STUDY SHOWS PROMOTIONS ARE A BOTTOM-LINE TREAT

McCLEAN, Va. -- Grocers could sweeten their bottom lines by treating themselves to more candy promotions, according to a recent study conducted for the National Confectioners Association here.When looking at promotion, candy is one of the best categories in the store, according to John Phipps, a partner at Deloitte & Touche, Wilton, Conn. Deloitte & Touche conducted the NCA study using scanning data

McCLEAN, Va. -- Grocers could sweeten their bottom lines by treating themselves to more candy promotions, according to a recent study conducted for the National Confectioners Association here.

When looking at promotion, candy is one of the best categories in the store, according to John Phipps, a partner at Deloitte & Touche, Wilton, Conn. Deloitte & Touche conducted the NCA study using scanning data from Information Resources Inc., Chicago, secondary research, and retailer interviews.

"One of the very nice things about candy is that it's virtually always consumed very soon after the purchase point and it doesn't really detract from future sales of the product," Phipps said while speaking at a seminar during the Food Marketing Institute's annual convention in Chicago. "So in effect, as a retailer, you can promote the product without it detracting from future sales. The increment you get really is a real increment for you."

One of the most important conclusions of the study, Phipps said, was the discovery of a large window of opportunity for retailers to boost their annual candy sales.

"Candy manufacturers and many of the retailers we talked to said there's a huge opportunity there to fill that gap with some kind of mega-summer promotion," Phipps said. "One major retailer we talked to actually has two summer candy carnivals. They have one in May, which is chocolate. They have one September, which is non-chocolate. They've had a tremendous amount of success with that."

The same retailer does a good job in conjunction with candy holidays.

"They also try very hard to sell the consumer a product at the beginning of that season, which might be a week or two before the actual holiday date. Then they try to create a second sale very close to that date. So they're kind of getting a double bang, as well as getting two whole promotions." The results of the study prove, Phipps said, that contrary to popular opinion, candy is not a mature industry. In fact, the compound annual growth rate for candy for the last 10 years has been close to 6%.

Future growth of the confection industry also looks good. According to the Bureau of the Census, the percentage of children between the ages of 5 and 14 will rise slightly through the remainder of the decade. On top of that, teen population is expected to grow at twice the rate of the overall population.

Retailers need to aggressively court those new shoppers -- as well as existing ones -- by stepping up their promotional activities and improving their space management of the candy category, Phipps said.

Candy sections should be located in high-traffic locations, typically a central aisle near the front end. Keeping the candy near the front of the aisle could spur impulse sales by those waiting to checkout, the study concluded.

Of course, cash register space has been one of the most profitable areas in the store for candy. Retailers who have reduced candy's checkout space have expressed regret, Phipps said.

Checkout-merchandised candy typically accounts for 30% to 50% of confectionery sales, Phipps said, stressing that the impact of this candy should not be ignored.

"The suggestion in this data is that having confectionery well represented at checkout helps sell confectionery throughout the total store," he added. "As you dedicate more checkouts to confectionery, total store sales [of candy] progress in a linear fashion," Phipps said.

Permanent secondary displays near complementary products have proven to be even more productive than space in the regular candy aisle, according to the study.

"Many stores are very big on doing that, locating it near video, near produce, other snacks, school supplies, greeting cards. Stores are getting more creative that way," said Lawrence T. Graham, president of the NCA.

Since nearly one-third of candy purchases are considered impulse sales, these displays are vital, Phipps said.

"This is especially important in that the average shopping experience has dropped a couple of minutes over the past five years," he said. "There's not a lot of time nowadays to attract the consumer's eye. Confectionery would appear to be one of those categories that can do that."

"To say it's impulse is one thing," Graham added. "To take advantage of it is another. To drive volume of an impulse item, you have to get it in front of the consumer to spark the impulse.

Phipps also said the study showed that retailers who dedicate higher-than-average section feet (or share of store space) and share of registers to candy have enjoyed higher candy sales while maintaining space productivity.

"We also found in our interviews a couple of retailers who had radically overspaced the confectionery space," Phipps warned. "You can't expand the category forever." Expansion is clearly needed in terms of promotions, Phipps stated.

"We are suggesting that through better use of promotions, sales of confectionery in grocery stores could be a lot higher," he said.

"There seems to be a tremendous amount of paydirt in promotions for this category," he added. "Confectionery demonstrates extremely high lift on promotion. Candy and gum average a 142% lift with merchandising." The combination of a feature and display, Phipps said, brings in the best results.

Stocking the correct assortment of products will also boost candy sales, Phipps said.

"The top-performing retailers [in the study] said micromarketing is important. Older people may consume a significantly different set of candy items than younger people.

"There's a bigger opportunity is higher-income areas to stock high-end confections which provide a high margin."

Keeping the correct assortment takes constant updating," Phipps said.

"It probably makes a lot of sense to have at least one annual review of space for this category -- just because it's a fair amount of turning of the items -- along with the seasonal resets. The category does require a fair amount of attention in that sense. But it appears to pay off."