There's a sweet scenario about to take place in supermarket candy sections -- one that involves more space and more advertising devoted to confections. The aggressive approach is seen as a move by grocers to fight back against the continued success alternate classes of trade have been achieving in their candy programs. While supermarkets recently have posted impressive gains in candy sales, those

There's a sweet scenario about to take place in supermarket candy sections -- one that involves more space and more advertising devoted to confections. The aggressive approach is seen as a move by grocers to fight back against the continued success alternate classes of trade have been achieving in their candy programs. While supermarkets recently have posted impressive gains in candy sales, those gains are merely half of the increases garnered by mass merchants.

The healthy growth in candy sales by mass merchants has earned the respect of supermarket retailers, as evidenced by the results of SN's first State of the Industry report for candy, based on an exclusive, nationwide survey of retailers and wholesalers. An overwhelming majority (90%) of respondents rated mass merchants as "strong" or "very strong" competitors for their candy dollars.

The survey was developed by the Super Market Candy staff and conducted by the Market Research Department at Fairchild Publications, New York, which publishes SN.

The report is derived from responses of executives in charge of candy operations at 100 retailers and wholesalers. Executives were asked about various candy-aisle promotional strategies, as well as how their plans for 1996 differed from 1995. They were also polled on the sales performance of various types of candy products in their stores.

Together, the responses reveal a strikingly clear picture of a category in the midst of needed change. While the mass merchants and other classes of trade have earned the respect of the supermarket industry, they also have forced supermarkets to step up to the plate and challenge them for candy superiority.

Supermarkets still control the lion's share of the market, having racked up $2.8 billion in sales of candy and mints for the 52 weeks ended July 16, according to Information Resources Inc., Chicago. While that represented a 6.7% increase over the prior year, it lagged behind the 7.1% increase posted by drug chains and the 12.6% jump realized by mass merchants. Drug chains sold $1.6 billion and mass merchants $1.7 billion in candy and mints during the period.

Grocers have made a sudden about-face in terms of their candy aisles, as evidenced by their plans to increase space and advertising for the category.

While 56% of the respondents said they decreased their candy space last year, about the same percentage (57%) of respondents reported they have plans to add to their candy space during the next 12 months. On the downside, 39% of those polled said they plan to decrease space devoted to candy.

The advertising picture looks similar. While 53% of the respondents reported a decrease in their candy advertising for the 12 months prior to the survey, 59% revealed plans to pump up their advertising in the coming year. About 40%, however, are planning to cut their candy advertising budgets.

The area most exploited by alternate classes of trade continues to be price. When asked which types of outlets they effectively compete with on price, only about one in six of those responding named warehouse clubs. On the other hand, three out of four respondents said they compete well on price with large supermarket chains.

Independent supermarket operators -- defined as those with fewer than 11 stores -- scored well in terms of candy pricing, mostly at the expense of the larger chains. Only 41.9% of large chains -- more than 50 stores -- and 64% of midsized chains -- 11 to 50 stores -- said they competed well on price with independents.

However, they may be doing better than they think. Independents responding to the survey reported margins of 29% on candy products, nearly 3 percentage points higher than large chains and slightly higher than midsized companies.

Furthermore, when asked about average pricing on selected types of products, the independent operators came in at higher levels than their larger competitors. In bulk candy, for example, 40% of the independents said their average price is between $2.50 and $2.99 per pound. Meanwhile, 40% of the midsized chains and 47% of the large chains said their average price is between $1.50 and $1.99.

Retailers and wholesalers overwhelmingly pegged kids' novelties to be the top growth area in candy sections over the next 12 months. Nearly half (47%) chose that segment, while about one-quarter of those polled said sales of chocolate would improve most.

That might be a tall order for the chocolate segment. (See related story on Page 8.) With its customary perch atop the category, chocolate is a prime candidate to lose sales to other segments. Nonchocolate confections, for example, continue to close the enormous gap between their sales and those of chocolate items. However, those polled said chocolate accounts for more than 40% of their candy sales, well ahead of the next segment, nonchocolate, at 26%.

As supermarket retailers step up their efforts in the candy aisle, they are certain to re-examine their promotional practices. Based on the SN survey results, those relying on coupons to move candy should look in another direction. The survey asked grocers to rank the effectiveness in generating increases of candy sales on a scale of 1 to 5, with 5 being very effective. Coupons appearing in freestanding inserts and circulars were given ratings of 4 or 5 by only 37% of the respondents. On-pack coupons scored even lower, getting ratings of 4 or 5 from only 15% of those polled.

Displays, on the other hand, seem to be the way to go. A combination of a display and feature ad was given a high rating by 92% of the respondents. Nearly 80% also rated a display and price promotion combination as effective or very effective. Displays outside the department received high marks from 59% of the candy executives. Displays in the department were not as popular, with 37% of the respondents rating them as effective or very effective.

The front end remains the location of choice for displays outside the department. Nearly half of those polled ranked it as the most effective out-of-department area to display candy.

In the aisle, respondents devoted an average of 20 feet to their candy sections. Midsized chains led the way there, using more than 22 feet on average for candy.

Peg lines continue to take up more of that aisle space. Nearly three-fourths of those surveyed reported adding at least one peg line to their candy offerings in the last 12 months. Other areas with growing selections included bulk candy (30%) and service chocolates (18%).

The ever-changing nature of the candy aisle makes frequent resets a must, according to the survey results. Indeed, more than 60% of the executives from midsized chains reported resetting their candy aisles within the last six months. Independents and large-sized chains reset their aisles less frequently; 60% of the independent operators said they had reset their candy aisles within 13 to 24 months. The most common time frame for aisle resets among large chains was between six and 12 months. However, two large chains -- both of whom reported plans to decrease candy shelf space next year -- reported that the last reset of their candy aisles took place more than three years ago.

Attracted to Advertising

More good news and bad news for the candy category. The bad news: More than half the respondents decreased their candy advertising this year. The good news: Nearly 60% of the respondents expect their companies to increase candy advertising over the next 12 months.

Advertising Expenditures This Year

Increased 39%

Decreased 53%

No Change 8%

Expectations for Next Year

Increase 59%

Decrease 38%

No Change 3%

A Pricey Issue

Faced with increased competition from other classes of trade, supermarket operators generally are finding it tough to compete with the lower prices featured at those outlets.

Following are the outlet types and the percentage of respondents who said they can compete on price with that kind of outlet.

Independent Supermarket 56.6%

Mid-Size Supermarket Chain 63.6%

Large Supermarket Chain 75.8%

Mass Merchandisers 35.4%

Drug Chains 40.4%

Convenience Stores 36.4%

Warehouse Clubs 18.2%

Competing With Other Grocers

Supermarket retailers find it easier to compete on price with their peers than with operators of other types of outlets.

Following is a percentage breakdown of those who feel they are competing successfully against particular kinds of competition.

Competing Successfully Against:

Respondents Large Chains Independents Mid-Size Chains

Independents 80% 100% 60%

Mid-Size Chains 63.9% 52.8% 88.9%

Large Chains 41.7% 58.3% 91.7%

Independents = fewer than 10 stores Mid-size chains = 10 to 50 stores Large chains = more than 50 stores

Chocolate Rebounds

Performance data on major candy groupings for the last three 52-week periods, tracked by Nielsen North America, Schaumburg, Ill., shows, among other trends, that chocolate sales jumped 5.1% after two sluggish years.

Sales in Millions

1993 1994 1995

Chocolate $1,096 $1,085 $1,140

Nonchocolate $582.5 $619.1 $671.2

Chocolate Miniatures $471.9 $457.1 $472.5

Chocolate Specialties $199.3 $199.7 $204.3

Hard Roll Candy $82.0 $78.5 $73.4

Lollipops $41.6 $43.0 $46.6

Nonchocolate Miniatures $34.1 $38.5 $39.5

Dietetic Nonchocolate $10.0 $9.9 $10.7

Candy Kits $9.7 $9.3 $8.4

Dietetic Chocolate $7.4 $7.3 $7.7

Candy sales in supermarkets for the 52 weeks ended March 11, 1995, compared with the two previous 52-week periods

Rating the Competition

Respondents tabbed mass merchants as the biggest threat to sales of candy in supermarkets.

Percentage rating as strong or very strong:

Mass Merchants 90.2%

Warehouse Clubs 54.8%

Drug Chains 53.8%

Other Supermarkets 50.5%

Convenience Stores 45.7%

Promotional Practices

Teaming a display with a feature ad has proven to be the most successful way to generate candy sales. Coupons did not receive high marks.

Retail Promotion Effectiveness in Generating Sales Increases (Rated 1 to 5, with 5 being very effective)

Display and Feature Ad 92% 4.5

Display and Price Promo 78% 4.2

Feature Ad 71% 4.0

Out-of-Department Display 59% 3.7

Price Reduction 46% 3.5

In-Department Display 37% 3.2

Coupon 37% 3.3

On-Pack Coupon 15% 2.7

Sweet Margins

Most retailers and wholesalers reported earning margins of 20% to 30% on their candy. The only ones earning less than 10% were wholesalers.


Under 10 percent 6%

11-15 percent 1%

16-20 percent 8%

21-25 percent 21%

26-30 percent 38%

31-35 percent 20%

36-40 percent 4%

greater than 40 percent 1%

The bigger you are, the smaller your margin.

Mean Totals on Margins by Group

Independents 29%

Mid-Size Chain 28.2%

Large Chain 26.3%

Wholesaler 24%

Sales Up, But . . .

Although supermarkets were able to post a 6.7% gain in candy sales during the past year, their drug chain and mass merchant counterparts did better.

Sales Percent


Supermarkets $2.8 6.7%

Mass Merchants $1.7 12.6%

Drug Chains $1.6 7.1%

Dollar volume of candy/mints for the 52-week period ended July 16, 1995, compared with previous 52 weeks.

Source: Information Resources Inc.

Behind Bars

Consumers continue to make bars their preferred form of candy packaging. Candy bars account for nearly one-third of all candy purchases.

Percentage of Total Sales per Segment

Bars 30.7%

Laydown Bags 24.2%

Mints and Gums 19.4%

Hanging Bags 15.8%

Bulk 9.9%

Positive Signs

Supermarkets continue to lead the way in top-10 candy categories with the exceptions of Easter and Christmas candy. Supermarkets posted sales gains in eight of the following categories, which helped produce a 6.7% increase in overall candy sales.

Sales in thousands

SupermarketsDrugMass Merchants

* Chocolate Box/Bag

(More than 3.5 ounces) $569.4 $223.3 $339.1

Chocolate Bar

(Less than 3.5 ounces) $453.3 $204.1 $110.8

Chocolate Snack/Fun Size $407.2 $17.3 $212.6

Regular Gum $274.6 $126.1 $180.9

* Sugarless Gum $261.9 $88.0 $98.7

Nonchocolate Box/Bag

(More than 3.5 ounces) $200.8 $93.5 $103.8

Hard Candy Package/Roll $177.5 $95.4 $135.5

Easter Candy $161.1 $187.2 $215.7

Christmas Candy $142.0 $139.5 $150.3

Breath Fresheners $117.3 $58.0 $47.1

Sales in thousands of dollars. Source: Information Resources Inc. Candy sales for the 52 weeks ended July 16, 1995. * Categories with sales declines in supermarkets. Chocolate box/bag down 1.1%. Sugarless gum down 3.4%.

The Kids Are All Right

Kids' novelties are expected to be the hot area in supermarket candy sections during the next year. Indeed, 80% of independent operators pegged kids' novelties to grow more than the other sections.

Kids' Novelties 46.9%

Nonchocolate 22.4%

Chocolate 17.3%

Bulk 7.1%

Other 6.3%

Resetting Priorities

The seasonal nature of the candy category plus the constant flow of new products makes the candy aisle a prime category for resets. More than 80% of respondents had reset their candy aisles within the last 12 months.

Time Elapsed Since Last Reset or Revamp

Less than 6 months 40.6%

6-12 months 39.6%

13-24 months 16.7%

25-36 months 1%

37 months or more 2%

Attracting Impulse Sales

Even though a few chains have designated some of their checkout lanes as "no candy" lanes, the front-end area remains the hot spot for cashing in on the impulsive nature of candy sales.

Best Secondary Locations for Candy

PERCENTAGE RANKING IT BEST (Scale of 1 to 8, 1 being best)

Checkout 46% (2.1)

Endcap 20% (3.2)

Dump Bins 13% (3.5)

Shippers 13% (3.0)

Display in Front of Candy Aisle 6% (4.7)

Produce 3% (6.1)

Deli 1% (6.9)

Video 0% (6.2)