CHOCOLATE HEAVEN

R. MICHELLE BREYER

Boxed and fancy chocolates -- a sight for a gourmand's sore eyes -- are giving the candy aisle a new look of indulgence.

"People are not denying themselves [chocolate]," said Annearle Morris Klein, category manager for the Northern region of Supervalu, Minneapolis. "There are consumers who feel like they deserve it."

Double-digit increases in chocolate sales in Supervalu's Northern region have spurred the wholesaler to devote 10% more space to chocolate than it did a year ago, said Morris Klein. She attributes higher sales to an economy in which people are treating themselves to luxuries like fine cigars and brandy. Of the 350 chocolate stockkeeping units sold in Supervalu's Northern region, close to 15% are gourmet chocolate.

While Morris Klein reported that consumers in her region buy more chocolate than anywhere else in the country, retailers nationwide are seeing healthy increases in chocolate sales.

Fat-free and low-fat chocolates may have fueled chocolate sales in the past, but today boxed and gourmet candies account for much of the current growth in the $13 billion industry, according to Jim Corcoran, director of trade relations for the Chocolate Manufacturers Association, Reston, Va.

"The Baby Boom generation is purchasing more upscale products," said Corcoran. "High-end chocolates are benefiting from that."

Retailers are responding to the current trend by increasing shelf space and bringing in more varieties of richer chocolate.

"For a while, so many people were talking no-fat and low-fat, but they're buying full-fat," said Bryan Ryckeley, candy buyer for H.G. Hill Stores, a Nashville, Tenn.-based chain of 14 stores. "The whole indulgent attitude has come back with candy."

Of the 125 chocolate items sold by A&P, 25% are gourmet. And that doesn't include the retailer's selection of Russell Stover chocolates, said Andy Carrano, vice president of marketing and corporate affairs for the Montvale, N.J.-based chain.

"Chocolate feels like a special treat," said Kathy Schwartz-Lussier, spokeswoman for Houston-based Randalls Food Markets. "And if they [are going to] spend the calories on chocolate, a lot of people want the good stuff. Low-fat only goes so far."

With margins of 30% or more for upscale chocolates -- compared with about 25% for regular chocolate -- boxed and gourmet items have sweetened retailer profits.

Indeed, the highest growth segment of the chocolate category is in boxed chocolates, some priced as high as $50 a pound. Sales grew 13% last year for Russell Stover Candies, said Brian Berish, vice president of marketing for the Kansas City, Mo.-based candymaker.

Mike Kinney, spokesman for Hershey Foods Corp., Hershey, Pa., agreed that boxed chocolate is the fastest growing confectionery category. Hershey manufactures the one-and-one-half-year-old Pot O' Gold line of boxed chocolates, which has done especially well at supermarkets.

Thanks to its moderately priced Pot O' Gold line, Hershey has quickly grown from a nonplayer to the No. 2 boxed-chocolate vendor in the United States, behind Russell Stover.

"What Hershey does on an ongoing basis is monitor the confectionery industry and look at long-term growth opportunities," said Kinney.

Chocolate, which accounts for more than 60% of confectionery candy, has seen per-capita consumption grow about 20% since 1990 to 24.3 pounds, according to the CMA. Overall consumption of chocolate has risen 30% since 1991 to 3.1 billion pounds.

Corcoran attributes this growth to several factors, including the baby boomlet (younger consumers eat more candy), product affordability, product innovations and a renewed acceptance of candy in an era in which people are tired of counting every fat gram.

Boxed and gourmet chocolates are no longer reserved just for special occasions, said Berish of Russell Stover. Sales of his company's top-selling chocolate, the Whitman Sampler, were up 30% last year.

Like many retailers, Schnuck Markets, St. Louis, keeps a large assortment of boxed chocolates in stock, said Keith Shannon, candy category manager. Gourmet chocolate stockkeeping units, including boxed chocolates, account for 15% of the chain's chocolate selection.

The gourmet segment includes Russell Stover, Pot O' Gold, Lindt and Toblerone. In a third of Schnuck stores, 4 feet of the aisle are dedicated to gourmet chocolate.

Ryckeley of H.G. Hill recently began selling boxed chocolates again. For a while, the chain sold them only as a seasonal or promotional item. The company carries Hershey Pot O' Gold and Russell Stover boxed chocolates.

Supermarket chains stock their boxed and gourmet chocolate in many areas of their stores, from liquor to the pharmacy. Often these items are displayed away from the candy gondola.

At most of its stores, Schnuck sells Russell Stover chocolate in the floral, liquor and greeting cards sections. The stores recently ran a promotion giving customers $1 off on floral or greeting cards when they bought a box of chocolates.

Randalls sells chocolate throughout the store. For example, there are chocolate-covered strawberries in the bakery and a large, four-sided Russell Stover display in the pharmacy, with smaller ones placed at the checkout stand for impulse buys.

One of the most successful placements for boxed chocolates has been in the floral department, said Schwartz-Lussier.

Randalls sells a brand called Stephanie's Chocolate, which is available daily in flower-covered boxes. The boxes are displayed in baskets, surrounded by floral arrangements to make them look "classy, elegant and romantic," Schwartz-Lussier said.

"Visual impact is very important for sales," she said. During holidays, like Valentine's Day or Mother's Day, chocolate is used as a value-added product to sell floral arrangements.

Randalls also sells chocolate-related gift baskets in its floral department, including a chocolate and champagne basket and the "Chocolate Overdose," a basket filled with gourmet chocolate bars, gourmet hot cocoa mixes and Hershey's Kisses.

"I think it's expanded the market for chocolate," Schwartz Lussier said. "It gives shoppers one more place to look in the store to find chocolates."

H.G. Hill Stores stocks its gourmet chocolate lines such as Lindt, Ghirardelli, Perugina and Toblerone in the gourmet section, along with gourmet pastas, beer and chips.

Supervalu is rolling out a new total-store strategy for candy over the next 18 months, Morris Klein said, which will provide multiple locations for candy and chocolate throughout the store, beginning with the gondola in the candy section and followed by additional front-end planograms. The new strategy will also involve augmenting the number of gourmet and specialty candies.

Retailers are also looking more carefully at seasonal opportunities in the chocolate category, since seasonal confectionery is a major growth area. About 80% of boxed chocolate is sold between Thanksgiving and Valentine's Day, according to the CMA.

Ryckeley noted that consumers seem to be returning to a more elaborate celebration of the holidays, and that seasonal confectionery is growing much faster than the overall candy category.

Morris Klein attributes Supervalu's dramatic increase in candy sales in the Northern region to a strategy that focuses on seasonal items first. The company recommends that its stores display their holiday candy early.

"For Halloween, a lot of sales occur the last few days, but there are additional sales you can get by displaying early," Morris Klein noted.