SUPERMARKETS ARE FINDING UPSCALE CHOCOLATES A PROFITABLE ADDITION TO THEIR CANDY DEPARTMENTS

Premium chocolates, by the bar or the box, are fattening up the gross margins and upscale images of retailers who make room for them in their grocery stores. Often associated with specialty shops and department stores, fancy brands such as Perugina and Toblerone have found a permanent home on many retail shelves. In some cases, the brands are sharing in-store territory with local chocolatiers' products,

Premium chocolates, by the bar or the box, are fattening up the gross margins and upscale images of retailers who make room for them in their grocery stores. Often associated with specialty shops and department stores, fancy brands such as Perugina and Toblerone have found a permanent home on many retail shelves. In some cases, the brands are sharing in-store territory with local chocolatiers' products, and even a sprinkling of private-label programs.

Some retailers -- more typically those operators grounded in upscale merchandising or looking to build that side of their business -- are finding the higher-ticket chocolate products to their liking.

The product formats range from oversized 2.5-ounce candy bars to attractive boxes of gourmet truffles. Supermarkets are working with a fairly wide range of programs, from moderate presentations of the fancy candy bars to elaborate programs of gift box chocolates and even separate departments.

On the moderate side, for instance, there's the setup at Wayne, N.J.-based Grand Union Co. During a recent visit to one of the chain's larger stores by SN, 12 linear feet of the candy gondola was devoted to premium chocolate products.

The product assortment included Ghirardelli bars for $1.79, and Toblerone and Lindt at $1.99. Other varieties were priced slightly higher, such as Rademaker chocolate cappuccino sticks, retailing at $2.29.

The chocolate was buttressed by nonchocolate upscale brands such as Cavendish & Harvey and Callard & Bowser toffees, to create a sizable fancy candy section. Grand Union officials were not available to comment on how the section affects sales.

A&P's Food Emporium division, based in Bronx, N.Y., takes the business a step further by offering about 50 stockkeeping units of fancy chocolates on the top three shelves of its 13-foot candy section.

A sampling of products include an assortment of Lindt, Ghirardelli, Perugina and Cailler chocolate bars for $1.99, as well as 10 SKUs of boxed chocolates from the above manufacturers, retailing for $9.99 and $10.99.

Food Emporium even carried a five-piece box of Reber chocolates sporting a Mozart them. The famous composer's face was on every foil wrap. This particular item retailed for $5.39 -- that's more than a dollar apiece.

Food Emporium units, for the most part, cater to a higher end customer base than many Grand Union units, as well as other A&P formats. But some merchandising presence of fancy chocolates can add incremental candy dollars at almost any type of store, said retailers and other industry sources.

The math behind it is simple to understand. "You get higher sales and dollar rings," explained Frank Worrell, vice president of operations at Minnesota-based Lund's, an operator of nine upscale stores.

"You sell truffles for $1.75, which is a high sale, and secondly, it would be a higher margin as well. So, from the gross dollar margin standpoint, premium chocolates are phenomenal," Worrell said.

For his company, the strategy for merchandising fancy chocolate successfully includes pushing the products under customers' noses at places other than the candy aisle -- a mating of indulgence and impulse.

"We put bulk chocolates in our service bakery. And we also have some other chocolates merchandised away from the candy department in secondary displays throughout the store," said Worrell.

Byerly's, Edina, Minn., is another operator that plays up the fancy chocolates, featuring a full line of Lindt and Ghirardelli candy, two strong brands in the upscale candy arena.

But, according to Pam Wilson, general merchandise manager at the St. Cloud store, the main focus of the chain's program is on a private-label brand called Wood's.

"Wood's is gourmet candy; it's wonderful," said Wilson of the exclusive Byerly's label. The Wood's line is premium-priced, to mirror its national counterparts, and carries a higher margin than regular candy products as well.

Along with its bagged products, Byerly's also carries a line of Wood's boxed chocolates. "It has a bunker all to itself on the end of the HBC section, and has very good movement," Wilson said.

The Lindt and Ghirardelli products are located in the store's candy gondola, which happens to be the first aisle in the store. "This candy will move a little faster towards the holidays like Valentine's Day, Easter and, of course, Christmas," she added.

Rice Food Markets' Epicurean stores market the See's brand of gourmet chocolates, "which isn't quite as expensive as Godiva, but it's about $10 a pound," said a source at the company who asked not to be named.

"We tie the display in with the floral department," the Rice source said. "A lot of people also want candy in gift baskets. Chocolate sales of candy sold by the floral department get better year after year. It's a good way to merchandise upscale candy."

A buyer with the high-end operator Buehler Food Markets, Wooster, Ohio, said premium candy "seems to do the best out of the aisle, in other areas, like the floral department and the bakery."

Another area for merchandising fancy chocolates is in or near the greeting cards/gift wrap section of the store, agreed retailers. Indeed, chains often feature a Russell Stover endcap of boxed chocolates adjacent to that department.

For many chains, however, such an endcap is about the full extent of their upscale chocolate programs. What's more, the emphasis on the upscale segment, especially boxed chocolates, at such chains tends to be strictly seasonal.

Sue Hosey, vice president of consumer affairs at P&C Food Markets, Syracuse, N.Y., and Bob Downum, chief operating officer at Acme Markets of Virginia, North Tazwell, Va., are two retailers who told SN boxed chocolates are brought in for holidays only.

Factors such as income demographics and slow turns were named by the chain executives as reasons they don't expand fancy chocolates merchandising beyond in-and-out holiday programs.

"I haven't put in boxed chocolates yet," said Mimi Peck, grocery buyer for Copps Corp., Stevens Point, Wis. "I'm interested in putting in something similar to a Whitman cooler and combining it in our floral and card department.

"We don't have a lot of space in the grocery store, and you have to fight for it. There are some [of our] stores that will choose to do it, but it's more like a test than a corporate decision right now," Peck explained.

At the other end of the spectrum are the smaller, more specialty oriented food store operators who consider pricey chocolate an essential addition to their candy inventories.

Take West Point Market, Akron, Ohio, for example. This grocery retailer has raised chocolate retailing to a very high art form, creating a specialty shop atmosphere within the store.

"Our candy shop has three separate cases, which makes it look like a department store with glass shelves," said Cindy Yost, West Point's specialty foods buyer. The shop features hand-sold or prepackaged bulk and boxed candies, including a line from Godiva.

"Generally, in our chocolate shop sales have shown double-digit growth on a weekly basis, even in the summer when chocolate sales are suppose to be slow," said Yost. "For example, during a five-week period we were up 14%, then 23%; then sales dipped, then we were back up 22%, then up 31%."

But in the event a West Point shopper doesn't make it to the candy shop, Yost has plenty of goodies in the grocery aisle to satisfy his or her chocolate desires.

Lindt, Cloud Nine and Godiva chocolate bars all retail at around the $2 mark. "These are a big business," said Yost, "and because they are considered a specialty item, they carry a higher margin than standard grocery items."

West Point also carries a line of fancy chocolates from a Grabhams, a local chocolatier whose products rival Godiva's, said Yost.

And as far as industry competition is concerned, Yost asserted that West Point has established itself as the place to go for fancy chocolates.

"People seem to use West Point as a destination point for their chocolate purchasing; it's really not much on impulse. It's for gift-giving, special occasions, or just as a treat for themselves," Yost said.

If a lone seasonal display of boxed chocolate is one extreme and West Point's gourmet department is another, then the Nandy's Candy department at Jitney Jungle would fit solidly in the middle.

Jitney Jungle Stores of America, Jackson, Miss., hooked up with Nandy's Candy, a popular candy manufacturer, to install a stand-alone permanent display of upscale chocolates and other candies in its Premier superstore format.

The Nandy's Candy line has been afforded its own section, at the head of a power aisle of perishables. "It's known all over the city as probably the place to go if you really want a specialty piece of candy -- a premier piece of merchandise," said Buddy Winstead, Jitney Jungle's vice president of marketing, explaining the appeal of Nandy's and Jitney's reasoning for linking with the local brand. "We thought it was something that enough people in Jackson wanted. And while customers were in our store, they could pick it up, rather than going to the original Nandy's Candy retail store."

Kash n' Karry Food Stores, Tampa, Fla., was hoping to trigger the "treat myself" impulse among its customers when it installed a special case display of Daskalides chocolates in several of its stores. In one unit it was placed at the end of the baby aisle, for tired mothers looking for a small luxury.

The display offered such items as a 7-ounce chocolate bar for $4.29; a canister of cocoa and hazelnut paste wafer sticks for $5.29, and a 16-ounce box of chocolates for $16.65.

However, this type of merchandise is not found chainwide, according to Joe Bullara, senior vice president of marketing, who was interviewed when SN visited Kash n' Karry earlier this year. "What you see in this store is a program that's only in a few select stores," he said, noting that this kind of program is used in higher-income areas.