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Smaller Suppliers Driving Big Growth in Candy

September 07, 2017

Novelty is one of the drivers of growth in the candy category -- these gummy candies, for example, enable consumers to mix and match flavors to create dozens of unique combinations
ECRM and RangeMe all about helping buyers at large retail chains find the latest and most innovative products for their categories that they may not otherwise be aware of. And in the candy category, it’s these new and emerging suppliers – those in ECRM’s attendee sweet-spot (pardon the pun) – where the most opportunity for category growth lies, as we learned during ECRM’s recent Candy Planning - Everyday & Summer Seasonal EPPS and Gourmet Confectionery EPPS.

According to Larry Levin, EVP of Consumer & Shopper Marketing for IRI Worldwide, who gave a State of the Industry presentation to a packed audience (click here to download the presentation slides), it’s the smaller manufacturers that are responsible for 82 percent of the category growth, even though they only represent 24 percent of total sales. “As a retailer, you want to ask yourself, ‘Am I connecting with these smaller companies?’” said Levin. “You want to make sure that you are winning the day with them.”

There were approximately $300 million in sales of new products for the candy category last year, and while the top four manufacturers represented 47 percent of the new products, the mid-tier suppliers represented 48 percent. “So when you think about whether you’re at a disadvantage as a smaller company, you’re not. You have actually leveled the playing field when it comes to new product innovation, and are neck and neck with the big guys. Indeed, almost half of IRI’s New Product Pacesetters last year came from suppliers with sales of under $1 billion.

Levin’s advice to new suppliers, particularly those, like attendees of ECRM EPPS sessions who are looking to get on the shelves of large retail chains, is to be more focused when it comes to distribution, and that relevancy is more important than breadth of coverage – it’s not about having every product in every store, but rather, having the right products in the right stores. “Not perfect distribution, but being distributed perfectly,” he noted.

Retail Channels
When it comes to retail, the convenience and dollar store channels are seeing the most growth in the category, with c-stores up 2.5 percent with 25 percent of the volume, mass up 2.4 percent with 27 percent of the channel and dollar stores up 2.3 percent and 6 percent of total volume. However, the drug channel, which represents 12 percent of total volume, is down 2.2 percent, and club stores are down 3.6 percent, with 5 percent of the market. “I think some of the club sales are being replaced by the Internet, because consumers are looking for the opportunity to purchase larger bulk items online,” said Levin. “So it’s important to solidify your positions in the c-store and dollar channels, and to help the drug and club stores regain some of their share.”

Some recommendations Levin shared, based on his research:

Drive innovation: Both retailers and suppliers should focus on innovation inside and outside of the category. Retailers can look for cross-merchandising and secondary placement opportunities within the store, and suppliers can innovate in “fun flavor features” as well as other areas of packaging and promotion. Following are some key trends mentioned by buyers and suppliers at the EPPS in which can be addressed via this innovation:
  • Sour: This was one of the most-cited candy trends by retailers and suppliers interviewed during the Candy EPPS. Unique and exotic flavors are also popular among consumers, they said.
  • Non-chocolate candy: According to IRI, growth in non-chocolate candy is up 5.6 percent over last year, and sour and gummy candy is driving a lot of this, if attendee’s comments are any indication.
  • Flavored/high-end chocolate: While chocolate is down, particularly bars, flavored chocolate candy and high-end chocolates are still popular. 
  • Novelty: Candy that has some sort of novelty associated with it, such as toys or collectibles, is growing in popularity, particularly non-licensed items like poop emoji, which one attendee noted in particular. One interesting product was a “create-your-own-flavor” packaged of gummies. Each package contained several different flavors, and the gummies were designed to interlock like Lego bricks, enabling the consumer to create their own flavor combinations.
  • Packaging: Multi-pack and stand-up resealable pouches continue to be popular with retailers and consumers.
Wellness & Sustainability: Consumers – particularly Millennials – are seeking healthier options and clean labels, which is something we’ve seen across all of ECRM’s Grocery EPPS meetings. They want to know from where and how the products they purchase are sourced, and how natural the ingredients are. “More than half of consumers say that product labeling is an important part of their decision-making when it comes to food purchases.

At the EPPS, many suppliers are addressing this demand for clean labels with healthier natural or organic ingredients, non-GMO offerings. One in particular, is Zollipops. Zollipops are natural lollipops, which contain erythritol, xylitol and stevia, healthy sugar alternatives. By helping raise the pH (a scale used to measure acidic or base qualities) in the mouth, Zollipops neutralize acid and help reduce the risk of tooth decay, dental caries and future development of cavities. (Click here for our recent post on the company).

Personalization/Digital: As more than three-quarters of sales begin online – whether via search, or a social media recommendation, or ad, etc. – it’s important for both retailers and suppliers to engage consumers digitally, and then to facilitate online orders. “The vast majority of CPG sales right now are at brick and mortar stores,” said IRI’s Levin. “But we’re going to continue to see ecommerce growth, and we’re going to have to adjust. How are you going to work with your retail partners online to make sure we don’t lose that opportunity to sell that last candy bar, that last chocolate? How are we going to simulate that impulse purchase that happens in the store?”

CLICK HERE TO REGISTER FOR NEXT YEAR'S CANDY EPPS SESSIONS:
IRI's Larry Levin on the challenges and opportunities in the candy category
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