MANAGING CHANGE

BOB BAUER

In an aisle that changes as much as the candy aisle, perhaps the most important component in a grocer's merchandising strategy is compiling the mix of products.

In the candy aisle, that means creating the right mix of product type and package type. What percentage of the offerings should be chocolate? How about mints and gums? What about upscale products? In terms of packaging, how many stockkeeping units should be set aside for pegged items? Should the remainder of the aisle contain lay-down bags? Is bulk candy an option?

Category management is helping to bring about answers to these questions, although such activity in the candy arena seems to be lagging behind efforts in other areas of the store.

Brian Harris, chairman of The Partnering Group, Cincinnati, said candy is a unique category because its products are available in so many other retail channels.

"It's probably a little more complex in nature to do category management because of the complexity of the channels and the seasonality of the products. There is significant opportunity for category management. It's a big, growing category."

Continued progress in category management will have to come from both the supplier and retailer sides, he added.

"Suppliers have to develop the capabilities to do this sort of work. On the other hand, you've got to have retailers who put this category on the priority list," he said. Some retailers have done just that.

"There's always a lot of change in the candy category, if nothing else because of the seasonal nature of things. I think it makes a lot of sense for the various links on the supply chain to work together in the candy area," said an executive with a Mid-Atlantic chain.

"We've done some things with Hershey's and with M&M/Mars that have helped us reorganize the candy section a little bit," said a buyer with a California division of a large chain. "It seems we're doing a better job lately of getting rid of slow-moving items."

The Mid-Atlantic retailer said the impulse nature of the category creates unique challenges.

"More so than in other categories, what's hot in candy one month may not be hot later, particularly with novelty-type items. But you get that even with packaging type. For a while, bulk candy seemed to be catching on real fast. Now that seems to have slowed and pegged candy is everywhere. I don't think it will be too long before people go back to the larger bags; they offer the best value."

Throw in the seasonal aspect of the candy category and you really need to have a plan, retailers and industry observers told SN.

Harris of The Partnering Group said two plans may be needed.

"You almost have to have a category business plan that has two parts, one being the seasonal part and the other being nonseasonal," he said. "You have to blend the two parts together to cover a year, where in other categories, although there may be some seasonality, you can basically have an integrated strategy."

Those two plans may be very different, Harris noted. "In candy, you have to make a decision as to whether you want the seasonal candy to play a different role because candy is not typically a destination category when it's not in season," he said.

"That's a good point," said the California retailer. "That's sort of how things have been done for years. But as with the rest of the category management process, it's a little more refined now.

"Seasonal items will usually be treated as a separate entity," he continued. Most of the time it goes in a separate area. We also do a lot more with shippers and other portable merchandising options with seasonal items than we do with regular candy. Right now, for example, we've got Valentine's Day candies in various places throughout the store -- in with the greeting cards, in the deli area so people will buy while waiting on line, all over."

Though candy segments are segregated throughout the store, candy merchandisers cannot lose sight of the fact that it's all one category, according to Bob Blattberg, director of the Center for Retail Management, Northwestern University, Chicago.

"Candy is a strange category," he said. "Retailers often break it up so they don't really ever grasp the total impact of candy. They break it up into things like seasonal, checklane, and they also have the shelf candies. They've got at least three ways they think about it, so they never look at the total magnitude. So it never seems as important as something like some of the categories that are heavily promoted.

"It's an ideal category because it's consumable," he added. "It's got margins, you can display it and you get a lot of incremental sales off of it."

Blattberg advises retailers to keep things simple.

"Unfortunately, a lot of what is going on in category management is to make it more complex. I don't want to minimize the fact that there is complexity. The real key is to figure out what complexity you need to live with."

Focus on key areas, Blattberg suggests.

"Figure out actually what is 90% to 95% of the business and get focused on that. I would try to get seasonal right because I think there's a lot of opportunity there. I would try to get checklane right because that's an impulse category that they can make a lot of money on. I'd try to get the basic category of the bags and the large-volume items right. Spending all that time on the last 10% doesn't add up to much. I believe in getting it close and getting it done, rather than trying to figure out every nuance to it."

Mark Lavelle, category management services manager at Hershey's, Hershey, Pa., said he has seen a heightened interest in candy category management among retailers. Like Harris and Blattberg, Lavelle cites the complexity of the category as challenge.

"In candy, you've got a plethora of different pack-type choices. That's why candy is such an exciting category to run category management projects on. We really are all over the store," he said.

"We've got a wide range of pack types in the in-line gondola from packaged candy to multipacks to nonchocolate candies and that type of thing," he explained. "Then you've got another piece up in the front end of the store with the singles and the king-size candy bars and the gum and mints. Then you've got a whole host of secondary displays and four-way racks. Then you've got the whole seasonal piece on top of that. "So you've got a significant range of places in the store where candy can really drive some impulse sales. You've almost got to treat each of those as a separate element. It's not just one piece of real estate you're dealing with."

Grocers, Lavelle said, must offer variety.

"What we've seen is that when you take a look at purchase behavior, consumers do like a variety of choices in confections and they have a whole bunch of different purchase needs. You've got everything from a single-serve need where it's an immediate impulse sale, all the way to a true family purchase where you're using some snack-size bag for the lunch box or for the candy bowl at home. Even on some of the larger bars, some consumers use those as ingredients for some of their baking needs. Across those choices you need to maintain adequate variety among all the various pack types."

Some retailers will gravitate toward a specific pack type, he noted. "Some people are out there trying to aggressively price standard bars day in and day out. Whereas other retailers are trying to make some margin there. It really does depend on the retailer."

Lavelle said retailers who have implemented candy category management programs have seen positive results.

"We certainly have seen people make some product mix decisions where they're keeping the harder-hitting SKUs in a particular pack type," he said. "So we've seen people gain some efficiencies by making those product mix reviews, while at the same time maintaining that good balance across all different pack types.