Candy sales leap in 2000.(Statistical Data Included)

Creative new breath mint and chewing gum product introductions, as well as a strong Easter selling season, bolstered confectionery sales in 2000's first three quarters

Bolstered by significant retail sales increases in 2000, the U.S. confectionery industry looks as if it will carry the momentum into 2001 with higher-than-average gains. But future success depends upon whether or not confectioners continue to introduce new and innovative products.

"I think there is a general relationship between the number of new products and sales growth [in the confectionery industry]," says Tom Vierhile, managing director of Marketing Intelligence Service Inc. "When you see a number of new products, it tends to bode well for the category. It helps create excitement. It encourages retailers to create end-aisle displays that encourage impulse sales." Significant retail confectionery sales increases from food stores, drug stores and mass merchandisers for the 52 weeks ended October 8, 2000, reflected an increase of new product introductions Chocolate candy sales increased 3.6% to $ 5.01 billion and non-chocolate candy sales increased 6% to $3.1 billion, reports ACNielsen. Chewing and bubble gum sales at the nation's largest retail outlets also increased dramatically, showing a 6.3% gain during the 52-week period.

John McMillin, food industry analyst for Prudential Securities, attributes the increases to the growth of Wal-Mart and its sales of bagged candies.

"Bagged candies are priced well and move well," he says.

However, strong seasonal candy sales -- bolstered by creative new breath mint, chewing gum and sugar-free product introductions -- also encouraged confectionery sales to climb.

The strongest seasonal performance through October of last year was turned in by Easter candy. It not only ranks number one among seasonal treats, but it continues to post the fastest growth rate among food retailers, drug stores and mass merchandisers, up 12.4% overall in dollar volume and unit sales. In individual channels, Easter again showed the highest growth rate for food stores, and the second highest for drug stores and mass merchandisers, where the "All Other Seasonal Candy" segment is growing even faster, 42.3% and 24.4%, respectively, from an almost nonexistent base.

Fresh approaches

Thanks to unique and interesting new product introductions from an array of confectioners, the most dynamic segment in the non-chocolate category are breath fresheners. Breath fresheners recorded double-digit gains in all three channels in the 12 months prior to October 8, 2000. This performance was exceeded only by a 22.4% jump in sugar-free /reduced-calorie candy sold in drug stores. The popularity of breath fresheners can largely be attributed to high intensity mints like Altoids. "Once the rage of the industry, Altoids still are doing well ... because people want maximum flavor and maximum taste without much fat," says McMillin.

Marie Read, candy buyer for Wawa Food Markets, says, "The hottest thing for us are the mints and powerful gums.

"It's a nice category because you get a good return for the investment of time you put into it," she explains. "You can add a couple of SKUs like Altoids, and see a huge increase in your category."

IRI reports that in the 52 weeks ended October 8, 2000, Altoids garnered a 52.9% sales increase to $ 118.2 million. Zingos Extra Strength mints posted a 51.3% increase to $3.1 million, while Certs Powerful Mints sales increased 40.2% to $25.4 million. These newer, robustly flavored products are cannibalizing the old standbys, with BreathSavers down 13.6% and regular Certs plummeting 35.9%.

In the chewing gum category, purchases of regular gum still outnumber sugarless. However, sugarless gum could reach parity with regular gum and exceed it, because sales of regular gum remain flat, while sugarless gum is growing about 10% per year. "Sugarless continues to grow faster, partly because its flavor has improved," reports McMillin.

Other sugarless products also are faring well.

Russell Stover's 18-month-old sugar-free candy line, for instance, has emerged as the latest star in the candy maker's portfolio. Targeted to diabetic and sugar-intolerant consumers, who tend to be older and choosier, the Russell Stover's sugar-free line jumped 126.7%. As a result, the company's best-selling sugar-free item, Pecan Delight, and its sister sugar free confections have quickly propelled Russell Stover to the top of the sugar-free/reduced calorie segment, which has emerged as a significant segment for the company.

Noting that the products are not reduced calorie, Co-president Scott Ward says the company waited to launch a sugar-free line until it was confident it had superior recipes. "We just wanted to make it taste great," he explains. "Its success all has to do with quality and giving consumers a chance to upgrade their choice," he says of the higher-end products.

Meanwhile, private-label products in IRI's "Diet" candy category increased 34.7%.

For consumers seeking a lighter product that isn't necessarily lower in calories, chocolate wafer bars are an increasingly popular choice.

The most rapidly growing segment in the chocolate candy category across all channels is the chocolate-covered cookie/wafer. "People want chocolate, but want something lighter," explains McMillin.

They also want something smaller, according to IRI data.

The chocolate snack size category reflects consumer interest in these products, recording healthy gains for almost every brand, and only two small declines, 0.6% for M&M's Chocolate Candies and 1.7% for Butterfinger.

Marketing Intelligence Services' Vierhile says he expects snack-size and bite-size products to continue to do well because adults, while they remain candy lovers, are interested in portion control.

There also seems to be a trend toward higher-end, more upscale products, Vierhile continues. "You see it in other categories like wine, as well. I think it's a reflection of the successful economy."

Testimony to the increase of higher-end confectionery consumption comes from Fererro USA. The company enjoyed a 42.6% increase in sales of its high-end Ferraro Rocher chocolates. It also did well in chocolate bags/boxes of less than 3.5 ounces, where it's in seventh position establishing itself as a formidable player with an especially strong sales of 43.1%.

But even that remarkable sales gain was exceeded -- Callard & Bowser Suchard posting an 80.9% jump in sales dollars during the 12-month period ended October 8, 2000.

C-store sales

While food stores, drug stores and mass merchandisers rack up the highest dollar volume of confectionery products -- $ 8.1 billion excluding chewing and bubble gum -- convenience stores also are a significant channel for confectionery treats, and are now tracked by ACNielsen. As this is a new Nielsen category, previous-year figures are unavailable.

However, ACNielsen reports that total C-store chocolate sales for the 52-week period ending October 28, 2000, were $918.8 million, followed by non-chocolate sales of $772.1 million and gum sales of $549.5 million.

Steven Keane, category manager at 7-Eleven Corporation Inc., reports that the product category that has been the hottest of late in the chain's more than 6,000 outlets, is nutritional bars. That's in contrast to both the chocolate and non-chocolate categories, which have shown small declines, Keane says. There are specific bright spots in the candy segment at 7-Eleven, however; sales of premium candy and king-size candy bars both are growing, according to Keane.

Wawa's Read says that while energy bars are doing very well at Wawa's C-stores, the growth in this category doesn't appear to be at the expense of candy. "We put in an energy bar program almost a year ago," she says. "It's a good time to look at the impact on candy. And I can't see an impact, because (our candy sales) are up so much."

Nevertheless, new confectionery product innovation is vital, if confectioners wish to remain competitive with other snack products competing for space in c-stores.

During a speech he delivered at Candy Industry Magazine's Confectionery & Snack New Products Conference in September, 7-Eleven's Keane urged confectioners to introduce more innovative new products, in a more efficient and expedient manner.

"When I ask `when will [a particular new product] be introduced?' and the sales rep tells me, `It's shipping now,' then that is too late," said Steven Keane, category manager at 7-Eleven Corporation Inc. With an organization as large as 7-Eleven (more than 6,000 outlets in the United States, Canada and Mexico), communication to either the franchises or corporately owned stores requires a lead time of at least six months, he said. …