruit-flavored bars). Other breakfast bar offerings are Masterfoods' Kudos, which are teamed with Snickers, M&M's and Skittles. Brach's has lent its name to fruit snacks, many of which are licensed.

Confectionery has also crossed over into beverages. Bravo! Foods has launched Starburst Slammers -- smoothie drinks in four of the fruity candy's flavors as well as Milky Way and 3 Musketeers versions. Dean Foods offers Hershey's-licensed milk and milk shakes.

Candy crossover with ice cream, of course, is not new. Breyers, Klondike and Ben & Jerry's have blended ice cream with Heath Bars, Twix and Snickers, while Denali Flavors has Tootsie Roll Ice Cream. Dibs, a new creation from Dreyer's/Edy's, are bite-sized ice cream snacks rolled in Nestle Drumstick cone and Nestle Crunch candy coatings.

It's hoped that these new products can add a little pizzazz to a flat market. Sugar confectionery sales grew 15% from 1998 to 2003, but at constant 2003 prices, sales grew only 2%, according to data compiled by Mintel International Group, Chicago.

For manufacturers, such products let them draw on their brand name to experiment with a category not far removed from their own.

"These items are trying to play off something that's familiar to us, yet new," said longtime eating trends analyst Harry Balzer, vice president of The NPD Group, Port Washington, N.Y. "People will try lots of things, so long as they're not too unfamiliar. Taste establishes new products, and change comes from something that brings ease -- or makes life cheaper."

The cereal bar-candy products are selling well at one-store Ted's IGA in Hebron, Conn., owner Todge Armata said. "I think the customer sees it as a little bit of candy, a little bit of health, and a little snack. These companies are taking a healthy snack and frosting it up a bit."

A product like Russell Stover's cereal bars satisfies two consumer demands, said Don Montuori, editor of Packaged Facts, Rockville, Md. "It gives them the green light to eat chocolate in the morning and provides some nutrition, too."

Treasure Island Food Mart, a six-store upscale chain in Chicago, recently introduced some of the new crossover products. "Anything new, people are anxious to try," said Larry Murphy, who manages one of the stores.

Established brands are able to leverage their brand equity to introduce new products and "brand families" to the market, said Tim Tackett, candy category manager, Giant Eagle, Pittsburgh. The continued introduction of new products competing for limited market share makes merchandising difficult, though, he said.

Retailers also have to know the target audience.

"Beverages are an excellent opportunity to cross merchandise the two categories, and maybe generate some extra sales," Armata said. "But the smoothie person may not like the candy, so you've got to be careful about who you're merchandising to."

The best way to merchandise cross-category snack products, Armata said, is to put them in one snack-food area. "You can always cross merchandise with end displays or with ice cream. It's often more about the impulse than about price. If people are looking for ice cream, they might think a cookie would be nice, too."

Cross-merchandising opportunities exist with milk, ice cream, desserts, lunch boxes and snacks to take to the beach, to mention a few, "because they're a little more stable in the heat." Retailers can vary displays to reflect the different types of candy customer: the multi-pack family shopper, and the person looking for a quick fix, he said.

Crossover candy items should be merchandised with the impulse- and convenience-driven shopper in mind, Montuori said. "I don't see them standing out in the aisles. These new products can get lost among the tons of items available."

In-store tastings are the best way to get these products in front of people, Montuori said. Character tie-ins can draw customers, especially young ones, but a brand name can't hurt. "It's immediate recognition, and you know exactly how it's going to taste," he said.

Merchandising possibilities for candy-containing products are endless, said Susan Fussell, spokeswoman for the National Confectioners Association, Vienna, Va. A Russell Stover cereal bar could be displayed with candy or cereal bars, but supermarkets should put it in multiple locations because the more it's cross merchandised, the more likely customers are to buy it, she said.

Marc Jampole, a spokes -man for Penn Traffic, Syracuse, N.Y., didn't see any cross-merchandising opportunities with such products, though. "The cereal bar buyer is interested in breakfast bars. The candy bar buyer is concerned with Russell Stover."

Penn Traffic stores merchandise candy more during holidays, however. For example, Russell Stover chocolates were placed in the floral department for Mother's Day. "Customers have a need for Mother's Day and not for Russell Stover as a brand," he said. "So, the crossover we do is based on customers' needs and not on the brand itself."

Observers predicted cross pollination between candy and other products would continue, fueled by the name recognition of the candy ingredient.

"I think you'll see more line extensions because it's cheaper and easier," said a Seattle-based grocery broker who asked not to be identified. "There's so much money at stake with new products."

Montuori predicted this trend would be especially strong in the beverage aisle, particularly among fortified or functional drinks.

Baking products and cereals also could be logical platforms for candy crossover, Armata said.

Whether such crossover products help lift the flat candy category is another question.

Most of these product line extensions, beverages and otherwise, likely will fail, the broker predicted. "I think they'll be a flash in the pan that people might try once. People are very particular about their beverages and tend to like pretty basic flavors."

At the least, individual manufacturers stand to benefit, Montuori said. "I don't know if these products will help the candy market per se, but they could help the candy companies, since they will bring in new revenue."