Success in a Sweet Segment | Convenience Store Decisions

By May 17, 2019Chocolate

The chocolate category in convenience stores welcomes a revolving door of innovative flavor launches and updated packaging formats to ensure something new tempts customers as they make their way to the checkout.

“Customers want innovation in chocolate and eventually go back to their tried-and-true favorites, which drives a temporary shift in share from an established item to something new, and then back to that established item,” said April Hogue, category manager, candy, at Maverik, a Salt Lake City-based 300-store chain. When new items launch, they perform well, Hogue noted, “but the incrementalism doesn’t hold.” 

Carly Schildhaus, public affairs manager for The National Confectioners Association (NCA), has seen a few ongoing trends impacting chocolate — a category Americans indulge in two to three times a week.  

“One significant one is that premium chocolate continues to rise in popularity; in fact, growth in this segment has been an influential driver of overall chocolate category growth,” Schildhaus said. 

While the overall chocolate category has grown in the convenience channel by around 1% year-over- year, Schildhaus pointed out that 59% of that growth comes from premium chocolate.

But even mainstream chocolate products see trends in flavor profile innovations. 

“As c-store retailers seek differentiation, they are more open to carrying products made with more unusual fruits, spices and nuts,” said Schildhaus. “This is largely driven by millennials, who are looking for these unique experiences in their treats. Novelty chocolate is also being introduced to c-stores, and there is a strong trend towards collaboration between manufacturers and c-store operators around seasonal treats.”

Also, packaging innovation is driving c-store choices, with companies providing both larger and smaller sizes to meet consumers’ varying needs.

Sizing Up Assortment
According to Liza Salaria, senior principal consultant at Impact 21, a retail management consultant based in Lexington, Ky., although exotic and unique flavors remain a small portion of the c-store chocolate business, this sector is growing fast.

“We’re seeing an infusion of sea salt, caramel, turmeric, chile, ginger and other flavors in chocolate,” she said. “Yet c-stores tend to lag behind because it’s a challenge to optimize mainstream brands and get the right assortment of products, while obliging the larger manufacturers’ contracts.”

Major brands are becoming more limited-time-offer (LTO) forward when it comes to innovations, said Hogue.

Maverik’s bestsellers include Hershey Reese’s Peanut Butter Cup (regular size), followed closely by Mars king Snickers, Hershey king Reese’s Peanut Butter Cup and Kit Kat (regular). 

At The PRIDE Stores, a Warrenville, Ill.-based chain, the five top-selling candy items are all chocolate. These include Snickers (king size), Snickers (regular), M&Ms Peanut (king size), Reese’s Cup (king size) and Twix (king size). The chain also carries Chicago’s Fannie May chocolates.  

“In 2018, we saw some chocolate candies enter the novelty candy subcategory, which for years has been heavily dominated by fruit flavors,” said Nicolette Jaeger, The PRIDE Stores’ loyalty and foodservice manager. “Chocolate candies, such as Kinder Joy and Yowies, exploded in popularity that year; we will continue to see this trend carry over into 2019.” 

Jaeger expects to see more chocolate and fruit combinations, such as chocolate-covered gummies, as well as more chocolate and coffee combinations like M&M’s coffee nut combination, which was successful enough that the chain opted to keep it in its permanent lineup.

At the Arlington County, Va.-based Marine Corps Exchange (MCX), which has 17 locations across the country’s military bases, the top-selling chocolate items, in order, are Snickers singles and king sizes; Reese’s Peanut Butter Cup singles and king sizes; M&M Peanut singles; Kit Kat single; Reese’s Peanut Butter Big Cup king size; Twix Caramel single size; and Kit Kat king size.

“For guilt-free and healthy indulgence, more chocolate brands are shifting toward natural and organic ingredients, eliminating artificial additives and high fructose corn syrup, using organic or fair-trade-certified cacao beans and providing consumers’ favorite chocolate items in smaller portion sizes,” said Ashely Davis, MCX’s food and candy consumable buyer. 

More chocolate items are made from dark chocolate, which many customers perceive as having health benefits. Reese’s Peanut Butter Cups, one of MCX’s top-performing SKUs, has a new product called Reese’s Thins that are 40% thinner and individually wrapped, so customers can indulge on-the-go while reducing calories. 

Packaging Sizes
Although more smaller-sized chocolates are allowing for portion control, the king-size market is also on the rise, as it offers more value for the price, said Salaria. She predicted resealable packaging will continue to play a big part in the market.

“Chocolate king-sized and regular bars are declining year-over-year, but chocolate bagged candy is increasing,” said Maverik’s Hogue. “We’ve had double-digit increases year-over- year for the past two years on bagged candy. I believe part of that success is driven by how we promote candy, but also the customer opting for larger sizes/ounces in resealable bags.” 

The reason? Consumers want portion control and on-the-go snacking. 

“Consequently, we are seeing an increase in stand-up pouches, resealable and shareable packages, which have driven a significant sales increase for the category,” said MCX’s Davis. 

Placement & Promos
Proper placement and merchandising are key for impulse buys.  

“We think of candy as a basket builder when it’s an impulse purchase. Finding the best spots can interrupt traffic at different points in the store,” said Salaria. 

“Retailers need to think about sidekicks, power wings and small two-by-two pods, which are great for store entrances,” said Salaria. “In c-stores, inventory management becomes a challenge, and that’s where we in the space sometimes fall short.”

Seasonal, for example, is a big opportunity, said Salaria, “with Oct. 28 being the No. 1 candy selling day.”

Source: Success in a Sweet Segment – Convenience Store Decisions