TRANSIENT STATUS

The kid's novelty category can be compared to a teen trying to establish his or her identity.Retailers have different opinions on where and how to merchandise this small but profitable segment. Its items are often relegated to shippers strewn throughout the store. Permanent shelf space is rare, buyers told SN, because of the in-and-out nature of the category as well as its high rate of impulse sales.If

The kid's novelty category can be compared to a teen trying to establish his or her identity.

Retailers have different opinions on where and how to merchandise this small but profitable segment. Its items are often relegated to shippers strewn throughout the store. Permanent shelf space is rare, buyers told SN, because of the in-and-out nature of the category as well as its high rate of impulse sales.

If nothing else, the segment seems to be crying out for attention -- something it seemed it would receive based on an SN survey of industry executives in charge of candy wholesaling and retailing operations conducted last summer. Nearly half -- 47% -- of those surveyed pegged kids' novelties as an area that would see substantial growth over the next 12 months.

A few months later it appears that category growth has nowhere to go but up. Most of the retailers interviewed by SN are indeed stocking a handful of the bubble gum beepers, candy-filled cellular phones, liquid candy squeezed from a tube and the blue raspberry anythings that make up this segment, but the majority are not committed to the category.

One wholesaler said the segment accounts for about 2% of its candy sales and another buyer estimated about 5%.

The biggest stumbling block appears to be a debate of sorts over where to merchandise the category's products.

A Midwestern wholesaler that also operates its own stores has disbanded its 4-foot novelty section in favor of shippers because it "couldn't keep up with the influx of new items," according to a buyer there. The buyer added that maintaining a permanent section becomes difficult because "you have to have an awful lot of inventory to maintain on those stockkeeping units because of the minimums."

A source at a Southern retailer agreed, saying the kids' novelty category is a "limited thing for us. It's not something that we do [a lot of]; we do a little in shippers and so forth."

Tom Yarrows, category manager at Big Y Foods, Springfield, Mass., said Big Y also does its kids' novelty merchandising through shippers. "We merchandise by putting shippers in the perimeter of the store."

While some grocers prefer to use shippers, others, such as the candy buyer at a Washington chain, won't or can't use them. "It's a difficult category for us because we have a clean floor policy," he said.

Not all retailers are convinced shippers are the way to go. Hannaford Bros., Scarborough, Maine, has been experimenting with a permanent kids' novelty display on the front end, said Judy Gagnon, spokeswoman.

She said the products are selling well and that merchandising them exclusively at the front end has not hurt category sales.

Ken Baughman, grocery buyer at City Markets, Grand Junction, Colo., said he merchandises kids' novelties in candy aisle gondolas. He does not cross-merchandise anywhere else in the store, and said category sales are growing.

Nanette Herron, grocery buyer at Rand's Inc., North Little Rock, Ark., said an outside company handles the kids' novelties category for Rand's by stocking 17 kids' SKUs on a rack display at the front end. Harper Marketing, Little Rock, Ark., continually updates the display's product mix, she said.

"If they've got an item that's not doing well, they'll pull it," she said.

While retailers appreciate the ample margins of this segment, the sometimes unlimited possibilities of where to merchandise it leave them in a quandary.

Some chains, like Big Y Foods, merchandise kids' novelties in the perimeter of the store; others in the main candy aisle, and still others at the front end. The one thing they all agree on is the products need to be in a high-traffic area.

Said Jace George, candy buyer at Spartan Stores, Grand Rapids, Mich.: "Merchandising these items is important -- they must be displayed to get quick turns."

A buyer with a Midwestern cooperative recommended putting kids' novelty items at the front end, though store-level personnel ultimately decide where to merchandise the items. "It's better at the front-end checkout. They tend to catch [the customers] a little bit better up there."

A source with a division of Nash Finch Co., Minneapolis, who requested anonymity, said, "Most of that stuff has to be merchandised in a really high-impulse area, a high-traffic area. And typically that's the front end or checkstand area."

Several buyers said they feel merchandising items at a child's eye level and within a child's reach is key in turning products. Spartan's George added that the wholesaler's member stores cross-merchandise in the toy department.

Despite kids' novelties holding a small percentage of total candy sales, most interviewed said their category sales had picked up over the last year.

To combat the in-and-out nature of the category, they recommended that their peers maintain some flexibility in their product mix. The buyer at the Midwestern cooperative said chains will cash in with successful sales as long as they keep the products fresh. "Trade things out; go with whatever's hot at the moment," he said.

George at Spartan agrees. "The key to kids' items is to keep new items moving in and out."

City Markets' Baughman concurred. "Just keep rotating product; that's what keeps the category moving at City Markets."

The products ringing in the sweetest sales for retailers are those that combine toys and candy.

Gagnon of Hannaford said the interactive items are popular because "there's still a toy after the candy is gone." Buyers said that translates into value; the child consumer wants something left over after the consumable product is finished. According to the buyer at the Midwestern cooperative, gum does better than candy because the consumer "feels like they get a better value if they can chew it longer."

The Midwestern wholesaler agreed. "I think a kid is looking at his money, too. He may find that the toy didn't last that long. Sometimes it breaks or it falls. Kids remember that. Then they go to a cheaper item where they can maybe buy two of that."

Spartan's George has been looking at bubble gum shaped like fast-food items (for example, french fries, hamburgers, hot dogs) and packaged in appropriate fast-food containers.

Flavors seem to move up and down with the trend, too. The buyer at the Midwestern cooperative claims blue raspberry flavor is selling well now, while Yarrows of Big Y says watermelon and tropical fruit flavors are becoming stale.