HUNG OUT TO TRY

LISA SAXTON

After watching mass merchandisers nibble away at their gondola candy sales, supermarkets are attempting to bite back -- with peggable candy products.

The pegged products run the gamut of the category, from premium chocolates to nonchocolate two-for-ones, from sugar-free to the sugar-laden, from branded to private label. The industry is taking many of the most popular candy products from the traditional laydown shelves and pegging them up as well for all to see.

Indeed, being seen is a major talent of the pegs, according to retailers contacted by SN. So is being seen as economical, compared with larger bags carrying larger price tags.

Retailers said such talents are helping pegged bags grab sales. In some cases the trend is so new that retailers were not able to pinpoint how much those sales have grown in the last year. Most interviewed by SN, however, did say that pegged items now account for 20% or more of the total candy aisle sales.

"Consumers can see the peg candy products better," said Cheryl Robertson, manager of consumer affairs at Dominick's Finer Foods, Northlake, Ill. "It gives the section a billboard effect and allows the graphics to draw the customers into the section."

Retailers said the aesthetics of pegging the colorful packages helps trigger that very important impulse purchase and, they hope, reduces the product's hang time, which looks good to retailers.

Mark Azzolina, grocery buyer at Food Circus Supermarkets, Middletown, N.J., said the real benefit of peg merchandising is in its eye appeal. "There's more visibility with pegs," he said. "It's going to sell. There's also less packout on the shelf to reduce inventory."

"You definitely get a better display," said Pat Redmond, grocery merchandiser at Rosauers Supermarkets, Spokane, Wash. "And you're able to rotate the products better and keep them fresher."

Greg Byrd, grocery buyer at Piggly Wiggly Carolina Co., Charleston Heights, S.C., also said the hanging bags are edging their way into retail aisles because "peggable products are a lot more visible than laydown items."

Retailers said price is the other main reason why peggable candy products are on the upswing. That's because they generally retail at under $2,

below their laydown counterparts, which range in the $2-and-up bracket.

"Basically, the appeal is it carries a lower retail point," said Tom Yarrows, candy buyer and grocery merchandiser/trainer at Big Y Foods, Springfield, Mass.

"During the recession, many people opted for a lesser amount of candy at a lower retail point, so the [smaller] bagged candy sales actually increased," explained Yarrows, indicating that the same dynamics are at work here.

"The first of all its benefits is the pricing," said Piggly Wiggly's Byrd.

"Most of the peggable items that are coming out are coming out with attractive numbers. And we can retail them with an attractive price point. Whereas the laydown bags that are typically in the gondola section could not hit on a retail that was attractive to the customer," he noted.

"Price points are a big factor," said Brian Ryckeley, a buyer at H.G. Hill Stores, a 14-store chain based in Nashville, Tenn. "Chocolate candies can get pretty expensive when you get into the big, laydown bags. With the pegs, we're trying to provide an item priced so the consumer will say, 'I'll spend 99 cents or $1.09, rather than $1.99 or $2.99.' "

Doyle Burnaman, grocery buyer at Lufkin, Texas-based Brookshire Bros., said a third factor in support of increased pegged bag sales is greater diversity of convenient sizes.

Most of the retailers contacted by SN said they're just beginning to get their new sets in order, given the activity from manufacturers in the last year or two. As a result, they were reluctant to say exactly how peg merchandising in the candy aisle has affected their bottom line; but all were confident that the product trend can only improve it.

"This will positively impact our business, because we can now select the proper mix of items for our store. Consumers will have more to choose from," said Dominick's Robertson.

An official at Hannaford Bros., Scarborough, Maine, said the chain is seeing an increase in bagged peg candy offered by manufacturers.

"We are currently reviewing the space allocations for these items, since manufacturers are producing more products that are conducive to peg merchandising display," said the official.

"I think the pegged product will have a positive impact to a certain degree," said Piggly Wiggly's Byrd, "You don't see any one item selling a lot of quantity . . . a lot of pieces, but, overall, there's probably a big dollar volume in that area."

Byrd also said because there are so many different sizes and varieties of gondola candy, space becomes an issue. And he said he has yet to increase the space devoted to gondola candy to accommodate the peggables.

He's not the only one. However, retailers did say they have revamped -- or are planning to revamp -- the space that was afforded gondola candy prior to the peg invasion.

"We reconfigured our department about 18 months ago with fewer laydown shelves. With peggable items, you're able to get more product on display . . . or more product in the same amount space," said Byrd.

Six months ago, Dominick's increased its space devoted to the candy peg section as well as the number of peg stockkeeping units, said Robertson.

This, too, appears to be the beginning of a trend that will find less space devoted to laydown bag shelves. Retailers are dwindling the number down to four, three, two, sometimes less, they said.

A good example of this is Big Y, according to Yarrows. "We have been giving the peg items more visibility, vertically from top to bottom. We have vertical, 12-foot sets with only one shelf of laydown bags under.

"We've done this to make the product more shoppable for the consumer. And with all [the peg products] in one area, it's easier to find them because they're not spread out over 20 feet to 25 feet of space."

And pegged bags at Big Y now account for 23% of its candy sales, said Yarrows.

"When we do resets, what we've been doing is putting in the Peg-Board for the increasing number of peggable products," said Food Circus' Azzolina, who also reduced the number of laydown shelves to do so.

To make way for pegs in his stores, H.G. Hill's Ryckeley had to say goodbye to its gondola king-size products.

"I've increased the peg line. We had our king-size bars in with the laydown bags rather than at the checkout and, consequently, they weren't moving at all," he explained. "So I discontinued all the king-size for the pegs.

"Now, whether or not the pegs are actually moving better, I can't say just yet," added Ryckeley. He said his peg offering -- which includes a major two-for-a-dollar program -- accounts for between 20% and 25% of his candy sales.

Likewise, Rosauers' Redmond reported identical figures. "We're down to two shelves of laydown bags, which has come down quite a bit," he said.

Suppliers, meanwhile, continue to beat the Peg-Board drum loudly. During the last year, many of them, including some of the industry's biggest branded vendors, provided supermarket retailers with more Peg-Board items.

"The manufacturers are pushing the peg big, big time," said H.G. Hill's Ryckeley.

"Manufacturers are promoting these sizes because they are trying to get distribution and more attractive retails," said Piggly Wiggly's Byrd.

But that certainly doesn't mean retailers are blindly hanging up the various programs. There are other factors to be considered, they said.

"We're starting to see quite a few manufacturers offering peg bag lines. And we're currently looking at that whole program. "But we want to be careful that we don't jeopardize our private-label program," said Big Y's Yarrows.

"We ask ourselves questions such as, 'Is this really providing another option for our customer, or is it just a line extension? Is there something new here?' Especially if the space is tight.

"Line extensions don't always enhance sales, and if the space is tight, we're going to look at the new products even more carefully," said Yarrows.

Big Y was joined by other chains in offering private-label pegged candy products as part of an overall program.

"It has higher margins than the national brands, and has our Big Y name on it, which is a nice feature," said Yarrows. "But from a retail standpoint, more branded peg items offer customers another option than just our private label."