HOW SWEET IT STILL IS

Seasonal candy sales remain strong in the Center Store despite increasing competition from alternative channels. While many retailers see the most movement in snack sizes and miniatures, higher-end boxed items are providing some with the means to challenge that competition.Christmas was a disappointing season for many in the larger retail world, yet the retailers SN spoke with did not feel the pinch

Seasonal candy sales remain strong in the Center Store despite increasing competition from alternative channels. While many retailers see the most movement in snack sizes and miniatures, higher-end boxed items are providing some with the means to challenge that competition.

Christmas was a disappointing season for many in the larger retail world, yet the retailers SN spoke with did not feel the pinch in their candy aisles. Although concrete numbers were not available at press time, all agreed that holiday sales were up.

At Dahl's Foods, Des Moines, Iowa, candy sales were decent, according to Ross Nixon, vice president of merchandising for the chain. Still, he acknowledges the increasing pressure to stay competitive in the face of supercenters and other alternative formats. "The category is so spread out now, with more outlets than ever before," he said. "To keep that business, we have to be more competitive and willing to give up some margin."

For instance, a 16-ounce fun-size bag that normally retails at $2.99 may sell at two for $5 during the holidays in Nixon's stores, a relatively steep price cut.

Ralph Radcliffe, a category manager for Homeland Stores of Oklahoma City takes a different approach.

"We're not going to combat them on price," maintains Radcliffe. "Seasonal candy is pretty impulsive, so an attractive display and a good location are key."

In addition, Radcliffe reminds retailers to make the most of limited space, stocking only the best items and taking care not to run out.

Candies geared toward entertaining appear to be the most popular seasonal items for grocery merchandisers today, regardless of the holiday.

"In our area, the bagged candy items geared toward the specific holiday do very well," Nixon said.

Nixon added that he has seen a steady erosion of other segments of the seasonal category, citing hard candies and sugar candies, as well as the boxed chocolate business, as examples.

Still, there are some sentimental seasonal favorites that cannot be ignored, even if they are not the primary attraction.

"We pick up heart-shaped gift boxes for Valentine's Day, in addition to the standard Fanny Farmer and Russel Stover varieties," Nixon said.

And although the novelty segment is fairly slow, Nixon makes some small concessions, carrying chocolate bunnies for Easter, but keeping the price point low, between $1 and $2.

Merchandising and display decisions at Dahl's are made on a store-by-store basis, and Nixon said most stores will set up additional seasonal displays in prominent positions throughout the store.

"The secondary display may be put in the first position, right as the customer enters the store, or in the last position as the customer approaches the checkout stands," he explained.

In the larger stores, managers will often have displays in both locations, according to Nixon.

Cross merchandising at secondary displays is generally minimal, especially as certain holidays don't lend themselves very well to this technique; for instance, Valentine's Day. Nixon contends that the holiday essentially revolves around candy and cards, and the effort to attempt a tie-in is more effort than it is worth.

Homeland's Radcliffe has witnessed the same trends with his seasonal candy, telling SN that miniatures and snack sizes have the highest percentage of seasonal sales year-round, and that novelty items and boxed chocolates are little more than a perfunctory presence in his stores. Yet, he did mention that boxed chocolates still do fairly well for Valentine's Day.

Radcliffe's stores also take advantage of secondary candy displays, varying from store to store.

"The location depends on the store," he said. "Sometimes we have a promotional aisle and sometimes a lobby display. It's left to the manager's discretion."

Cross merchandising the candy with nonfood items is common at Homeland's, popular themes being stuffed animals for Valentine's Day and Easter baskets for Easter.

Although some retailers report a distinct lag in boxed sales, others have done very well with some of the high-end varieties. Catering to a gourmet sweet-tooth may be a viable option for buyers and category managers trying to differentiate themselves from drug and mass, the home of less expensive domestic brands.

Stephen Hendley, the executive vice president for Guylian USA, a Belgian chocolate manufacturer with offices in Englewood Cliffs, N.J., said his company has seen very strong growth in the supermarket channel over the past three years. Initially, Guylian could only be found in upscale supermarkets, but today the brand can be found in Shop Rite, A&P and Waldbaums, to name a few.

"Our growth in the grocery trade has outpaced our growth in the specialty business, including department stores and gift shops," noted Hendley.

Hendley asserts that Americans are looking for quality as opposed to quantity, and that supermarkets can take advantage of this desire in the boxed chocolate category just as many are now doing with other grocery items such as olive oil, coffee and tea.

"Whether it be Guylian, Lindt or Perugina, all of these brands have demonstrated that American consumers are ready," said Hendley.

In Hendley's opinion, offering these products at popular price points is of utmost importance to conventional retailers and, to that end, the Guylian line includes boxes in the $6.99 to $9.99 range.

At Draeger's Markets, an upscale supermarket in San Mateo, Calif., gourmet boxed chocolates represent a good portion of the store's seasonal candy sales, according to Alexandria Christakos, a candy buyer for the store.

"I couldn't keep up with Godiva sales this Christmas," said Christakos. "I increased my order by at least a third and I still ran out of product by Christmas."

Of course demographics play a role, and Christakos claims that higher-end candy always does very well at her store, including international offerings from Spain, France and Italy.

"We have a lot of tourists coming through and people coming in from across the East Bay. There aren't many gourmet grocery stores around."

Most of the expensive chocolates are found in the center aisle, a 6-by-7-foot aisle that customers must walk through upon entering the store. The aisle is a representation of the entire store, and across from the chocolates is a case featuring high-end wines and cognacs.

"It's a very visual location," said Christakos.

Indeed, Christakos finds that visual considerations and aesthetic appeal are important for any holiday.

"A lot of people really like that visual experience for the holidays, especially if that means something wrapped and ready to go, with a nice ribbon. Or maybe a satin, egg-shaped box for Easter," she said. "I think these things really help sales."

Bulk candy bins are also found in the center aisle, holding smaller novelty items such as red foil hearts and lips for Valentine's Day. Overall, however, Christakos gives the novelty category a tepid review.

Christakos concentrates most of her efforts on moving product in the center aisle, but she also deals with the standard snack sizes and miniatures, which are mainly run off the shelves in the candy aisle. However, secondary displays are sometimes used for these items when space allows. Often, the less expensive seasonal candy can be found on a temporary rack in the freezer aisle.