2006 confectionery opportunities research
DESCRIPTION
An off-the-self powerpoint for use in a retailer presentation in the Candy businessTRANSCRIPT
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Expanding the Dimensions of Confectionery
A $10 Billion Opportunity
Place Retailer’s Logo Here
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A $10 Billion Opportunity For Growth
Source: Dechert-Hampe & Co.
Confectionery is already big business … but it could be much bigger!
$10 Billion
Opportunity
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NCA enlisted major national retailers Food/Drug/Mass/Dollar outlets Representing over 20,000 stores Accounting for over 15% ACV
NCA sponsored comprehensive research Consumer & category learning Benchmarks & Best Practices Opportunities & solutions for growth
Partnership For Confectionery Growth
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NCA Research Conducted
Individual interviews with numerous retailers, manufacturers & brokers
Audits of over 1000 stores across multiple channels
In-store interviews with over 900 Confectionery shoppers
In-depth interviews with Confectionery consumers
Analysis of store sales data & planograms from major retailers
Analysis of IRI syndicated data & secondary data
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Confectionery Category Opportunity
Dimensions of the Confectionery Category
Huge category One of the largest Profitable Strong margins Frequently purchased Key to shopping trips Incremental Builds the shopping basket Promotable Responds to activity Expandable Consumption leads to growth
Source: Dechert-Hampe & Co.
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Confectionery Is A Huge & Growing Category
$28.90$26.30$25.80
$24.30$24.00$23.80
2000 2001 2002 2003 2004 2005
Source: US Dept. Commerce
Annual growth 4% Over $ 1 Billion added every year
Confectionery Retail Sales ($ Billions)
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16%
14%11%
8%
5%
4%
3%
25%
14%
Supermarkets
C-Stores
Mass Merch.
Club Stores
Drug Stores
Bulk
Vending
Dollar Stores
Other
Confectionery Sold In Many Different Outlets
Source: IRI,NCA Estimates, 2005
Major measured outlets (Food/Drug/Mass/C-store) represent just over half of all Confectionery sales
ConfectioneryRetail Sales $27.9 Billion
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Confectionery Sales $ Billions
Potential For Improved PerformanceProjects To A $10 Billion Opportunity
Source: Dechert-Hampe & Co.
+35%
Potential growth based on top performing retailers
A $10 Billion Opportunity
A $10 Billion Opportunity
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Confectionery Is Among Largest Food Categories In Store
$ Billions
Source: IRI, Food/Drug/Mass, 2005
In total, snacks represent the largest category of sales in many stores
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Confectionery Delivers High Profitability Driven By High Gross Margin
27%30%
Confectionery Grocery Average
Confectionery margins are 3-5% points higher
Source: DHC Analysis of Retailer Data
% Gross Margin
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Confectionery Is Among Most Frequently Purchased Categories In Stores
Source: ACNielsen HomeScan
Frequent purchases make it key to retailers
Annual Purchases
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Confectionery is Expandable – Not a Zero Sum Game
Source: Dechert-Hampe & Co.
Fixed Consumption Expandable Consumption
Consumption
weeks
PurchasingConsumption
weeks
Purchasing
Consumption at fixed rate
Soap, Detergent, Toilet Paper
Promotion Loads Pantry
Consumption Driven by Purchase
Candy, Snacks, Beverages
Promotion Builds Consumption
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Consumers Often Have A Special Relationship With Confectionery
Source: Dechert-Hampe & Co.
“It makes me happy, when I’m feeling blue”
“It’s a little pick-me-up when I need some energy”
“I feel I’m a better person when I have my candy”
“I hide candy. I keep my own stash – the good stuff”
“The holidays wouldn’t be the same without the candy”
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Consumers Today Buy Confectionery Everywhere They Shop
Confectionery is important to build market baskets
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Top Performing Retailers Sell Confectionery At A Higher Rate
Top performers have a rate 35% greater than average
Source: DHC Analysis of Retailer Data
Confectionery Sales Index Per $MM ACV
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Top Performing Retailers Generate Higher Growth In Confectionery
Some of the top retailers are growing by double digits
Confectionery % Sales Growth
4.1%
1.9%
-2.4%Low
Performance
ModeratePerformance
TopPerformingRetailers
Source: DHC Analysis of Retailer Data
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Top Performing Retailers Have Greater Confectionery Section Productivity
Source: DHC Analysis of Retailer Data
What is the secret of this performance advantage?
Confectionery Sales Per Linear Foot
$15.57
$6.10
$13.91
LowPerformance
ModeratePerformance
TopPerformingRetailers
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Confectionery Growth & Performance Solutions Are Consumer Driven
Consumer
Seasonal Merchandising
Occasion-Based Marketing
Impulse Merchandising
New Product Innovation
Shopping Interruption
Best Practices in Aisle Management
Source: Dechert-Hampe & Co.
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Aisle Management
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New Patterns Of Consumer Shopping Behavior Change the Game
Consumer shopping patterns changed toward more shorter trips
Retailers competing with multiple outlets for shopping occasions
Majority of shopping trips today are convenience oriented
Shoppers must be drawn into the aisle
Perimeter displays must compensate for reduced traffic
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Dairy Deli MeatMeat
Bakery
Produce
Confectionery is Located In Middle Of Most Shopping Trips
Studies show middle of trip is least productive Consumers tend to buy more at beginning & end
Confectionery
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Locate Confectionery Section Earlier In Shopping Trip
37%
60%
45%
30%
18% 10%
All Retailers Top Performers
End of Trip
Middle of Trip
Beginning of Trip
Top performing retailers locate Confectionery near beginning of trip
Source: DHC Analysis of Retailer Data
Confectionery Location In Store
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Key Objective: Bring More Shoppers Down Confectionery Aisle
Only 20-25% of shoppers go down Candy aisle on a shopping trip
Conversion is high - when consumers shop candy aisle, they usually buy
Over 35 % of shoppers pick up a candy or snack during shopping trip
Locating candy in a higher traffic location results in significant improvements
Source: DHC Shopper Observations
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Confectionery Performs Best When Adjacent to Snacks
Adjacent Category
Top Performing
RetailersOthers
Salty Snacks 18% 12%
Nuts 18 8
Cookies 10 12
Fruit Snacks 12 6
Snack Bars 6 4
Total Snacks 64% 42%
Baking Needs 9 7
Bottled Juice/Water 3 9
RTE Cereal 0 6
Other 23% 36%
Top performing retailers offer a total snack solution
Source: DHC Analysis of Retailer Data
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Drive Sales By Allocating More Space To Confectionery Gondola
32.6
22.2
29.428.0
44.3
35.0
Grocery Drug Mass
All Retailers
Top Performers
Top performing retailers devote more space & generate more Candy sales
Source: DHC Analysis of Retailer Data
Gondola CandySection Size In Feet
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Confectionery Outperforms Many Other Food Categories In Store
Categories that tend to be over-spaced relative to performance Baby Food Baking Mixes Cat Food Cookies Crackers Dog Food Packaged Desserts Pasta/Noodles Powdered Drink Mixes Rice/Beans
Category performance must be evaluated at individual retailers
Adjacencies must be considered
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Provide More Variety to Maximize Sales
Top performing retailers generate more sales with increased Candy assortments
Candy is not often a need – consumers may walk away if their choice is unavailable
Retailers risk lost sales & reduced consumer shopping satisfaction
Sections must allow for new product introductions
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Increased Item Assortment Can Drive Confectionery Sales
Top performing retailers stock more itemsSource: DHC Analysis of Retailer Data
Non-Seasonal Gondola CandyGrocery Dollar Sales Per MM ACV Index
82
104
122
Less Than250 Items
250-350 Items Over 350Items
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Retailers Risk Lost Sales If They Don’t Stock Candy Items Consumers Want
Source: DHC Consumer Interviews
Consumers always have the options of buying nothing or going to another store
If you were shopping & could not locate the particular product you wanted to buy, which would you do?
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Many Consumers Are Unhappy With Retail Merchandising Of Confectionery
Consumer interviews reveal some of the shopper frustration at the shelf
“The candy section is confusing. It’s difficult to find what you want”
“The products are all clumped up. They run into each other”
“It would help if they stood them up so you see the packages”
“They need to separate the different kinds of candy better”
“It’s overwhelming. There’s no organization to help you shop”
Source: Dechert-Hampe & Co.
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Presentation of Candy Gondola Is Key to Shopping Behavior
Shoppers spend only about 30 seconds shopping section
Many consumers are overwhelmed by lack of organization at shelf
70% of purchase decisions made at shelf
Source: Dechert-Hampe & Co.
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Bring Attention To Candy Section BestPractice
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Block Section Into Key Confectionery Segments
Source: DHC Analysis of Retailer Data
Top performing retailers make the section easier to shop by blocking out segments
BestPractice
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Double-Face Top Selling Items In Center Of Department
Source: DHC Analysis of Retailer Data
Top 25-50 items usually represent a third of all sales Double facing highlights these key items & eliminates out-of-stocks
BestPractice
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Merchandise Candy Peg Bags Spanning Across Section
Source: DHC Analysis of Retailer Data
Spanning presents more variety & consumers are more likely to make multiple purchases
Set peg candy section to about 20% of total space to maximize productivity
BestPractice
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Make A Statement In Premium Candy
Source: DHC Analysis of Retailer Data
Carry an assortment of Premium Candy to build sales & image
Devote 10% of space to Premium & merchandise it as a block
BestPractice
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Create A Section For Dark Chocolate
Source: DHC Analysis of Retailer Data
Dark Chocolate has high growth potential based on health benefits
Carry at least 20 items or 5% of space
BestPractice
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Create A Section For Sugar-Free Candy
Source: DHC Analysis of Retailer Data
Diabetics & borderline consumers represent a huge potential growth opportunity
Carry an assortment of Sugar-Free items to provide variety to this consumer group
BestPractice
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Stock An Assortment Of Children’s Candy
Source: DHC Analysis of Retailer Data
Children are a key consumption group
Set the assortment to about 25 items or 7% of the space
Merchandise children’s items on lower shelves
BestPractice
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Create A Section For Theater Boxes
Source: DHC Analysis of Retailer Data
Theatre Boxes represent another Candy purchase decision
Stock an assortment of at least 12-20 items
Merchandise as a block with signage calling out the occasion
BestPractice
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Create A Licorice Section
Source: DHC Analysis of Retailer Data
Licorice is a key growth segment
Stock an assortment of brands & items
BestPractice
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Create A Section For Jelly Beans
Source: DHC Analysis of Retailer Data
Jelly Beans have a unique consumer appeal
Carry an assortment of flavors to appeal to this loyal consumer group
BestPractice
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Use Best Practices in Aisle Management To Maximize Confectionery Sales
Improve shopability & consumer satisfaction by blocking Confectionery section into key segments
Double face top selling items to highlight most popular brands & eliminate potential out-of-stocks
Organize peg bags spanning section to showcase variety & encourage multiple purchases
Provide assortment of premium candy to build sales & enhance image of candy department
Take advantage of health trends with an assortment of dark chocolate & functional candy/gum
Source: Dechert-Hampe & Co.
BestPractice
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Use Best Practices in Aisle Management To Maximize Confectionery Sales
Appeal to growing diabetic & weight conscious market with a selection of sugar-free items in key types
Stock theater boxes of candy in a blocked section & use signage to highlight this key usage occasion
Merchandise an assortment of kids candy products on a low shelf to appeal to this key consumption group
Create a section for jelly beans & carry popular flavors to take advantage of their unique appeal
Create a licorice section & carry popular brands to leverage this key growth opportunity
Source: Dechert-Hampe & Co.
BestPractice
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NON-CHOCOLATEPEG BAGS
NON-CHOCOLATELAYDOWN BAGS
KIDSNOVELTIES
LICORICE FUN SIZE BAGS
BOXCHOC
PREMCHOC
DARKCHOC
CHOCOLATELAYDOWN BAGS
MULTI- PACKS
BLOCKCHOC
KING SIZE
THEATER BOXESJELLY
BEANSMINTS
GUM
SUGARFREE
CHOCPEG
BAGS
Confectionery Schematic With Segment Blocking
BestPractice
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Reinvent Confectionery Section To Increase Appeal to Consumers
Utilize headers & signage to attract attention & create a fun atmosphere for shopping
Provide better shelf organization by blocking defined segments
Use shelf dividers & section breaks to improve appearance & shopability
Enhance shelf presentation with more stand-up & facing products or colorful signage
Use call-outs to highlight new items & bring attention to special offers
Source: Dechert-Hampe & Co.
BestPractice
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Shopping Interruption
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Dairy Deli MeatMeat
Bakery
Produce
Confectionery
Perimeter DisplaysPerimeter Displays
In-Aisle DisplayIn-Aisle Display
Impulse at Checkout
Impulse at Checkout
Seasonal & Occasional
Seasonal & Occasional
Candy Sales Are Improved By More Points Of Shopping Interruption
BestPractice
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Increase Confectionery Display On Perimeter & High Traffic Locations
Majority of shopping trips today are convenience
Shopping is focused on the perimeter of the store
Impulse buying is driven by more points of interruption in shopping trip
Develop new merchandising vehicles to enable more perimeter display
Source: Dechert-Hampe & Co.
BestPractice
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Candy Is The Most Responsive Category For Display Treatment
Source: IRI, Food, 2005
% Increase On Display Only
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Candy Is Under-Displayed Relative To Response It Generates
Source: IRI, Food, 2005
% Grocery Store Displays
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Top Performing Retailers Provide More Merchandising Support
Confectionery Gondola
% Volume
Low PerformersMedium
PerformersTop Performers
Feature & Display 5 8 10
Display Only 16 20 24
Feature Only 5 7 7
Price Reduction 14 17 18
Any Merchandising 40 52 59
Source: IRI, Food, 2005
Top performers display much more
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Make Confectionery Available At Key Shopping LocationsWhat Areas Of The Store Did You Shop Today?
Juices
Milk/D
airyF
rozen
Fo
od
sF
rozen
Ice C
ream/
No
velties
AT
M
Mach
inePotato Chip
Rack2 Liter Carbonated Beverages
Nu
trit
ion
Bar
sS
wee
t G
oo
ds
Sn
acksG
rocery
Pro
du
cts
Nuts
Ch
ips
Water
Bag
ged
C
and
yCh
ips
Chips
Meat Snacks
Sal
ty
Sn
ack
sSalty
S
nac
ks
Chips
Nuts
Donuts Display
Hot Dog Grill
Chips
Chips
HBCBatteries/
FilmMagazines/ Newspapers
Single Serve Frozen
Novelties
Restrooms
Cig
aret
tes
Ch
ecko
ut
Co
un
ter
Co
nfe
ctio
ner
yK
ing
Siz
e C
and
yC
on
fect
ion
ery
San
dw
ich
Co
ole
rF
ou
nta
in
Dri
nks
Outdoor Display Outdoor DisplayEntrance
Coffee BarN
utritio
n
Bars C
off
ee
Mu
gs
Mu
ffin
sBaked
G
oo
ds
Au
tom
oti
ve
Pro
du
cts
Co
nfectio
nery
Baked
G
oo
ds
Drinks
Candy
No
n-
Gro
cer
y
Ho
use
ho
ld
Pro
du
cts
Pet
F
oo
d
Microwave/ Supply Station C
and
y/G
um
Food Service
Carbonated/Non Carbonated Drinks Waters
Beverage Coolers
43%
Source: DHC C-Store Shopper Observations
13%
14%
20%
40%
22%
BestPractice
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Research Demonstrates Value Of Additional Candy Locations In Store
Retailers should add more points of shopping interruption
Source: DHC Analysis of Retailer Data
Candy Store Sales IndexBy Number Of Permanent Locations
85
101105
1 or 2 3 4 or More
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Product Innovation
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Candy Is The Leading Category For New Product Introductions
Source: ProductScan
Together, Candy & Snacks represent nearly 30% of all new Food & Beverage SKUs
New SKUs By Category
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9.5%
9.2%
67.8%
13.5% New Items
Items One Year Old
Items Two YearsOld
Items More ThanTwo Years Old
Nearly A Third Of Candy Sales Are Produced By New Items
Source: IRI, FDMX, 2004
New products are truly the lifeblood of Confectionery
% Category Sales
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Product Innovation To Meet Emerging Consumer Needs
Diabetes is growing 18 million in U.S. 1.3 million new cases per year
Why is market not responding Sugar-free candy down in 2005 Declines primarily in chocolate
Sugar-free Candy to show you care Grandma & Grandpa Expectant mothers
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Premium & Dark Chocolate Offer Health & Profits
Functional foods becoming a reality Antioxidants in chocolate Dark chocolate sales up 24%
Premium candy products Similar to gourmet coffee, fine wines, artisan breads 18% of consumers buy Premium Candy Premium Candy sales $ 1.0 – 1.5 Billion Less than 50% in FDM outlets
Source: IRI, Mintel, 2005
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Bring Innovation To Category By Tapping Into Snacking Trends
Adapt new flavor profiles from popular international cuisines to Confectionery
Challenge existing definitions of snack categories with new combinations
Expand the role of candy into more snacking need states
Leverage health benefits of cocoa to challenge existing perception of candy
BestPractice
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Seasonal Merchandising
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16%
34%
22%
28%
Valentine's
Easter
Halloween
Christmas
Seasonal Candy Represents About A Quarter Of All Confectionery Sales
Source: NCA, 2005
Halloween & Easter are large Valentines Day the smallest
Seasonal Candy$6.2 Billion
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Confectionery Sales Are Heavily Influenced By Traditional Holidays
471
798
867 849
572594
870
460435433458
487
490
0
100
200
300
400
500
600
700
800
900
1000
1/30 2/27 3/27 4/24 5/22 6/19 7/17 8/14 9/11 10/9 11/6 12/4 1/1
$MM
Valentine’s Easter Halloween Christmas
4 Week Period Ending
Source: IRI, FDM, 2005
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Top Performing Retailers Have A Greater Seasonal Candy Sales Rate
The top performers have a rate 35% greater than average
Source: DHC Analysis of Retailer Data
Sales Index Per $MM ACV
136
73
100
LowPerformance
ModeratePerformance
TopPerformingRetailers
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There Are Top Retailers That Have Greater Sales Rates at Each Season
The greatest variance is seen at Christmas
Source: DHC Analysis of Retailer Data
Top Performer % Advantage
27
%
%
%
%
33
41
22Halloween
Valentines
Easter
Christmas
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Most Consumers Buy Seasonal Candy at Traditional Holidays
Increased buying at traditional holidays is still an opportunity
Holidays/Occasions% Consumers Buying Candy
70%
73%
80%
81%
Easter
Valentines
Christmas
Halloween
Source: DHC Consumer Interviews
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Manage Seasonal Candy To Meet Consumer Needs
Recognize important role Seasonal Candy plays in consumer’s life
Consumers often view Seasonal Candy as a planned purchase
Retailers must stock extensive variety to appeal to specific consumer preferences
Balance inventory cost against risk of lost sales opportunities
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Christmas Candy Is An Important Feature In Holiday Celebrations
Christmas Candy
Usage
Gifts 95 %
Snacking 90
Guests/Party 85
Stocking Stuffer 86
Decorations 71
Baking 64
Consumers include Christmas candy in their holiday celebrations in a variety of ways
Source: DHC Consumer Interviews
77% of consumers agree:
“Christmas candy is an important part of the holiday
celebration”
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Consumers Buy Christmas Candy On Multiple Shopping Occasions
% Agree
Buy Christmas Candy during regular shopping trips 53%
Buy Christmas Candy when I see it on display 43%
Make a special trip to buy Christmas Candy 37%
Source: DHC Consumer Interviews
Consumers reported an average of 2.6 purchase occasions for Christmas Candy
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Consumers Buy Christmas Candy Over The Entire Season
1st PurchaseAdditional Purchase
Before Thanksgiving 21% 9%
2-3 Weeks Before Christmas 47% 32%
1 Week Before Christmas 23% 45%
Christmas Week 8% 34%
After Christmas 1% 32%
None 0% 7%
Some people make a first purchase before Thanksgiving A large number of people continue to buy after Christmas
Source: DHC Consumer Interviews
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Christmas Candy Segments Should Be Merchandised To Meet Seasonal Needs
Decorating & snacking candy should be available early
Gifts are concentrated in the 3 weeks before Christmas
Stocking stuffers in the weeks just prior to the Holiday
Continue to display snacking candy after Christmas
Weeks prior to Christmas
6 5 4 3 2 1
BestPractice
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Retailers Must Stock Christmas Candy Consumers Want
Source: DHC Consumer Interviews
Retailers risk lost purchases if they don’t carry a variety of Christmas Candy
If Desired Christmas Candy Were Unavailable …
22.4%
7.8%
6.9%
15.7%
25.8%
22.4%
Go To Another Store
Buy Nothing Or Don't Know
Buy Non-Seasonal Candy
Buy Another Type of Candy
Buy Another Brand
Buy Another Variety of Brand
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Stores Dressed For The Holidays Create A Candy Buying Environment
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45%
5%
26%
13%
11%
Display Only
Feature & Display
Feature Only
Price Reduction Only
No Merch.
Seasonal Candy Is Highly Dependent Upon Merchandising Support
Source: IRI, 2005
More than half sells on display
Seasonal Candy% Volume
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Top Performing Retailers Do More Feature & Display Of Seasonal Candy
Seasonal Candy
% Volume
Low PerformersMedium
PerformersTop Performers
Feature & Display 9 11 16
Feature 4 5 6
Display 47 45 46
Price Reduction 24 26 20
Source: IRI, 2005
Seasonal Candy responds to quality support
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Manage Holidays As Seasons Instead of Events
Recognize the patterns of consumer buying for each of the seasons Celebration / Decoration Gift (Family, male/female, child) Snack / treat
Consumer attitudes & buying patterns show the potential for increased seasonal purchases
Develop new solutions to maximize seasonal growth opportunities
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Occasion Based Marketing
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Other Major Holidays & Seasons Represent Key Opportunity For Candy Growth
Source: DHC Consumer Interviews
Thanksgiving is the biggest food holiday of the year & Candy should be a part of it
Holidays/Occasions% Consumers Buying Candy
10%
13%
22%
July 4th
Back-To-School
Thanksgiving
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Grow Confectionery With Additional Holiday Buying Occasions
471
798
867 849
572594
870
460435433458
487
490
0
100
200
300
400
500
600
700
800
900
1000
1/30 2/27 3/27 4/24 5/22 6/19 7/17 8/14 9/11 10/9 11/6 12/4 1/1
$MM
Valentine’s Easter Halloween Christmas
4 Week Period Ending
SuperBowl
Mother’sDay
School’sOut
SummerDays
Back-To-School
Thanks-giving
Source: Dechert-Hampe & Co.
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Expanded Holiday Buying Occasions
Holiday/Event Rationale Merchandising FocusSuper Bowl Major Social Event Bowl candy for parties
Mother’s Day Every Family Gift candy near cards
School’s Out Kids Home Piece candy for treats
Summer Days Picnics/Ballgames Hard candy won’t melt
Back to School Lunchboxes Candy bars
Thanksgiving Family Food Holiday Bowl candy / dessert candy / dinner mints
Source: Dechert-Hampe & Co.
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Other Potential Candy Buying Occasions
Source: DHC Consumer Interviews
Consumers also mention birthdays & going to the theater as candy buying occasions
Occasions% Consumers Buying Candy
3%
14%
15%
Ball Games
Going toTheater
Birthdays
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Create New Consumer Buying Occasions For Confectionery
Need to address new occasions Birthdays/parties/anniversaries/graduations Alternative holidays (Thanksgiving, 4th of July) Events (Super Bowl, Academy Awards, etc.) Hallmark holidays (Sweetest Day, Mother’s Day, Father’s day,
Grandparent’s day, etc.)
Cross category solution sales Candy & greeting cards Cigarettes & mints Boxed chocolate & wine
BestPractice
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Leverage Holidays & Events With Cross Category Merchandising
Merchandise gift candy with greeting cards as well as in the aisle
BestPractice
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Solutions For Confectionery Growth
Recognize the importance of Confectionery to the store & the retail growth opportunity
Drive shoppers to the section with better location, signage, & merchandising
Increase shelf space & assortment for more sales & enhanced consumer satisfaction
Reinvent the section with better shelf organization & a more appealing product presentation
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Solutions for Confectionery Growth
Drive sales with “points of shopping interruption” on perimeter & other high traffic locations
Create demand by leveraging secondary holidays & developing new consumer buying occasions
Embrace product innovation to meet new consumer needs
Harness the total power of snacking to expand the role & sales of Confectionery