Recession has little impact on confectionery

by Allison Gibeson
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Consumers may have been willing to cut back on many luxuries during the economic recession, but they weren’t willing to sacrifice the enjoyment candy and gum provide. Dollar sales for the confectionery segment were up nearly 4% during the year ended Dec. 25, 2010, a higher growth rate than all other food, drug and mass channel categories except produce, according to the Nielsen Co., New York.

“(Confectionery) as an industry … has been able to manage rising input costs,” said Todd Hale, senior vice-president of consumer and shopper insights at Nielsen. “They have been hit with rising cocoa prices and rising sugar prices, and they’ve been able to manage how they effectively assort their products in terms of either modifying the price they charge customers or modifying the package or ingredients — they’ve innovated.”

Mr. Hale said the industry hasn’t been afraid of raising prices, which has been critical. He said there are few categories that may drive growth in sales if all they do is cut prices. If an industry is justified in raising prices due to rising input costs, those industries do far better than those that don’t.

Confectionery also has outpaced most indulgent categories, including frozen novelties, snacks, pudding and dairy desserts, cookies, crackers and ice cream, Nielsen said.

The National Confectioners Association, Washington, estimated 2010 retail confectionery sales at $29.4 billion, up 3% from the previous year. The average U.S. consumer spent $95.06 on confections in 2010, with $56.55 of that in chocolate, the N.C.A. said. In terms of where consumers are buying candy, convenience stores and dollar stores are areas where sales have risen significantly.

The seasonality of candy also is driving success in the market as there are many times during the year when consumers may engage in the category.

“I think these guys are experts at seasonal holiday merchandising, know the importance of driving good advertising or in-store activity to take advantage of the fact that candy is a phenomenal category when it comes to attracting seasonal buyers,” Mr. Hale said.

Yet when it comes to the seasonality, sales for Halloween and Valentine’s Day have declined recently while sales for Easter and Christmas have risen, Nielsen said.

While many other categories are dealing with significant competition from private label, there has been relatively little development in store brands in the confectionery segment. Mr. Hale attributed this trend to the need for innovation and marketing power to survive, noting it’s harder for store brands to achieve as much success. According to the N.C.A., less than 10% of the market is private label.

There is clear room for innovation in development of ethnic products. Mr. Hale said the challenge that lies in that multi-cultural segment are the households that will be growing the fastest in coming years, and it will become necessary to determine what candies appeal to multi-cultural segments or if new products need to be developed to appeal to these consumers.

There also is still interest in better-for-you products.

“The great majority of consumers continue to see confections as an acceptable part of a balanced diet,” said Matthew Fenton, vice-president of marketing with Farley’s and Sathers, Round Lake, Minn. “However, demographic shifts and health concerns have created a growing segment of consumers who are seeking healthier options. To meet their needs, we’ve recently restaged our Brach’s sugar-free lineup.”

Other trends Mr. Fenton sees in the market include sharing, interactivity, eating on-the-go and flavor fun. Specifically, sharing involves products like Halloween candy corn or Easter jelly beans that are often presented in a candy dish specifically for others to enjoy. To be more interactive, Farley’s and Sathers has introducedTrolli Big Bold Bears that are four times larger than standard gummy bears with more accentuated arms that allows consumers to rip and bite each bear individually. Flavor fun involves blending and innovating new flavors as the company has done in the new Trolli Soda Poppers, which offers five soda flavors in a bag of pop-can shaped gummies for flavor variety.

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