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NEW YORK -- With most candy and snack food makers saying they will significantly increase the number of products they launch next year, the c-store channel could profit greatly by improving its new-item speed-to-shelf performance.
More than 90 percent of candy and snack producers expect to introduce between one and 10 products in 2010, according to Clear Seas Research. C-store operators have done a good job managing these two product categories -- dollar sales of the top 100 confection SKUs for the first 11 months of 2008 increased by 3.6 percent according to a joint study by NACS, the National Confectioners Association (NCA) and the American Wholesale Marketers Association. But the channel is missing a huge opportunity as it lags in getting new products into its stores.
C-stores get new confection and snack items to the shelf much more slowly than other channels of trade, including drug stores, arguably the channel's toughest competition for candy and snacks, the study revealed. The result: retailers benefit less from heavy consumer advertising that accompanies major launches and miss sales when customers are most excited to try new items.
Because convenience stores are not as concentrated in the hands of a few corporations and are working through wholesalers rather than buying directly, there are many more points of communication and distribution that have to be made to get the same level of distribution as the drug, mass and super channels, according to the report.
Exacerbating the problem: most c-store operators update their confection planograms just once or twice a year, their snack planograms perhaps once a year. Plus, with a limited footprint, there is little room to cut in new items.
Thus it takes a very coordinated effort to expedite the products to shelf.
This lack of coordination, it seems, is costing c-store operators big bucks. A study of one new chocolate SKU item revealed the drug channel reached a distribution level of 74 percent during the product's critical first 12 weeks after launch compared to a distribution level of only 21 percent in the c-store channel. During that time, c-store sales of the item were $900,000; but if c-stores' speed to shelf mirrored the drug channel's, the report projected that sales of the product would have reached $3.5 million during those first three months of the product's life. For the first six months of the item's life, c-store sales were $3.8 million, against a potential $8.7 million opportunity.
Looking at a gum SKU introduction, the c-store channel reached 17 percent distribution in its first 12 weeks, for sales of approximately $300,000, while the drug channel hit 80 percent distribution. The potential missed sales opportunity caused by slower distribution of that one item in just the first three months: more than $1.5 million.
Many retailers, though, feel they are doing the best they can, given the nature of the convenience channel and store format. While getting products into the stores quickly is critical to the candy and snack categories, perhaps just as important is knowing exactly what consumers are looking for in a new item, noted Danna Huskey, candy and snack category manager for E-Z Mart Stores, based in Texarkana, Texas.
"Sometimes it's important to get something out even before national advertising hits because a flavor profile or package may catch the customer's eye," she said. "On the flip side, it's a pain to figure out where in the world to put all of the new items being launched."
Three-fourths of E-Z Mart stores have a 12-foot in-line set of candy; the others have an eight-foot set. Stores also have a four-foot set for kids' candy and novelties and Hershey, Wrigley and Mars counter racks. The two top shelves of the novelty display are devoted to quick in-and-out items.
"We use those two shelves for many of our new items or, if we are trying to get rid of 12 bars of a 24-bar box of something that has been discontinued, we will place them there," Huskey explained.
With 300 stores, E-Z Mart benefits from regular visits by manufacturer representatives and brokers, keeping Huskey up-to-date on new item launches. "Some companies, such as Cadbury, regularly recommend items to pull to make room for new products," she said. "We get a lot of guidance from manufacturers, and due to contractual obligations sometimes we [are compelled] to add the newest items. But E-Z Mart has veto power over any item."
Jim Callahan, director of marketing of Geo H. Green Oil Co., which operates three stores and owns 45 others, said he often hears industry executives complain about the "never-ending stream" of new items hitting the market. "But I like them because that is where you are going to find manufacturers spending their advertising money," he said, "and constant innovation by candy and snack makers is a direct result of expensive market research into the changing collective palate of the American public."
Even so, Callahan said selecting which new items to stock is difficult. "Candy racks do not get any bigger so for every item we bring in, we try to eliminate another at the same time. Placing new items up front or at the cash register can give you an early indication of the draw and the hoped-for staying power, but that's hard to do, because the counter is our Golden Acre and we try and reserve it for the really quick turnover and high gross profit items, such as disposable lighters."
Typically, the Fairburn, Ga.-based c-store operator receives notice of a new product four to six weeks prior to its launch. The often chain relies on new product alerts, sent electronically by wholesaler Eby-Brown once or twice a week.
"With the industry dominated by one-and two-store operators, it's quite impossible for the candy and snack companies to keep us cutting-edge ready," said Callahan. "Still, while you might find a drug chain or Walmart, aided by the benefit of direct shipments, displaying a new product a few days before us from time to time, the major distributors do a quite remarkable job with speed-to-market initiatives, keeping us close to the big boys."
Indeed, the gap between c-stores' and other channels' speed-to-shelf could be closed if manufacturers, distributors and retailers work more closely together, said Lance Smith, category manager, McLane Co., based in Temple, Texas.
"It is incumbent upon the manufacturer and the wholesaler combined, to collaboratively work with the retailer on the timing, promoting and essentially the execution of new items into the convenience class of trade," he said.
McLane has a number of programs, including a virtual trade show, used as a platform to get new items in front of retailers. "Manufacturers typically know months in advance when a new item will launch," he said. "It is the responsibility and commitment of the manufacturer to promote and sell new items to their wholesale partners. In turn, the wholesaler has a huge responsibility to help retailers gain those incremental sales. If they are both preaching speed to shelf, it will advance that strategy."
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