HEALTHY SALES 1998

RICHARD TURCSIK

Retailers are using sugar-free sweets to attract diabetics and the diet-conscious to the once-forbidden candy category.

Sugar-free candy sales are on the rise, in part, due to an increasing number of Americans being diagnosed with diabetes each year. According to the American Diabetes Association in New York, there are approximately 15.7 million people with diabetes in the United States, 5.9% of the population, with another 800,000 cases being diagnosed each year.

Bonnie Shaver, a spokeswoman for the Juvenile Diabetes Foundation International, New York, said the rate of diabetes is highest among the Hispanic, African-American and Native American populations.

"We are still studying the cause. We think that it is linked to genetics and environmental factors," she said.

Also spurring sales is the continued better-for-you movement. Catering to consumers who want to lessen the amount of sugar in their diets, manufacturers have improved the quality of their sugar-free offerings and greatly expanded the flavors and varieties of sugar-free items.

For the 52-week period ended Jan. 4, 1998, the diet-candy category had $67.6 million in sales, a 6.2% increase over the previous 52-week period, according to Information Resources Inc., Chicago. Unit sales increased 3% to 46.5 million bags. Much of the growth was fueled by the Lifesavers Delites products from Nabisco, which is the largest sugar-free brand, followed by Sweet 'N Low, Estee, Sorbee and GoLightly.

Many retailers prefer to merchandise their sugar-free candies in-line, right next to traditional candies. This strategy attracts not only diabetics but also mainstream consumers, category managers told SN.

"In the past few years we have revised and increased our selection of sugar-free candies," said Tom Yarrows, category manager at Big Y Foods, Springfield, Mass.

"There has been a good lift in sales on these products; we are attracting new users to the subcategory without much cannibalization effect in the overall category," he said.

Silverman attributes the increase in sales to improved product quality and a growing

population of diabetics.

"Unlike diet sodas, when it comes to candy it is still mainly diabetics eating the sugar-free candy," Silverman said, although he is starting to notice a little more usage of sugar-free candies by the general population.

Still, Silverman sees sugar-free candy as being the cornerstone of marketing to the diabetic customer.

"To be really successful at merchandising sugar-free candy you really have to shoot at it from all cylinders in the store," he said.

In addition to sugar-free candy, a good supermarket should carry sugar-free hot fudge sauce, ice cream, cookies and other diabetic items so that the customer is not forced to shop a special sugar-free health-food store for primary grocery needs, he said.

"We're trying to grow the whole sugar-free category; not just candy. We want our store to be a destination shop. Once you get a reputation for carrying those products, the doctors and hospitals will be your best referral and tell their patients that Rice Epicurean carries a large variety of sugar-free items," Silverman said.

Silverman said Rice merchandises most of its sugar-free candies in-line with the traditional candy and also in the bulk candy department. Rice's Sweet Street bulk department stocks a "substantial" variety of sugar-free hard candies.

"We have big stickers on the bin with 'SF' for Sugar free," to alert the customers," Silverman said.

However, sugar-free chocolates are not sold out of the bulk department because they have a higher price tag of up to $10 a pound, compared with $3.99 or $5.99 for the other bulk candies. The higher price results from increased manufacturing costs. As a result, the bulk chocolates are sold prewrapped nearby.

Instead of merchandising its sugar-free candies in one area, Rice's cross-town rival, Randalls Food Markets, takes a different tactic.

"We merchandise our sugar-free candies in four different areas of the store," said Chris Barclay, category manager for the Houston-based chain.

Randalls merchandises about 20 stockkeeping units of the Estee brand in the health and beauty care department; the LifeSavers Delites, GoLightly and Sweet 'N Low items in the grocery aisle; about five SKUs in the bulk department and local brand Pangburns sugar-free chocolate turtles in the specialty candy department.

Merchandising candy in different areas has not hurt sales because Randalls' customers know to look for the items in those areas, he said.

"The customers who were originally buying sugar-free were shopping for it in the HBC section. I think companies like Nabisco and GoLightly have expanded that and are trying to get customers who are not only diabetic but are watching their sugar intake to pick up their items. They try to get them on the grocery aisle where there is a lot more traffic," Barclay said.

One drawback to the sugar-free candies is that most of the brands have little -- if any -- advertising support, Barclay said. He also has to sell them at lower margins than regular candy to remain competitive.

"In some instances I carry a little less margin because the sugar-free products are a lot more expensive to manufacture. A lot of times I will take a little bit of a hit on margins to keep the retails within line. If I kept the same category margins that I keep on standard candy, then people won't buy it," he said.

Barclay said sugar-free only accounts for 3% to 4% of Randalls' total candy-department sales, but the figure is increasing slightly each year.

"Sales are not rapidly growing, but if I discontinue an item I usually get calls from people. The people who buy it are usually pretty vocal," he said.

The buyer for one leading Midwestern chain may be getting a lot of customer calls as that chain prepares to shift this summer from the Sweet 'N Low brand to the new Crystal Light brand, manufactured by Sorbee under license from Kraft, which manufactures the popular drink mix.

The chain merchandises about five SKUs of the sugar-free candy in-line in the candy aisle, and also has some offerings in the bulk set.

The sugar-free selections are merchandised with a different color peg so shoppers do not confuse them with regular chocolates.

Magruder, Rockville, Md., stocks up to eight SKUs in sugar-free candies in the GoLightly and Sweet 'N Low brands, said Mark Polsky, senior vice president. The candy is merchandised in-line with the regular candies.

"We are getting some increased sales because the world is discovering that they are diabetic," Polsky said.

Yarrows of Big Y said his chain tried merchandising sugar-free candies from the bulk department, but because of limited appeal the move was not successful.

"Too many bins need to be allocated and you need variety to have success in this area. The net result would be eliminating some of the regular hard-candy mix to make room for additional sugar-free, resulting in declining overall sales and profitability of the bulk candy. We also do not have unlimited space in the bulk area," he said.

Big Y has had success merchandising sugar-free candies in the candy aisle on peg racks with the regular candies.

"Sugar-free candies are merchandised together next to similar pegged candies offering a choice to the consumer. We do not merchandise sugar-free candies in multiple locations," he said.

Rosauers Supermarkets, Spokane, Wash., merchandises sugar-free candies from upscale-looking clear plastic dispensers, said Pat Redmond, buyer. Sales for the candy, which is sold in both bulk and bagged form, are strong, he said.

To make shopping easier for his customers, Redmond merchandises sugar-free candies in their own area of the candy aisle, where they have special signage.

"They get much more attention being integrated," he said.