Candy & Chocolate: America's Sweet Tooth

April 25, 2008
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Private label chocolate and candy show their healthier side.

In 1971, Gene Wilder had viewers yearning for Wonka bars, snozzberries, edible wallpaper and chocolate waterfalls in “Willy Wonka and the Chocolate Factory.” Now fast-forward to 2007 where there is an even wider variety of candy and chocolate options available to consumers. Choices range from chocolate-coated marshmallows to popcorn-flavored jelly beans.

However, despite the influx of new confections, dollar and unit sales of candy and chocolate have been inconsistent for the past year.

According to Information Resources Inc. (IRI), Chicago, dollar sales in the private label chocolate segment decreased by 3.5 percent, and unit sales decreased 13.5 percent for the past 52 weeks ending May 20, 2007. There’s been much debate within the chocolate industry on why sales numbers have begun to melt, so to speak. One argument is that sales are decreasing because Americans are struggling to fight the obesity epidemic.

According to Alex Chimens, vice president of sales and marketing at Sunrise Confections, El Paso, Texas, “The continued focus on obesity, particularly the obesity of children, is hurting the category overall.” The American Obesity Association notes that approximately 127 million adults in the United States are overweight, 60 million are obese and 9 million are severely obese. One way that individuals are combating obesity is by eliminating unhealthy foods, which has caused chocolate sales to take a hard hit.

Despite the diet trends and health fads that may emerge from time to time, chocolate candy still has a loyal consumer base. According to the National Confectioners Association, “approximately 65 percent of American chocolate candy brands have been around for more than 60 years.”

The sales numbers over the past year show that consumers have not written off candy simply because their favorite confections are not high enough on the food pyramid. Instead, consumers are finding ways to incorporate their preferred sweet treats into their lifestyles. One way manufacturers have made this possible is by creating more 100- calorie packs. “100-calorie packs continue to be a focus in the segment,” says Rick Drehobl, chief executive officer of Georgia Nut Co., Glenview, Ill. The packs enable consumers to satisfy their sweet tooth, yet not go overboard. The key is moderation, and single-serve, portion-control packages are enabling consumers to do just that, thus helping the segment to grow.

The Feel-Good Chocolate

Since Americans are more health-conscious today than they’ve ever been, manufacturers are producing chocolate products with added health benefits. One of the biggest chocolate trends in the marketplace today is the growth of dark chocolate. Dark chocolate contains high amounts of cocoa, which is rich in antioxidants and, in turn, can help lower cholesterol.

According to Karlo Flores, owner of Terra Nostra Organic, Vancouver, British Columbia, “The benefits of cocoa have brought forward much attention to dark chocolate.” A recent study by the American Medical Association, Chicago, revealed that a small amount of dark chocolate a day (30 calories or less) actually can lower blood pressure.

“Dark chocolate’s benefits are similar to that of red wine; if you eat it in the right quantities it can be good for you,” says Paul Pruett, chief executive officer of Bloomsberry & Co. and Praim LLC, Salem, Mass. “Therefore, it’s becoming acceptable for individuals to treat themselves with chocolate, but it has to be done in moderation.”

Because chocolate is getting a healthier reputation, companies are producing more dark chocolate SKUs, Drehobl says. “We’re seeing a significant trend in dark chocolate, so it’s important to offer unique products that play on the health benefits of the dark chocolate trend.”

Similarly, manufacturers also are focusing on organic and all-natural chocolate products. According to Greg Cater, vice president of sales and marketing at Sconza Candy, Oakland, Calif., “There has been an increase in organic and natural chocolate products.” Individuals want to be healthy, yet they also want to occasionally indulge themselves. Individuals don’t want sugar-free candy, because it does not typically taste good and contains aspartame. And this trend is evident in the sales numbers for the segment.

According to IRI, sugar-free chocolate candy dollar sales decreased 71.5 percent in the past 52 weeks, and unit sales decreased 63.5 percent. These numbers are indicative of the fact that people would rather have all-natural or organic chocolate than “diet” chocolate.

“The continued good news about the health benefits of dark chocolate have been a big boost,” Chimens adds. “It has turned a guilty pleasure into a healthful indulgence.”

Overall, chocolate is slowly becoming an upscale food purchase. “Consumers are more sophisticated. As a result, there is a trend for high-end confections that are packed in upscale boxes,” Drehobl notes. The typical grocery store chocolate bar is now overshadowed by dark chocolate items that are mixed with fruits and nuts and packaged in gift boxes. In fact, private label gift box chocolates have increased 71.2 percent in dollar sales and 60.8 percent in unit sales over the past year.

Additionally, “[Manufacturers] are fusing chocolate with a variety of exotic flavors and spices,” Cater says. “By doing so, chocolate can appeal to consumers with differing taste palettes.”

Even though sales for private label chocolate candy have decreased, the addition of dark chocolate and high-end chocolate products have opened a new window of opportunity for growth.

According to Drehobl, “There are opportunities in private label for unique items that do not directly compete with the national brands.”

And Pruett agrees, saying, “Chocolate continues to get into new distribution channels, which it never was before.”

“Everyone in the chocolate category is benefiting; the pie is getting bigger, which is good news for everybody,” Pruett adds.

Something to Chew On

Although private label chocolate has decreased slightly, the non-chocolate candy category actually has increased in the past 52 weeks. The total private label non-chocolate category increased 8.2 percent in dollar sales and 8.1 percent in unit sales. Private label sugar candy and non-chocolate candy have specifically contributed to the sales increase. Private label non-chocolate chewy candy dollar sales have increased 5.5 percent and unit sales have increased 3.6 percent. In addition, private label hard sugar candy dollar sales have increased 3.8 percent and unit sales have increased 1.3 percent.

One reason for the growth of non-chocolate candy over the past year is that, “Candy is an impulse-buy,” Cater notes. Typically individuals do not put candy on their grocery list; instead, it is a product that is bought last-minute while in line or strolling through the aisles.

“The old adage of ‘see candy, buy candy’ is as strong as ever. If a retailer buries their brand candy in the in-line set and does not bring it into higher-traffic locations, the sales velocities will lag,” Chimens says.

Because candy is an impulse purchase, merchandising and packaging is very important. “Communication is key; you need to promise something wonderful with the product packaging and then deliver something wonderful with the product,” Cater notes.

Additionally, “You need to put the pertinent information on the packaging, clearly explaining the product’s attributes and differences from conventional [confections],” Flores says. “It’s essential to show how your product stands out, so the packaging needs to be unique, bold, and lively to grab the customer’s attention.”

For example, Bloomsberry and Co. features a variety of innovative designs that hone in on their consumers’ sense of humor. If you’re trying to stay on a diet, yet are craving something sweet, they have a “Girthcontrol” dark chocolate design. Having a bad day? Then have a “Chocolate Makes It All Bearable” design. Although the chocolate will not actually help you lose weight or turn your day around, the packaging grabs the customer’s attention. A product’s packaging should not be overlooked because it can make or break a consumer’s purchasing decision.

The bottom line is that candy has staying power. Although private label candy and chocolate have experienced a great fluctuation in unit and dollar sales over the past year, “the margins are there for a private label program that provides good products at good prices,” Cater says. The recent news about dark chocolate’s health benefits coupled with candy’s creative packaging enables the category to create a new name for itself. The confections are no longer objects of desire that will throw off diets. Instead, they’re morphing into high-end luxury treats and heart-healthy rewards.

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