SEASONAL SMARTS 2004-11-01 (2)

LUCIA MOSES

When it comes to merchandising holiday candy, many retailers let drug and mass get all the goodies.

Supermarket operators wanting a bite of the year-end action can enjoy stronger holiday candy sales by employing an "early and often" strategy. Giant Eagle, Pittsburgh, has consistently grown sales year over year, with a 95% sell-through rate. It expects low single-digit sales growth this year by offering more candy items that are positioned as a convenient gift alternative, such as boxed chocolates and stocking-stuffer items, said Tim Tackett, category sales manager for candy. Key to competing with drug and mass channels is offering a wide selection of holiday candy at low prices, he said.

Others are pushing fall-themed candy out earlier to capture impulse and repeat sales.

Big G Foods, a one-store operation in Marengo, Iowa, has been selling candy pumpkins, Red Hots, candy corn and the like on pallets since October. Until recently, Christmas candy didn't come out until after Thanksgiving, owner Garth Grafft said. As his competitors started displaying it earlier, however, he had no choice but to follow suit. Now, favorites like boxed chocolates are on endcaps and in aisle displays by mid-November.

Bozzuto's, which supplies about 700 stores in the Eastern United States, has pushed up its display and promotions calendar, too. "We usually don't miss a beat," said Don Spencer, confectionary category manager for the Cheshire, Conn.-based company. "We have Christmas candy up as soon as we take down Halloween candy."

Bozzuto's knows shoppers who buy early usually will return to make a second purchase. "The customer usually makes a buying decision with the idea of holding the product at the house until the holiday," Spencer said. "As consumers ourselves, we know that is not going to happen. That candy bought in early November will be consumed well before the holiday, and the customer will be in to make a second purchase." Bozzuto's also has expanded its selection and variety of its offerings.

It's true that stores are getting better about getting seasonal candy out earlier and cross merchandising it with cards, wrapping paper and the like. However, they may find incorporating candy into non-candy aisles isn't easy, said Raymond Jones, managing director at Dechert-Hampe & Co., a marketing consulting firm based in Northbrook, Ill.

"More and more retailers are setting up seasonal aisles, and candy often becomes one of the items featured in that aisle." He also sees more retailers promoting candy in stages, recognizing that shoppers may look for decorating items early in the season, then gift ideas, and lastly, stocking stuffers.

"Retailers are recognizing candy has expandable consumption," said Jones, who consults to the National Confectioners Association, Vienna, Va. "It's a category consumers can be driven to impulse relatively easily."

Still, supermarkets' share of the candy market has been slipping as other channels devote more space to it and generally get displays out earlier, observers said. Of non-chocolate candy, 16.7% was bought in supermarkets in 2003, down from 17.5% in 1998, while Wal-Mart/warehouse clubs' and drug stores' market shares grew, according to Mintel International Group, Chicago.

Christmas is an important holiday for candy, accounting for about 30% of seasonal, confectionary dollar sales, according to Packaged Facts, the New York-based market research report. In turn, seasonal candy represents about 30% of all candy sales, according to NCA.

Yet supermarkets have conceded seasonal candy to mass marketers, who are "merchandising it longer and stronger," said Jim Corcoran, vice president of trade relations for the association.

"Supermarkets tend to stay away from seasonal products because they don't want to be stuck with a lot of unsaleables," agreed David Bishop, director at Willard Bishop Consulting, Barrington, Ill. Other channels, he said, "understand it's incremental, impulse, expandable."

Observers see the opportunity for supermarkets to do more to tie in seasonal candy with other categories, increase displays to prompt impulse buys, and suggest different uses for candy. With the economy improving, NCA expects Christmas sales to grow 3% this year, after stagnating for three years. Given that people are willing to spend more for premium candy for holiday gifts, retailers would do well to offer more premium boxed candy, Corcoran said, noting that 60% of boxed candy is sold in the last two months of the year.

Good merchandising is key to promoting impulse buys, Bozzuto's Spencer said. "We continue to put an emphasis on display shippers and self-contained modules that have graphic appeal," he said. "This year, we have expanded our larger pack selections due to the influence of mass merchants and club stores. We also have increased the number of licensed products, such as the Disney lineup from Imagination Confections."

Retailers also can take advantage of the fact that people are putting off their gift shopping, Corcoran said. The mass and drug channels have been showing sales spikes later in the season, which creates an opportunity for supermarkets to sell people candy earlier, when they're doing routine shopping. With supermarkets, he said, "They're in the store every week."

Retailers need not worry about offering holiday candy in every diet variety imaginable. People like to treat themselves at this time of year, and tend to revert to familiar brands and tastes.

Licensed products and everyday brands sporting holiday-themed packaging will continue to be big sellers, said Tom Vierhile, executive editor of Productscan Online, a new-product database of Marketing Intelligence Service, Naples, N.Y. He's already seen a number of holiday-themed licensed candy products in recent months.

Holiday candy also will reflect interest in nostalgic flavors and new forms of treats, said candy consultant Joan Steuer, president of Chocolate Marketing, Los Angeles.

Flavors like caramel, toffee and peppermint will continue to dominate, but they'll be used in new ways, like pistachios in chocolate bark or peppermint as a meringue flavoring. High-end stores will stock chocolate bars with flavors like absinthe and wasabi.

Confections that blend cookies and candy also will be big for the holidays, as will treats whose familiar fillings are on the outside, Steuer said. "I think consumers are really looking for textural play."

Putting candy in a candy dish, giving or receiving a box of chocolates, and creating or receiving a stocking filled with goodies are popular uses of candy during the holidays. However, there's more to holiday candy sales.

Steuer said she sees people returning to home candy-making in a continuation of the nesting trend. Betty Crocker is ready for them, with Candy Maker kits out for Halloween and a Christmas version to follow.

"It's spending more time with kids. It's staying closer to home. It's also gift-giving and sharing."

Retailers can exploit this trend with displays of caramels and nuts and recipes that suggest candy-making, she said.

Supermarkets also are in a natural position to focus on the everyday and the holiday gift sale.

"There's so much competition, and yet it seems like it's a natural opportunity because it's where we go two to three times a week."

Retailers can promote chocolate, one of the first categories to benefit from self-indulgence spending, to harried moms by sticking individually sized packages of chocolate at the bakery and deli departments, she said.

That seems to be the main message when it comes to candy: While many holiday candy purchases are planned, it's still a category that relies heavily on impulse, and repeat, buying.

"If it's out there," said Corcoran, "people will buy it."

Don't Forget About Thanksgiving!

Candy may not hold as hallowed a place at the Thanksgiving dinner table as turkey and pumpkin pie do. Yet confectionary is a natural addition to a festive table, as well as to retailers' merchandising plans.

Supermarkets can make sweets a part of their Thanksgiving dinner promotions, taking advantage of the fact that their big candy competitors -- mass merchandisers and drug stores -- don't put a big emphasis on the holiday, said Jim Corcoran, vice president of trade relations, National Confectioners Association, Vienna, Va.

Confectionary can be promoted as a gift, something for the candy dish, or as a post-meal offering. "It's basically a dinner celebration," Corcoran said.

Some retailers are seizing that opportunity. Wholesale supplier Bozzuto's offers its retailers a number of holiday selections that go from Thanksgiving to Christmas, such as dinner mints, boxed chocolates, thin mints, candy dish products and chocolate-covered cherries, said Don Spencer, category manager for the Cheshire, Conn.-based company.

To get shoppers to think of candy beyond Halloween, A Southern Season, a gourmet market in Chapel Hill, N.C., adds pumpkin truffles and chocolate leaves to its Halloween novelty and bulk chocolate counters in early October. As an alternative to pumpkin pie, candy buyer Joyce Fowler plans to promote chocolate turkeys as holiday table centerpieces that can double as dessert.

Sugarplums and Candy Canes

Christmas confectionery sales (in billions of dollars) have remained fairly flat over the past six years, though they are expected to increase this year:

1998: $1.42

1999: $1.42

2000: $1.43

2001: $1.44

2002: $1.41

2003: $1.39

2004: $1.40 (est.)

Source: National Confectioners Association, based on data from Information Resources Inc., NCA/CMA monthly shipment reports, and U.S. Department of Commerce