A Sweet Taste of Home

Since 1895, AAFES has been proudly selling confections to soldiers, airmen and their families wherever they are stationed in the world—with a merchandising mix and approach that is all-American. BY RENEE M. COVINO
This retailer’s typical candy customer is an 18-to-34-year-old male with a sweet tooth who tends not to worry about calories and wants a quick snack. That may sound like a very ordinary confectionery consumer, but it certainly is not. For this candy shopper may also be under extreme stress in a war zone and often chews gum as a stress reliever. This is an American soldier or airman—and sometimes his favorite link to his homeland is the candy that he purchases at his nearby Army and Air Force Exchange Service (AAFES) store, which banners the slogan, “We go where you go!”
“Candy is an important part of the overall merchandise mix because it brings a true taste of home to soldiers, airmen and their families wherever they are stationed,” says Kathy Wulff, senior buyer at AAFES. “It has grown through the years from a few items of convenience to a 40-foot set in AAFES’ largest stores with separate fixtures for Godiva and Russell Stover.”
Based in Dallas, Texas, but located all over the world, AAFES retail formats vary widely from its largest Main Exchange stores to Military Clothing Stores, from “Shoppettes,” to Class 6 (liquor) stores and even theaters. Yet all formats sell candy in ways that mimic their traditional retail channel counterparts.
For example, Main Exchange candy displays are similar to other mass retail candy displays while shoppettes have a convenience store set, the largest being 28 feet. Not only do they look like the traditional American retail candy displays, they are backed up by two of its largest players. Masterfoods developed the AAFES Main Store sets and Hershey developed the shoppette sets.
While the largest Main Exchanges can sell up to the 776 total candy SKUs that AAFES currently manages, the Military Clothing Stores house an “impulse rack” of typically 12 confectionery SKUs.
As for merchandising, the chain is intentionally very “American standard” in its approach. “We merchandise candy on standard gondolas and on impulse racks in the checkout area,” Wulff explains.  “We also use pallet displays during the fourth quarter, and shippers and powerwings throughout the year.”
Keeping it convenient
AAFES is currently in the process of changing its shoppette format to one that is even more familiar to convenience-oriented consumers—something AAFES shoppers certainly value as much as any American consumer. “We are changing the shoppette set to a true convenience-store set with more space devoted to single candy bars, gums and mints,” Wulff explains. She expects that “the change to the shoppette set will have a great impact on AAFES candy sales for 2005.”
In line with that, AAFES has recently added 79 new SKUs and deleted 122 SKUs from its candy offering. More specifically, it has increased the gum and mint assortment and reduced the “kid” candy assortment.
Why? “AAFES is increasing the focus on single bars, gum and mints to improve service to customers and improve margin,” Wulff states. “AAFES also added Altoids Cinnamon gum…to respond to a request from the Army Dental Activity to carry items that are recommended to prevent tooth decay. AAFES also worked with QSP to develop candy bars with Army and Air Force graphics.” These items became available in AAFES stores this April.
The chain is constantly evaluating and re-evaluating all forms of candy, because it has learned it can contribute greatly to the pleasure/mood of its soldiers/airmen and their families. Currently, this is where the chain stands on some of the top-watched candy categories, according to Wulff.
Low- or no-sugar candy. AAFES carries Godiva, Russell Stover, Almond Roca, Sugar Free Turtles, Go-Lightly, LifeSavers, and a number of sugarless mints and gums, she says. “It’s a very small portion of AAFES’ business…but there is increased demand,” she adds.  
Dark chocolate.  AAFES is increasing its focus on dark chocolate with Lindt, Hershey and M&Ms.  
Novelty candy. This is where emphasis has been reduced, putting the brakes on what is typically known as kid candy. “The main focus on novelty will be in seasonal buy plans,” Wulff maintains.  
Bulk candy. In general, AAFES does not carry bulk candy in the Main Exchanges or shoppettes.  
Premium chocolate candy. AAFES does extremely well with Godiva, Lindt, Ritter Sport, Almond Roca, etc., according to Wulff.  “AAFES customers are well traveled and they know chocolate!” she adds.
Bite size candy. AAFES carries products from Masterfoods, Hershey and Nestlé.
King-size candy. King-size bars are merchandised on every other “impulse” rack in the Main Exchanges, according to Wulff. “These are very strong items in AAFES stores,” she emphasizes.
Nostalgic candy.  Nostalgic candy “performs well in seasonal buy plans and for in-and-out buys,” Wulff maintains.
Peg bag candy. Simply put, peg bag candy performs well in AAFES stores, according to Wulff.  
Going for gifting
While the majority of candy sold in AAFES stores is for immediate consumption, the chain also has a strong business in boxed chocolates, primarily with Godiva and Russell Stover. During the fourth quarter, it will also typically bring in additional boxed chocolates to capture more gift sales.  
But the future holds even more gifting opportunities for AAFES, and it is adjusting accordingly. “We will be adding Godiva powerwings to our Class 6 (liquor) stores and mobile Godiva racks to our Main Exchanges in the near future,” reports Wulff. She believes this will improve candy sales by allowing for more cross-merchandising opportunities.  
AAFES currently cross-promotes Godiva two ways—on a mobile rack and on a sidekick. “The mobile rack allows managers the flexibility to cross-promote with lingerie, etc.,” says Wulff. “But we are also introducing a Godiva sidekick rack that will allow us to merchandise Godiva next to port and dessert wines in Class 6 stores.” The exchange stores also have had cross-merchandising success by selling candy bars in its beverage coolers for customers who like their candy very cold.
AAFES also supports another familiar American retail tradition—participating in movie and license tie-ins.  “AAFES will participate in the Mars M-pire promotion coming up in May,” states Wulff. Apparently, this is a marketing approach that has already proven itself to be well received by AAFES customers. “We had good sell-through on Frankford’s Nickelodeon licensed products, such as Sponge Bob and Dora,” she maintains.
Limited edition opportunities
In addition to more “adult candy,” cross promotions and license tie-ins, AAFES sees its confectionery future in new items, especially in-and-out candies that are only available for a short time. “Limited Edition is the word for 2005,” says Wulff. “New candy items will continue to drive growth.”
That is made possible because AAFES tracks its candy sales using Teradata, according to Wulff. “We use this sales data to determine which items should be retained or deleted from the stock assortment,” she explains. “AAFES buyers review sell-through on one-time buys to determine the quantities for future ads or buy plans. Our buyers also evaluate the lift and sell-through on sales promotion items for future ads.”AAFES vendor partners are also able to access sales and promotion information through AAFES’ Extranet.
So while AAFES stores may all merchandise, market and track candy sales in the typical American fashion, the chain must deal with one foreign aspect of doing business due to its global locations: distribution. According to Wulff, AAFES distributes candy though its distribution centers in the United States, Germany, Okinawa, Korea and Japan.
“Since AAFES has a long lead time to warehouses overseas, candy buyers have to keep a close eye on quantities purchased,” she says. “The large minimum orders that have been imposed during the last few years have complicated this process,” she admits. n
A Proud Ten
These top 10 confection items at AAFES (unit sales) should sound very familiar to any other retailer selling candy in the United States.
1. Snickers
2. Snickers King Size
3. Reese’s King Size Peanut Butter Cup
4. Peanut M&M’s
5. Reese’s Peanut Butter Cup
6. Doublemint Plen-T-Pack
7. Strawberry Twizzlers 7 oz.
8. Big Red Plen-T-Pack
9. Plain M&M’s
10. Wrigley Spearmint Plen-T-Pack
Despite the fact that the company has made recent candy SKU changes/deletions/additions, this top seller list hasn’t changed in quite some time, according to Kathy Wulff, senior buyer at AAFES. She also notes that the chain carries a wide variety of packaged candies. "Single bars are our top sellers, but we also do extremely well with peg candy," she says.
Last year, AAFES’ total candy sales comprised a $58 million dollar confectionery category for the chain, which approached nearly $8 billion in total dollar sales across all product categories.