The candy industry has the potential to achieve double digit growth over the next several years despite recent estimates of flat sales over the past 52 weeks (adjusted for Easter). Yes, double digit, but first, it is important to recognize that candy dollar sales have been growing at a decreasing rate over the past several years in spite of the retail price increases driving retail growth. More concerning is that unit sales of candy items have fallen, while consumer spending is increasing. A couple of reasons for this lackluster candy category performance have been America’s focus on obesity and gas prices shrinking disposable income. So where are these sales going? And where is the opportunity for candy category growth?  

First, consider how the consumer is changing. Consumers are becoming savvier about value and nutrition. They are more time-stretched, which has led to more snacking vs. full meals. This trend has increased the demand for more convenient, healthier snacking items. It is no coincidence that nutritional bars hit their peak growth over the past five years. Nutritional bar manufacturers are getting better at making their bars taste good, and the definition of “nutrition” has expanded to include everything from caffeine/energy, to balanced nutrition, to specialized nutritional supplements.

Health and beauty care manufacturers have recognized the power of candy as a delivery vehicle and have launched chewing gums that deliver vitamins and minerals, lollipops that contain sore-throat-soothing ingredients, and mint film products that deliver a variety of functional ingredients.

These manufacturers are focused on innovative product development and category creation, while the majority of the candy manufacturers have relied on brand extensions for growth. Health and beauty care manufacturers are absorbing some of the valuable impulse merchandising locations that have traditionally housed candy. Already, some candy manufacturers have recognized this opportunity and have been developing new candy formulations relevant to today’s customer.

Research and product development must come first and fast to provide sugar alternatives and flavor masking. Breakthrough development of sugar alternative ingredients by companies like Cargill, has reduced digestive upset and glycemic impact significantly from the more widely used maltitol. Sucralose has shown tremendous potential as a substitute for sugar and has been used with fruit juice to allow marketing of 100% fruit juice candy items. Even fruit-based ingredients are lowering dependence on sugar. More needs to be done to further the progress on developing sugar substitutes; new sweetener technology should be aggressively pursued by candy manufacturers.  

First and foremost, candy has to taste good to succeed. Functional ingredients provide unique challenges. Caffeine, for example, is very bitter, yet it is the main ingredient in many “energy” products. New technology to encapsulate these types of ingredients are showing great promise toward improving taste without reducing efficacy. Keeping up with FDA requirements can be a challenge, but is a worthwhile investment.

In Japan and Germany, consumers spend $150 per capita on functional snacks vs. Americans who spend less than half that, but the gap is quickly closing. We have been feeding our kids 12 essential vitamins and minerals in their cereal for years; it is time for the candy industry to catch up. Now is the time for the candy industry to embrace this more healthy change in the customer. n

Derek Schmitt, former candy category manager for 7-Eleven, now owns and operates Category Solutions LLC. Category Solutions is a product development and consulting company specializing in the functional confections arena. Derek can be reached at (214) 215-6603 or at derek.schmitt@comcast.net.