Non-chocolate is the reigning king of kids’ candy. Here is one sub-segment of confectionery where you just don’t hear that much about chocolate; it clearly doesn’t have the ideal/interactive fit that non-chocolate, in its many forms, has. Similar to last year, chocolate novelty candy is down by significant double-digits in dollar sales—nearly 32 percent, according to Information Resources, Inc., which tracks only the food, drug and mass retailers, excluding Wal-Mart. Meanwhile, kids’ novelty non-chocolate candy showed modest, but good, comparatively, dollar-sales increases in the 4 percent range, according to IRI.

Researchers say that when the entire category is considered (and this includes many “alternative” retailers from outside the mass market), overall dollar sales have been somewhat flat recently; however, there is good news in SKU growth. New items have been dubbed the “lifeblood” of the category (thanks to the unsurprising fact that kids’ tastes are constantly changing and awaiting the next “it” items); mid-2007 figures show that kids’ confectionery SKUs grew by almost 25 percent. Innovation is rampant from typically small, but many, players. That is keeping candy buyers on their toes and constantly juggling/evaluating new flavors and new brands. The management of the category has, therefore, been classified as one of the toughest in confectionery.

Except for the occasional candy-addict adult who, perhaps, is really a kid at heart, the primary target for kids’ candy is kids, tweens and, typically, younger teens. Parents are a secondary target, as they are often standing in the candy aisle, too—ready to say “yay” or “nay” to the treat. Sometimes they have been known to buy novelty candy for their kids while shopping alone, wanting to bring home “a little something” that is a fraction of the cost of a “real” toy. Teachers, too, may stockpile some novelty candy treats as prizes/awards or for party days. This has spurred some “nostalgic” novelty candy to be incorporated into the kid sets—items that remind the adults of candy that was around when they were young—but usually in a smaller, ancillary way. Teenagers have also been known to “revert back” to buying candy that reminds them of their childhood, either for themselves, or perhaps a younger sibling.

But kids are no spend-slouchers all by themselves; in fact, they have been shown to have an undeniable and building spending power, according to a multitude of industry research. For instance, a recent Harris study reports that American kids, teenagers and young adults ages 8 to 21 have annual incomes (for kids, this includes allowances and other “earned” money) totaling $211 billion, and are actually spending 81.5 percent of it—which rounds out to a nice $172 billion per year. Alloy Media reports that the tween segment alone is spending $51 billion per year. Futurist Jim Taylor, vice chairman of the Harrison Group, separates the boys from the girls, proposing that boys under 18 have an average of $525 to spend each month, while girls of the same age group have $430.

Kids’ money today is not all small bills and loose change. Industry research highlights that 22 percent of U.S. teens have credit cards while in high school. Even more enlightening: Researchers expect many of these numbers to keep climbing at exponential rates.

Category observers say that with all the innovation—and constant influx of merchandise—retailers who want to truly profit from kids’/novelty candy should give it a permanent home, then supplement it with outposts and highlights. This will require a labor of love for kids and the category, because the true magic is said to lie in the well-maintained movement of a stable section, which, obviously, is no easy feat.

But it certainly can be done. The thinking is that if a retailer has kids in its stores, it should appeal to their impulsive nature with a kids’ candy set that rotates new items in at least every 6-12 months; some have said that ideally, at least 50 percent of the set should be rotated annually, with as much choice as possible.

Then, anchor items as well as topical items such as movie licenses, can be promoted off-shelf in floor displays to drive incremental impulse points in the store. Retailers should remember that this category is not necessarily one of “big brands,” but rather, one of true innovation. It has been said that with so many smaller manufacturers spending research and energy on packaging, new concepts, flavors and textures, a retailer’s job of attracting kid consumers is largely being handed to them. They then have to run with the ball and manage the process swiftly.

The spring and summer seasons have a strong impact on novelty candy, especially for retailers that know how to highlight that from a kids’ perspective. Youngsters may not be in tune to Memorial Day as a holiday per se, but they do care that it marks the start of the summer season. Some retailers, therefore, set promotions and outposts around “Candy Carnival” and “Candy Circus” themes right around this important category time; some start even earlier in the spring. Attractive signage that calls attention to a carved-out section is an important aspect of its success. Making relevant movie tie-ins for the big summer blockbusters is also key to kid attraction.

Some experts believe that eventually there will need to be a “re-thinking of distribution” on the part of industry manufacturers in order for products to flow through the system faster. As the stream of new products increases, it is expected that so, too, will the strength of the category.

Meanwhile, the challenge for retailers will be to continually consider the “next great concept.” Some experts advise candy buyers to use more “kid panels” and focus groups in helping them decide what to buy. The thinking is that category plan-o-grams and profit would be much stronger if kids had a real voice in the selection of the mix.

Ultimately, industry players see a stable future for both the category and the retailers that truly embraces it as a growth opportunity.

• Non-chocolate makes up the lion’s share of the kids’/novelty segment.

• With constant sku proliferation, novelty category management is the toughest in confectionery.

• Kids have an undeniable (and building) spending power.

• A permanent kids’ candy set should be rotated every 6-12 months, with at least 50 percent traded out for new items.

• Eventually, improved distribution and more kid involvement could have a very positive impact.