Sugar Rush

Retailers are positioning candy as an inexpensive alternative to higher-ticket items, such as gift cards, this holiday season

With the economy in a slump, retailers are expecting more shoppers to select sweets as substitutes for more expensive presents this year.

To help boost sales, many chains have set up candy displays in multiple high-traffic locations. Some have also created elaborate holiday centers that position candy alongside yuletide-themed general merchandise.

“Because candy is an impulse buy, we have merchandised our holiday candy assortment in the lobby for maximum exposure,” Brian Smith, category manager for Bi-Lo, told SN.

The Mauldin, S.C.-based chain fills displays with Christmas classics such as red and green M&M's and chocolate-covered cherries, two of the top-selling items at Bi-Lo each Christmas.

This year, the retailer has chosen to also mix in its own brand of new Southern Home chocolate-covered raisins, peanuts, spice drops and old fashioned hard candy mix.

“Based on our sales on this program so far, our private label [candy sales] should be strong for Christmas,” Smith said.

Unlike other categories throughout the store, he expects candy to fare well despite current economic conditions. He based the prediction on Halloween candy sales, which were in line with the chain's projections of a slight increase.

Jim Corcoran, vice president of trade relations for the National Confectioners Association, Vienna, Va., forecasts a similar outcome this season. He anticipates a sales increase, albeit a small one, of around 1% during the weeks between Thanksgiving and New Year's.

“Last year, Thanksgiving was so early compared to this year, so retailers are losing merchandising days,” explained Corcoran. “I still think sales will be up a little in 2008, though, because candy is an affordable gift that anyone can purchase.”

One reason for the anticipated sales success is the downturn of another seasonal category: gift cards. The prepaid plastic presents used to be the biggest competition for the candy category, experiencing growth in the double digits for several years in a row.

However, as consumers watch one retail establishment after another succumb to economic woes, a declining number of consumers are reporting plans to buy gift cards this year. Instead, Corcoran sees shoppers converting to confections as a low-cost alternative.

“Even the National Retail Federation is predicting a decline in gift card sales,” he said. “Gift cards and candy are both viewed as impersonal gifts, so if people aren't comfortable buying cards, they're likely to turn to candy.”

According to NRF projections, sales of gift cards, which it describes as the most-requested present, can be expected to fall by nearly 6% this holiday season to $24.9 billion, down from $26.3 billion last year. Contributing to the decline is the expectation that fewer shoppers will purchase gift cards (53.5% this year vs. 56.6% last year), and those who do will spend less on them (an average of $147.33 this year, vs. $156.24 last year).

SWEET STRATEGIES

Simply stacking them high and letting them fly might have worked in the past, but if retailers want to push profits, they'll need to extend their promotional efforts this holiday season, said Corcoran. He recommends merchandising candy in high-traffic areas such as at the checkout, on endcaps and throughout the perimeter of stores.

Plumbs, a Spartan Stores banner supermarket in North Muskegon, Mich., sets up a single table of holiday candy several feet inside its front entrance. Some of the more unique products there include chocolate letters that spell out the word “JOY” and white chocolate truffles topped with candy cane shavings.

Meijer, Grand Rapids, Mich., has much larger displays in a main aisle between its food and nonfood departments. The stand-alone sections contain everything from Peppermint Patties wrapped in red, green and silver foil to long strands of mini candy canes, stuffed animals clutching vials of Reese's Peanut Butter Cups and packages of mixed chocolate varieties from companies like Godiva and Russell Stover.

Every supermarket should carry such an assortment of sweets, said Corcoran.

“Holiday candy can be broken down into three main segments: decorative snacks, stocking stuffers and gift items,” he told SN. “Each of these should be included in a chain's displays so shoppers can find everything they're searching for in one location, and hopefully several additional items not on their lists.”

Small novelty toys filled with candy, Lifesaver books and holiday Pez dispensers are suitable as stocking stuffers. Boxes of Whitman's or other samplers can be stocked as gifts.

Justin Leazer, category manager at Schnuck Markets, St. Louis, offered a solution for ornamental snacks.

“Red and green M&M's, Hershey's Kisses and candy canes are always a favorite among our customers during the holidays, since they can serve as decorations as well as treats,” he said. “Andes mints and Lindt chocolates in Christmasy wrappers are also good for candy dishes.”

Supermarkets should set up signs too, said Jim Hertel, managing partner, Willard Bishop Consulting, Barrington, Ill. Even though candy might seem like a straightforward sell, it's important to offer usage suggestions, he told SN.

Simple slogans like “Fill your candy dish with these” or “Candy makes a great gift” would work well.

“POS materials could also read, ‘Keep a box or two on hand for the mailman, babysitter or your child's favorite teacher,” said Hertel.

OTHER OPPORTUNITIES

Robert Auerbach, president of Candyrific, the Louisville, Ky.-based licensed gift/candy manufacturer, believes that collectibles packed with candy are an integral part of the mix. His company makes M&M's-branded handheld fans that oscillate at the press of a button and have a bag of the candy-coated chocolates attached. At $2.99 each, they're bound to attract penny-pinchers, said Auerbach.

“Anything with an interactive quality vs. just a container filled with candy is always a hit,” he noted. “Licensed candies with Hannah Montana or Madagascar on the package are a big thing this year. The license is so alluring to shoppers that many toss a pack into their carts not even realizing there's candy inside.”

According to Bi-Lo's Smith, the chain sometimes carries products like this. Coffee mugs with candy stuffed inside are also hot-ticket items. So are hollow plastic candy canes filled with confections. But the category manager chose to forgo everything but the basics this time around.

“I wanted to change up the assortment a bit, because we don't sell as many premade gifts with candy during the fourth quarter,” he said. “Those sell best in our stores during holidays like Valentine's Day.”

Food Lion, Salisbury, N.C., is playing it safe this year as well. M&M's, Hershey's Kisses and chocolate-covered cherries — three top-selling items during the 2007 holiday season — are in stores again this year. But Tom Grassey, category manager for the retailer, wasn't confident that consumers would be buying much else due to budgetary concerns. As he sorted through stacks of catalogs for the season, the lack of new product introductions caused him to scale back for the first time in years.

“There are really no exciting new items for the 2008 season that caught my attention,” he said. “This might be because candy manufacturers have predicted that sales will trend flat compared to last year.”

That said, Food Lion is still focused on increasing sales of the products it does have in-house. The retailer has merchandised its seasonal products by the checkout and wherever there is extra space in the perimeter of the store.

Whatever setup they use, retailers have more opportunities to cash in on candy than they might realize, according to Don Stuart, managing director, Cannondale Associates, Wilton, Conn.

“[Candy] is the gift that keeps on giving throughout the holiday season for parties and entertaining; it's not just a one-day gift,” said Stuart. “As Christmas Day approaches, the impulse to grab becomes even more important, so stocking stuffers and gift boxes should be all over the place during the last week or two leading up to the 25th.”

After that, boxes of chocolates and other celebratory sweets can be promoted as hostess gifts for New Year's parties to extend sell-through, he added.