CSD: Sweet Opportunity
By Bob Gatty
Through a special arrangement, presented here for discussion is an excerpt of a current article from Convenience Store Decisions magazine.
If manufacturers, distributors
and convenience store retailers would embrace some basic changes in the
confectionery category and work more closely together, they could realize
a potential bonanza of hundreds of millions of dollars in new profit, according
to a new joint industry study.
That is the message of the soon-to-be released "Convenience, Candy &
Profit," study developed by industry expert Kit Dietz, of Dietz Consulting
in Huron, Ohio, under the joint sponsorship of the American Wholesale Marketers
Association (AWMA), the National Association of Convenience Stores (NACS)
and the National Confectioners Association (NCA).
According to the year-long study, if the nation’s 146,000 convenience stores
and their distributors worked together to make sure the top 50 SKUs in candy,
gum and mints–the "core brands"– were always in stock, as much
as $358.8 million in new candy sales could be generated. Numerous other steps
that could generate even higher sales and profits–in excess of $500 million–are
Mr. Dietz pointed out that profit margins on candy products are already strong–often
50 percent or better. For the first 11 months of 2008, total dollar sales
of the top 100 confections SKUs in the convenience channel increased by 3.6
percent compared to the previous year. Convenience chocolate sales were up
4.6 percent; non-chocolate, 5.1 percent; and gum, 4.4 percent. Only mints
showed a decline, down 12.9 percent.
The study uncovered major
opportunities available through improved manufacturer, distributor and
retailer collaboration directed at broadening the scope of category management
- Keeping core brands in stock
at all times.
- Improving in-store product
- Understanding and responding
to consumers’ typical shopping practices to maximize prime selling areas
and secondary multi-vendor merchandising opportunities.
- Improving execution
of new item strategies.
- Improving exit strategies for
poor performing items.
Having the proper balance
of focus on core brands and new items is an important component of effective
category management, according to Mr. Dietz, who said distributors can
help retailers develop and execute the most profitable candy plan-o-gram
for their stores instead of relying on manufacturers, whose natural bias
is to promote their own brands.
"The retailer is the ultimate decision maker and this process provides
a solid basis for developing the optimal planogram for their stores; and
to determine how implementation and execution will take place," said
Mr. Dietz, pointing out that there exists a significant opportunity to increase
candy sales and profit among the growing number of independents.
While many independents do an excellent job of category management, many
are unduly influenced by product cost and the search for deals, instead of
using a more strategic process provided by the distributor aimed at long-term
"Just because a retailer might be able to get a cheaper price at a club
store, those products might not be the ones that will generate the most sales
and profit," Mr. Dietz said. "At
the same time, they will consume space that could be devoted to the best
selling core items or exciting new items being heavily promoted."
What do you think of the suggestions offered in the study for maximizing
confectionery sales? What suggestion will make the biggest impact? Which
one is the most overlooked?