NOVEL IDEAS 1998-10-12 (1)

BARBARA McDONALD

Sales increases in novelty candy show no signs of ebbing, but many supermarket retailers only recently have begun to catch the wave of this profitable trend.

Novelty candy, also known as interactive candy for its play value, has shown double-digit increases for the last four years, according to Information Resources Inc., Chicago.

Bob Bruno, category merchandiser for grocery sales at A&P, Montvale, N.J., said that mass merchants like Toys 'R' Us have historically done a better job of selling novelty candies than have supermarkets. Nonetheless, that situation may be changing, as more retailers come to understand the value of novelties.

Bruno merchandises candy in 370 A&P stores in the New York metropolitan area. "We are doing [novelty candy] as in-and-out, whereas [Toys 'R' Us] is keeping sections," said Bruno. "We have a three-shelf section, but it's in less than 10% of the stores right now. We are going to put it in more stores, because we believe in it." Like other grocery retailers, Bruno said it's tough to find space for novelties. Expanded stores or new units with more square footage have not necessarily helped the candy department, since most new space has gone to perishables.

Retailers have also been challenged by where to stock novelty items, which are a blend of the general merchandise/gift category and the candy category. One thing is certain, though: Novelties need to be highly visible so that they will attract impulse buyers.

That's why floor stands make sense, according to Bruno. "You want to keep an eye on it, it's high ring. And you want it where it's high traffic -- somewhere up front where people can see it."

Giant Food Stores, Carlisle, Pa., a subsidiary of Ahold USA, Atlanta, currently uses shippers at the front of the store for novelty candy.

Edwards Super Food Stores, Carlisle, Pa., a division of Giant, promotes novelties as "bonus buys" when a manufacturer gives a temporary price reduction. Sales of novelty candy are growing, helped by the revival of PEZ, said Denny Hopkins, vice president of marketing and sales development for Giant. "We are looking to put PEZ in as a permanent item," he said.

Lynette McCoy, candy buyer for Minyard Food Stores, Coppell, Texas, has noticed that the novelty candy category is growing, with an increasing number of items available at buying shows. But Minyard has not significantly increased space devoted to the novelty category, she said.

"We don't carry any novelties in our regular candy lineup. Most come in as in-and-out promotions on a floor stand," said McCoy. "One promotion that we are getting ready to do is a Rug Rats floor stand, with three gum items." One of these, called Tommy's Bottle, is shaped like a baby's bottle and comes with a comic book based on the TV show.

Many novelty items are movie tie-ins, and these tend to be chocolate, she said, such as Nestle's new bars based on the Disney movie "It's a Bug's Life," which will be released for Thanksgiving. Minyard, a chain of 85 stores, does no central buying for novelties; rather they are ordered store by store.

Some retailers want to create permanent displays for novelties rather than continue to use shippers, but lack of space in stores, as well as "clean-floor" policies, create problems. For example, Genuardi's Family Markets, Norristown, Pa., has very few permanent displays, according to John Paul, category manager.

"We have identified the category as very profitable; it's growing, and has a lot of potential. One of the things we have struggled with is where to put it," he said.

"We do have some novelty product on our regular gondola shelf and in our front end," Paul continued.

"We have been able to make some inroads in the in-and-out business, by bringing in power wings, shippers and that sort of thing, and displaying them throughout the store. "We have very limited space even for that, because we are very sensitive to our customers. We want to make sure we are not cluttering aisles, making it difficult for them to navigate through the store."

According to an industry source that did not wish to be identified, a candy buyer from H.E. Butt Grocery Co., San Antonio, solved the space problem by closing off one front-end checkstand and building a permanent display for kids' interactive candy.

The mini-department, now in 170 H-E-B supermarkets, carries about 80 items, a mixture of old standbys and the new, hot and trendy, according to the source. H-E-B headquarters could not be reached for comment.

The H-E-B novelty "departments" contain about 480 inches of novelty candy, according to the industry source. "There's such a focus on trying to sell a shipper once, when it's smarter, and lower-cost, to turn the product," the source said.

Clearly, candy manufacturers would prefer that novelties had permanent space allocation in the supermarket.

"There are a lot of folks who try to sell shippers on an in-and-out basis. We have tried to build our business with a kids' novelty section planogrammed in the front end of the store," said Bruce Thompson, vice president of marketing, Amurol Confections Co., Yorkville, Ill., a wholly owned subsidiary of the William Wrigley Jr. Company, Chicago.

Cap Candy, Napa, Calif., another leading novelty manufacturer, expects to double its business this year, according to Tom Prichard, general manager of the candy division. He advised supermarket executives to look at sales and profit per square feet for this category.

If they do, he said, "I think they can find the space pretty easily. Albertson's recognizes the category and jumped on it; they are probably the leaders in the grocery business," said Prichard. Most of Cap's products retail for under $5, he added. "Over 80% of our merchandise is sold on impulse, which is why the grocery chain is such a great opportunity."

Prichard said he believes people go to grocery stores to buy basics, and many try to stay away from the candy aisle. He said because all Cap product is "try me," with batteries already installed, shoppers play with it and it captures their attention. Cap just started to ship a new NASCAR Skittles dispenser that retails for $9.99. Preliminary sales results look excellent, he said, but it is not available in any supermarkets yet. "Supermarkets are wary of going above the $5 mark. But if these products will sell at a Wal-Mart, there should be no reason they wouldn't sell at some of the giant grocery chains," Prichard said.

Not surprisingly, some retailers SN spoke with did express skepticism about novelty candy's staying power.

"While this is a growing category nationwide, it is somewhat dependent on fads. In this category, timing and sustainability are the key," said Dennis Curtin, director of public relations for Weis Markets, Sunbury, Pa.

"We buy PEZ seasonally -- it's a consistent seller, with collectible value. But as for the rest, it's an iffy thing," said Bob Edenfield, category manager with B&B Corporate Holdings, which has 21 stores in the Tampa, Fort Myers and Lake Okeechobee areas of Florida. "Novelties," he complained, "are like ladies' lipstick. They can go in and out of fashion, and you don't want to get stuck with it."

Still, he conceded,"If we had big stores, we'd probably have an area for those items, next to toys and coloring books. It's hard to promote in-and-out things when you don't have a tremendous amount of room." B&B's stores range in size from 28,000 to 40,000 square feet.

Most novelty items, like Warhead candy and Thermonuclear bubble gum, is sold in "each's," or individual pieces, Edenfield explained. "They go better in a C-store. In supermarkets, it's easier to sell fun-size bags, which give a bigger ticket ring and let you stay with the consistency of the known product," he noted.

For supermarkets, for the 52 weeks ended Aug. 16, 1998, sales of interactive candy were up by 12.7% in dollar sales to $99 million. Supermarket unit sales increased, too, by 8.7%, for a total of 108 million units.

This was more units than were sold by either of the other two major channels, drug stores and mass merchants, IRI said, although mass merchants had higher dollar sales -- at $126 million -- for the same period. The sales leader, according to IRI, is PEZ Novelty Candy, Orange, Conn., with the pop-out plastic dispenser familiar to baby boomers who might remember back to 1952, when PEZ was first introduced to the U.S. market.

"We have 24 stockkeeping units, but we're not in the candy section," said Scott McWhinnie, president and CEO. Instead, PEZ items are found hanging on pegs by the checkout stands. "A higher proportion of our sales are through supermarkets, compared with most other [manufacturers]." McWhinnie said.

"Supermarkets tend not to be the trendsetter in candy, so their increase is coming a little behind other two channels, because [only recently] are supermarkets devoting more space to these interactive candies," said James T. Corcoran, director of trade relations for the National Confectioners Association, McLean, Va.

"A number of things could be driving the supermarkets' increase: good products, new products and retailers getting much better at merchandising candy products," he said. A&P's Bruno noted that the overall candy category is in the billions, much larger than the novelty segment, so that supermarkets' 12% increase is coming from a relatively small base. For 1997, total retail candy sales were estimated at $22.7 billion, up from $21.4 billion in 1996, according to the NCA.

"More and more, I am happy to report, we are doing permanent placements of a novelty rack in supermarkets," said Joe McEnerney, national sales director for Impact Confections, Roswell, N.M. The company's Alien Pops, for example, are carried by numerous Kroger, Winn-Dixie, Dominick's, Ralphs and Vons stores, said McEnerney.

The pops, which launched three years ago, continue to perform. Indeed, he said, the pops did progressively better in their second year than in the first, which is unusual. "Often, novelties last 6 to 16 weeks, or even 16 months -- it just depends," McEnerney noted.

"Amurol has pretty much invented this category. It was a fluke, then everybody else in the world jumped in," said Debbie Patterson, a salesperson with Atkinson-Crawford, a Dallas food broker. Amurol introduced its Big League Chewing gum in a reusable pouch in 1989.

According to Patterson, increases in the nonchocolate candy segment over the last 10 years can be credited to kids' novelties. "It's interactive, and it has staying power," she said.

The word novelty initially scared supermarket buyers, because of its come-and-go connotation. "The best name for it is kids' confections because that's the most accurate," Patterson added.

"Supermarkets are a little bit slower to react to this category than the convenience store and drug store chains," said McEnerney of Impact Confections.

"The grocery store looks at their 4, 6, 8, or 12 feet of shelf and decides to stay with their laydown bags and not deviate too much. I wish they would open their eyes a little more. Kids are looking for the new and exciting. They don't look in the supermarket much, because it isn't found there. They will look in a C-store or drug chain, which have realized this is the fastest growing segment of candy."

"We do a fair share of business with the grocery trade, but I think it could be more. I think most manufacturers would concur, especially those who concentrate on novelty candy," McEnerney added.

The strong U.S. economy has helped sales of candy and gift products, NCA's Corcoran noted, leading to rising price points. "If you find a 99-cent price point was effective, maybe you'll now try $1.99. [But] there has to be some inherent value in there over and above the candy, for the consumer to lay out that much." He went on to say that some novelties can cost as much as a box of chocolates.

Last Easter, some novelty baskets sold for as much as $19.99, said Genuardi's Paul. "There are some items that aren't very price sensitive that enable us to make a nice gross." Other seasonal novelties also have that potential, he said.

For Halloween, for instance, Genuardi's will do well with huge jawbreakers in a plastic clamshell sold in the bulk candy section, Paul predicted. For Christmas, Hershey's has hollow milk chocolate balls filled with kisses and actual tree ornaments that he expects will have good sales. Finally, he expects to sell a lot of Palmer's chocolate apples with green gummy worms inside for Valentine's Day. The item is positioned as a gift for teachers.

Some candymakers emphasize tins as collectible items to be saved once the candy is gone, and this works well as a novelty for adults, Paul added.

Current demographics in the U.S. population are particularly good for children aged 5 to 15, which should help novelty sales. "Those are your heaviest consumers of confectionary products in general, teens and preteens, and that is the age group that the interactive candy's appeal to most," said Corcoran of the NCA.