Stretching the Candy Dollar
by Richard Jenkins
King-size bars satisfy consumers and deliver profits to retailers.
Who among us does not remember escaping from the heat of the day into a cool, dark movie theater to spend a long, lazy afternoon watching our favorite heroes blaze across the screen — a king-size box of candy or chocolate bar to keep us company?
In fact, while it may seem that king-sized offerings have been around in movie theaters since talkies began in the 1920s, c-stores have been selling these products to customers for over 30 years.
“We first introduced king-sized candy into the c-store channel in the late 1970s,” says Dave Onorato, vice president, National Convenience Store Sales, for Hershey Foods. “It was positioned then as a pack-type line called ‘big blocks.’ We extended the line in the 1980s to include Reese’s Peanut Butter Cups and Kit Kat, among others. Then we introduced Mounds, Almond Joy and York peppermint patties.”
The segment really began to experience solid growth as other manufacturers like Masterfoods (then M&M Mars) and Nestlé extended their key brands to king-size offerings as well, thus creating a new candy segment in-store.
That said, standard size still posts the greater numbers in the bar-good category. “It represents 41 percent of total candy, gum and mint category sales, while king-sized represents 13 percent,” says Onorato. For the four-week period through Feb. 21, 2004, Hershey’s king-sized confection category was up 5.4 percent and regular count was up 7.4 percent
A size for every taste
“Due to the increase of king-size/pegged candy sales, I see more manufacturers focusing on this segment,” says Sharon Vaughn, candy sales manager for Altoona, Pa.-based Sheetz Inc. “In fact, candy margins have increased due to the success of this category.”
King-sized bars account for 20 percent of category sales with pegged candy at 14 percent at Sheetz. “It’s interesting because other c-store chains have higher SKUs and greater standard bar sales, while overall we have higher SKUs in the king-sized category than the c-store average.” Vaughn notes that candy manufacturers do offer Sheetz incentives for product performance, which are tied into the number of SKUs offered.
At Sheetz c-stores, the best-selling brands are Reese’s King and Fast Break King, Snickers King, Hershey Almond King and Milk Chocolate King. “We also have a locally manufactured brand in Altoona which does quite well for us called the Boyer Mallo King,” says Vaughn. “Actually, it’s our sixth-largest-selling king bar.
“Another big seller is the King-Size Cadbury Caramello Bar,” she adds. Besides the endcap, there are king-size bars and “theater” sizes right on display at the sales counter area — for those impulsive customers who feel a little voice calling to them for chocolate as they’re checking out!
“The king-sized market is for a very specific consumer, and confectionery products have been well ahead of other categories in that there have been a variety of portion sizes for years,” says Jim Corcoran, vice president of trade relations for the Washington, D.C.-based National Confectioners Association. “For the last 15 or more years, confectionery manufacturers have offered snack-size and fun-size for those who desire smaller portions, and king-size for those who need a more substantive snack. Basically, portion-controlled sizes have evolved right along with the consumer.”
All about the rings
The key to successful candy merchandising, in Corcoran’s view, is to offer a variety of products for every consumer need. “The confectionary industry has been very responsive to consumer needs, and the successful brand is going to take care of many different usage occasions,” he says.
And the channel that provides the most turns for king-size? “In my opinion, the optimum channel for the king-sized market continues to be convenience stores,” he says.
According to ACNielsen Convenience Planner, total chocolate candy sales for convenience stores for the 52-week period ending December 27, 2003 were $1.02 billion. This represents a 10.2 percent increase from the same period in 2002, and total chocolate candy as a dollar share of all categories tracked by Nielsen for the same period stands at 3.7 percent.
Sales of king-sized candy greater than 3.5 ounces whether boxed, bagged or bar-type (in food, drug and mass retailers, excluding Wal-Mart) were $1.3 billion for the calendar year ending December 28, 2003, according to IRI. That represents an 8.25 percent increase in dollar sales from the same period in 2002.
For Hershey’s, king-size also means higher register rings. “Our regular and king-sized offerings went from [suggested retail prices of] 69 cents and 99 cents to 79 cents and $1.09 cents because of a price increase in January 2003,” points out Onorato. “Soon after, we found that many retailers were experimenting with multiple-bar pricing on king-size, moving up to a 2-for-$2 purchase or one bar for $1.09 cents to $1.19 cents, thus enabling them to make a two-bar sale, thereby increasing the dollar ring and penny profit through the register.”
According to Juv Marchisio, brand manager for Bethlehem, Pa.-based Just Born, king-sized candy is a valuable weapon to have — because of profitability and visibility — when competing with large manufacturers. “King-size is a natural fit because it gives more penny profit to the retailer and higher margins to the manufacturer. And king-sized bars, with a limited amount of space, offer a fairly good-sized billboard,” he says.
“There’s more visibility because of the number of facings and SKUs displayed, which is crucial because the simple fact is that smaller manufacturers just aren’t going to get the prime shelf location that a larger manufacturer does.”
The company is putting a concerted effort into promoting the 3.3-ounce Peanut Chews brand in the northeast c-store channel because the brand has a lot of visibility right now. “We set the price point at $1.09 for the original and milk chocolate brand and we sell the bars in 18-count display boxes,” Marchisio says.
“King-size bars account for a little more than half our sales in open stock product,” says Dale Lundberg, category manager for confections at the Erie, Pa.-based Country Fair convenience store chain. While Lundberg did not give a brand-by-brand breakdown of the best-selling king-sized SKUs, he does acknowledge increased penny profits on king-sized offerings.
“Our gross profit percentage on our king-sized offerings is very close to that of our standard bars,” he says. “But the difference is that the higher ring and increased penny profit make up for any loss in the gross profit percentage.”
Lundberg has worked in his present position with Country Fair for four years and has witnessed the rapid rise of king-size. He explains: “Since I’ve been in this position, I’ve seen an interesting trend. Manufacturers will introduce a standard size item to us and then — almost immediately — put a king-sized offering into circulation once there begins to be significant movement with the standard size bar.”
In fact, according to Onorato, a significant number of c-store retailers have approached Hershey’s about putting king-sized (and standard bar) candy offerings at strategic points of interruption throughout the store that consumers will notice. King-sized candy and convenience stores — the two go together.