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Candy continues to fare well.

CDR Roundup - The candy category continues to mark steady sales increases and produce nice profits for chain drug stores, where it accounts for about 3.4% of sales. And yet, at least among manufacturers, there appears to be less confidence in the category's "recession-proof" reputation.

Even in hard times, candy traditionally has fared well. Consumers might put off big-ticket purchases. But for inexpensive indulgence, candy can't be beat.

Indeed, in the current recession candy sales have held up well. Last year overall retail sales of candy climbed 8% to about $9.4 billion. At chain drug stores candy sales (including nuts and cough drops) rose 10.5% to nearly $1.8 billion.

At the same time, explains Chain Drug Marketing Associates merchandise manager Ben Cassesse, there has been unease - especially among manufacturers of chocolates (which account for roughly half of all candy sales). Apparently, price increases that they implemented last year didn't sit well with consumers. "Although sales are healthy," says Cassesse, "the leaders have felt the pinch."

As a result, major manufacturers are responding. Notably, this spring M&M/Mrs Inc. kicked off an aggressive marketing program keyed to its pricing. As part of the promotion, Mars will refund 5 cents for every wrapper from its single and king-size candy bars mailed in. The promotion, which requires a minimum mailing of 20 wrappers, runs through mid - October.

The big candy marketer is also using price cuts to win more shelf space for its products in increasingly crowded retail candy aisles. Mars has reduced the wholesale list price on its packaged M&M candies by an average of 9.4%. That reduction rolls back prices to 1987 levels.

Almost immediately after Mars move, its biggest competitor, the Hershey Chocolate USA unit of Hershey Foods Corp., responded with a rebate program of its own.

Hershey launched a consumer promotion offering 5-cent refunds for proofs of purchase from any Hershey's, Reese's or Peter Paul/Cadbury candy bar that weighs 1 ounce or more. Participants who respond to the offer by July 31 will also receive four coupons good for free standard-size candy bars.

In addition, Hershey is offering consumers the option of having their refunds donated directly to the Children's Miracle Network, a charitable organization that raises money for about 170 children's hospitals in the U.S. and Canada. The Hershey refund program runs through October 31.

Jackie Millon, candy buyer for New Orleans-based K&B Inc., says that thus far the refund programs have not had any noticeable impact on sales in her market. "It's still a little bit early to tell," she says. "Unfortunately, the promotion didn't get rolling while children were still in school, when it might have prompted wrapper collection campaigns."

Generally, Millon is pleased with the sales results and profit margins for candy bars. Her one complaint, however, about the recent price increase (which put a single bar at 45 cents to 50 cents) is that it has made multiple purchases harder to promote. "At lower prices, bars can be promoted at four for a dollar," she says. "However, the current promotional pricing is less attractive, less eye-catching."

The decision by Mars and Hershey to slug it out in the price arena has not surprised industry analysts. "It was the next logical step," says Eric Larsen, a food industry analyst with Morgan Stanley & Co. "The two have been fighting it out for the top spot in the industry for years. When Hershey acquired Cadbury Schweppes a few years ago, things heated up even more."

Cassesse says that the consolidation that has visited the candy industry in the past five years or so has been both good and bad for retailers. On the one hand, it's become easier for retailers to buy a good mix of products from a single manufacturer-often on a direct basis. However, with less competition, the promotional deals that are offered to retailers have become less attractive.

Nonetheless, the category can be very good to retailers. "You just have to know how to merchandise it," says Cassesse. "For example, at Easter retailers might promote jelly beans as a loss leaders; at at the same time, they can profit from chocolate bunny sales. The trick is the mix."

On the manufacturers' part, new products remain very important for whetting the consumers' appetite. Candy bar makers continue with a steady stream of line extensions. On the West Coast, for example, Mars is test marketing a version of Milky Way with 25% fewer calories than the standard bar.

In the nonchocolate arena, says Millon, tart-tasting candies are still very popular with children, while gum sales have been unspectacular. "We're all wondering how long it is going to last," she says.
  Top 25 chocolate candie(*)
Rank   Item
 1     Snickers
 2     Reese's peanut butter cup
 3     M&M's peanut
 4     Kit Kat
 5     Butterfinger
 6     M&M's plain
 7     Snickers king size
 8     Reese's peanut butter cup king size
 9     Hershey's with almonds
10     Milky Way
11     3 Musketeers
12     Nestles Crunch
13     M&M's peanut king size
14     Hershey's milk chocolate
15     Twix caramel
16     Baby Ruth
17     Milky Way Dark
18     Almond Joy
19     York pepperrmint patties
20     Snickers peanut butter
21     M&M's plain king size
22     M&M's peanut butter
23     Kit Kat king size
24     Rolo
25     Mounds
(*) Based on sales through CS&T distributors for the 12 months ended
January 1992
Source; ICC/Accutraks.
  Top 25 nonchocolate candies(*)
Rank   Item
 1     Skittles original
 2     Starburst
 3     Pay Day
 4     Twizzlers strawberry
 5     SweeTarts
 6     Spree
 7     Nibs red
 8     Zero
 9     Necco assorted wafers
10     Good   Plenty
11    Tootsie Roll
12    Hot Tamales
13    Bit-O-Honey
14    Starburst California
15    Skittles wild berry
16    Starburst Tropical
17    Sweetart chewy
18    Planters peanut bar
19    Skittles king size
20    Fun Dip
21    Nerds grape strawberry
22    Skittles tropical
23    Pearson salt nut roll
24    Good n Fruity
25    Skittles Tart n Tangy
(*) Based on sales through CS&T distributors for the 12 months ended
January 1992
Source; ICC/Accutraks.

U.S. candy consumption slips

CDR Roundup - Americans simply don't eat enough candy, say confectioners, so they've set a goal It's "25 by '95" - that is, 25 pounds of candy consumed annually per person by the year 1995 (and gum doesn't count).

According to the National Confectioners Association (NCA), Americans rank only 11th in the world in per capita candy consumption. Europeans, for example, eat much move: their annual 11th in the world in per capita candy consumption. Eurean

"Im Europe candy is considered part of the food groups," says a spokesman for the organization. "It is a staple in the home and is replenished on a regular basis."

The candy industry has claimed some progress in boosting candy consumption in 1990. According to the spokesman, per capita consumption rose about one pound to 20.7 pounds in 1990. Last year, however, Americans had less of a sweet tooth: per capita consumption slipped to 20.3 lbs.
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Publication:Chain Drug Review
Date:Jul 13, 1992
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