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Is there such a thing as candy sales that are too sweet? Along with snacks, confections are the supreme impulse items, but that doesn't mean c-stores can't aspire for the icing on top and become a category destination.
Industry experts have long thought the convenience channel should own confections and snacks. Recent studies and Nielsen Co. research presented at the Convenience Store News' 2009 Candy & Snacks Best Practices Roundtable, sponsored by McLane Co. and held in conjunction with the National Confectioners Association's (NCA) 2009 All Candy Expo, indicate c-stores have a good opportunity to sprinkle best practices atop solid category sales for even bigger gains.
The confectionery sales growth of 4.7 percent last year outpaced the growth of most other merchandise categories for c-stores, according to The Nielsen Co. and the latest CSNews Market Research.
"The sales increase was primarily driven by manufacturer price increases, which gave retailers the opportunity to raise prices to consumers and harvest more margin than in the previous year," said CSNews Editor-in-Chief Don Longo, who presented top-line category results from the 2009 CSNews Industry Report to the group. "Candy has proven to be, if not recession-proof, then at least recession-resistant," he said.
Candy and snack retail participants -- representing chains that varied in size from 82 stores to 1,200 stores -- responded with ideas that could encourage others in the channel to run with recent category momentum and perhaps bring a renewed sugar and snack rush through c-store doors.
Discussions kicked off with attendees' most effective category practices to date:
Taking Charge of Category Management: "This is one of the first years that I haven't signed several of my vendor contracts," said Stephanie Poitry, category manager for Kum & Go. "They were just so SKU-heavy across all the [sub]categories. It's actually worked out to my advantage. At first I was scared to death because that's margin you get right off the top. But I figured category management is what we're supposed to be doing. And it did work out. Those vendors worked with us and negotiated the SKU count."
A similar approach was taken by Natalie Nader, confection category manager at BP/ampm. "We're managing the category by SKUs and rationalization. We're evaluating numbers instead of queuing on SKU requirements."
Catering to a Core, While Allowing Creativity: "Something we really focus on, because we're a 100 percent franchise organization now, is education and trying to help franchisees better understand their choices," explained Jim Hachtel, category manager for BP/ampm. "We really focus on planograming, and we rely heavily on core items. We're hitting those Top 50, Big 33 and Top 25 -- all of the top-selling items in the various subcategories. So our franchisees have great guidance on what they should be carrying every day. We also give them some space -- roughly 20 percent -- with every planogram to be creative and do their own thing. Hopefully, we win with the top SKUs, then let them be creative with what they put in the flex space."
Taking "Second Chances" on Merchandising the Hits: "In our stores, the No. 1, 2 and 3 candy items are all king-sized -- Reese's King, followed by Snickers and Mallo Cup -- and it's been like that for years," noted Jared Sturtevant, category manager for Nice N Easy. "So we put those three kings at every pay point in the store." Most stores have two to four pay points in addition to the in-line candy sets.
Getting in/Getting out: "Speed-to-shelf is one of the huge things we do, especially with all the innovation in gum this year," said Danna Huskey, category manager with E-Z Mart. "But if it doesn't sell within a certain amount of time, it's out. Nine months is a good telltale time for us with candy. With snacks, we give it more time than nine months. We try to get it out as soon as possible. We change our candy planogram twice a year."
"We refresh our planograms yearly on the smaller categories and twice a year on candy and gum," added Judy Gleason, category manager for Valero Retail Holdings. "We are working vigorously on SKU optimization."
Having a Markdown Plan: Moving quickly on items that aren't selling is a built-in strategy at Valero. "We developed a wire bin. We fold it up and put it away when it's not in use, otherwise, we mark things down half-price and put up a clearance sign," Gleason said.
Hosting Internal 'Buying' Shows for Store-specific Winners: "Internally, we started doing trade shows for store managers. They're really buying shows," explained Gleason. "We are more field-oriented in the last few years, so our stores have the ability to buy some products. But they buy what's right for their individual store -- such as premium chocolate products for some stores. It's been a good thing for us. We do it in January and follow up with a seasonal catalog. The live trade show is to touch and feel products. Then they can order later from the catalog version for seasonal items. It's helped get a lot more products in the stores than I would normally order because managers know what works in their stores."
"We always did a 'dog and pony' show, then we finally made it a buying show, and store managers felt so enthused about it," added David Stukus, category manager for TravelCenters of America. "We gave them the confidence to do their own orders, and things that we would never have pulled the trigger on as category mangers, they put in their stores and they worked. It's amazing how store managers vote differently than category managers."
Keeping an Eye on Buying Opportunities: "Years ago, three months after 'The Lion King' came out, I saw 250 cases of Lion King candy cases sitting in a distributor's warehouse, and I got the idea that because we're small, we could take them," explained Jim Callahan, director of marketing for Green Oil Co. "So we buy post-dated shippers, it might be a three- to six-month sell date on them, but we'll make a good margin, sometimes 40 percent, while blowing them out with great retails." Green Oil started this tactic years ago, and with two truck stops, the company might go through 20 to 30 336-count shippers in a month, said Callahan. "We've become known for selling candy like this, and are indeed, a destination for candy. It's something a small company can do that a big one can't because there is a finite amount of this type of product."
Aiming High on Counter Margins: "We encourage customers to buy 99-cent items and above from our counters," explained Sturtevant. "Having closeouts or discount items on the counter is counter-productive. You already took the margin hit. There's no margin in a quarter."
Other developing practices retailers mentioned they would like to see "in the works," included:
Multi-vendor Endcaps for Confections: "In snacks, we see that it pulls somebody to the endcap and then it usually pulls them into the aisle," said Huskey. "It not only grabs customers' attention, they shop both areas."
"Every retailer who I have spoken with is in favor of them," added Sturtevant. "They say it works well to either create their own program or go with a pre-set display."
Not surprisingly, the problem with multi-vendor endcaps is space. "There was a time when we had a king-sized candy endcap, it did phenomenally, but as packaged beverages, especially energy drinks, became more popular, it demanded the space," said Hachtel. "We put multi-vendor snack endcaps in that we actually did ourselves. It's been great, but it's not something we can do in every store."
More in and out Shippers: Stukus is keen on 'in and out' 72-count shippers, "to test and promote a new flavor, for example," he offered. "I do not think we're doing enough of it, but it gives us an opportunity to take advantage of the small amount of space we all have, whether it be a power wing, clip strip, etc. I'll ask a lot of companies, especially as I walk the show floors, 'Hey can I get that in a clip strip?' No one is going to complain about that, it gives you a chance to try a new item."
Seasonal Candy: The potential for c-stores to sell more seasonal confections, including Valentine's Day candy is there, Gleason noted. The channel would have to be a bit patient though, to get customers used to the idea. "In the grocery and drug channels, they sell more Valentine's in January because the consumer buys the product when they first see it," she said. "The consumer eats it before the holiday and buys a second package. It's just like the Cadbury Egg -- the earlier you get it out, the more of it you sell. So it would be the same thing with Valentine's candy. If customers see it they may not buy it right away. We're more used to putting candy out and selling it quickly. But if a customer sees it time after time, they'll get the idea they can buy more holiday candy from us. Our periods being every month, we'd have to make the decision to sell Valentine's candy all of January and part of February, or just for a couple of weeks in February."
Private Label Snacks: "One of my missions [at the All Candy Expo] is to find a private label manufacturer," noted Sturtevant. "The hardest thing for us is meeting the big manufacturer's minimum requirements with only 82 stores. I'm primarily looking for a potato chip that we can do in the foodservice area. We'd get a lot of volume from that; right now that space is allocated to Frito Lay and Wise."
At Kum & Go, private label in the category is "doing great," according to Poitry. "We just hired somebody to help with private label items for us."
Premium Chocolate: This is an opportunity for the channel, especially now that price points have gone past $1, according to Callahan. "We're at $1.59 for king-size bars -- that lends itself for us to get into the premium chocolate side of the business because now the price differential isn't that much," he said.
"There are a lot of high-end chocolates [at the show]. It's quite impressive," Sturtevant commented. "There is an opportunity with the large and gourmet bars since we've already broken past the $1 price point."
Buyers also discussed some of their most recent category frustrations, often involving manufacturers that did not consider retailers' timing.
"Most c-store chains are pretty consistent when updating confection programs, but it seems like this year, the main candy manufacturers rolled out new items inconsistently," said Larry Vertal, category manager for Circle K Great Lakes. "As opposed to January and June rollouts, which would match up with our planogram updates, they're releasing new items at odd times, including March and September, which makes it more challenging for us to execute."
Gleason agreed odd manufacturer timing was not in the best interest of the category. "I'm forced to look at [certain competing manufacturers] and ask which one is more innovative in order to set dates for the planogram," she said. "If you want to be fast-to-market with something new, it's really frustrating."
"Manufacturers think they're one-upping each other by coming out with new items faster," said Hachtel. "They're not realizing how best to get items out to our channel more quickly -- that's what we really need."
Hachtel also agreed the too-frequent releases go against the whole idea of speed-to-market. "[Manufacturers] can come out with 25 things a year, but it's a waste of time if we can't work them into our planogram cycle," he said.
Sturtevant would also like to see fewer pre-priced packages from manufacturers. "If it's not a 'magic' price point such as 99 cents, it's not worth having it pre-priced," he said.