Keeping It Sweet

Convenience retailers can rely on the candy category to consistently deliver profits.

Keeping It Sweet

October 2023   minute read

By: Sara Counihan

The candy category continues to be a sweet bet for convenience retailers. Candy posted a 51.84% gross margin last year, which was an increase of 1.27 points over 2021, according to the NACS State of the Industry (SOI) Report of 2022 Data. Gross profit was up 18.0% in 2022 over the prior year, and the category represented $4,103 in gross profit per store, per month and accounted for 5.00% of total inside gross margin.

With candy representing 3.55% of inside sales in 2022 (up 0.27 points from 2021), retailers saw an average of $7,914 in sales per store, per month in 2022—an increase of 15.1% from 2021, according to the SOI report.

“Candy was the No. 6 category in terms of gross margin contribution last year, and it’s easy to see why,” said Jayme Gough, research manager, NACS. “It’s a highly impulsive category, especially when consumers choose to indulge, making it a profitable basket builder.”

According to Joseph Bortner, senior category manager, Rutter’s, the candy category is “thriving” in the company’s 85 locations across the Mid-Atlantic.

“It’s thriving through a lot of the pricing changes that we’ve seen over the last 18 months, [and] we’re still seeing unit growth on the same-store basis,” he said. “King size is still the main driver, but we’ve seen the most growth out of gum and mint.”

The Pieces of Candy

Nearly all the candy subcategories experienced year-over-year sales and profit increases. The top four subcategories each experienced double-digit growth in both sales and gross profits.

The chocolate bars/packs subcategory is the largest sales contributor (37.4%) to the candy category, and trends within this subcategory are highly reflective of the category, according to Gough. Chocolate bars/packs sales per store increased 13.0% in 2022, averaging $2,961 on a monthly basis, and a gross margin increase of 1.21 points helped yield a gross profit increase of 15.8%, according to the NACS SOI report.

Chocolate bars dominate candy sales for Chicago-based Rmarts. “80% of our [candy] sales are the king-sized and regular-sized candy, and that’s really what’s holding up our numbers for sure,” said Dan Razowsky, director of operations and marketing, Rmarts, which has 13 stores in the Chicagoland area.

However, what’s pulling the candy category down for Rmarts is the bagged/repacked peg candy subcategory. “It seems like it’s too big of a ring, and [customers are] not going for that big, six-ounce bag of candy. … I think most people would just want to eat a candy bar and then be done with it.”

However, Baltimore-based High’s is seeing a “huge” customer transition to bagged/repacked peg candy. “Chocolate is still by far our largest subcategory. It makes up roughly 55% of our overall candy sales, but our sales are flat to down in terms of units. But with the larger pack sizes, we’re seeing a lot more people value shopping because the perceived value in those pack types is more,” said Noah Sanders, category manager, High’s.

According to NACS SOI data, bagged/repacked peg candy was 22.0% of category sales in 2022 and saw a year-over-year sales uptick of 20.6%, as well as a 24.5% increase in monthly gross profits. According to The Hershey Company, retailers that lean into take-home packs are seeing growth. “We are seeing continued stickiness of the take-home pack post-pandemic,” said a Hershey representative.

The third largest category contributor, accounting for 16.7% of candy sales in 2022, was the non-chocolate bars/packs subcategory. This subcategory increased its sales by 21.9% and gross profits by 25.2% last year, which was the most among candy subcategories. It also had the second-largest gross margin among subcategories at 54.48%, which was up 1.44 points from 2021.

[Our queue line] gives us a vehicle to get something directly in front of the customers.”

Hershey says that its non-chocolate brands continue to accelerate. Its Jolly Rancher brand is up 13.6%, and its Twizzlers brand growth is up 39%, fueled by take-home 16-ounce displays and food bundles.

The fourth largest sales subcategory in 2022 was gum, which struggled in 2020 due to social distancing. However, with most consumers back to their pre-pandemic habits and activities, sales of the subcategory increased by 20.8% and gross profits increased by 24.7% in 2022, according to NACS SOI data.

“Gum sales have made a strong recovery,” said Gough. “In 2023, monthly sales were higher in the first three months of the year for the first time since 2020.”

Rutter’s has seen the most growth in the candy category from gum and mints. “I’d say that by now, we have fully rebounded from any softness that the pandemic had caused,” said Bortner.

According to Hershey, refreshment trends are strengthening as mobility increases and workers return to the office. Its Ice Breakers brand is up 39%.

Merchandising to Move

Even though candy is an impulse category that does sell easily, it is important to merchandise candy so it makes the most impact. Rutter’s leans on its queue lines to increase impulse purchases and basket size.

“[Our queue line] gives us a vehicle to get something directly in front of the customers. They walk through it, and it’s a way that our team can get creative and create unique displays,” said Bortner.

But merchandising isn’t just about placement, it’s also about engaging your employees in the merchandising process, he said.

“The people in the stores are the ones that are doing the day in, day out work to make sure any of these programs are successful, so making sure that they’re aware of everything going on and engaged in the process is always key to success,” Bortner said.

At High’s, loyalty is key to selling candy. The company has a king-size Reese’s promotion for loyalty members—if a customer buys five Reese’s items, they receive the sixth one for free. High’s also gets its employees involved with suggestive sell contests, which “move the needle significantly,” said Sanders.

There are so many people who left the candy category entirely, either for health or lifestyle reasons, who are finding their way back through better-for-you options.”

“We have stores compete against each other for prizes. The biggest percent increase over the prior year in units wins a prize,” he said. High’s awawrds one winner per district, and there is one overall grand prize winner out of the entire company.

Sanders added that making sure displays are fresh is important when merchandising the category. “A lot of times shippers will stand there and become part of the scenery, but you got to break them down and rotate through them and get new ones up so they don’t become stagnant,” he said. “Move them around the store to get hit different traffic patterns, so customers might be interrupted by candy.”

Hershey suggests pairing salty snacks with candy. Carbonated beverages and prepared foods are the top two cross-purchased categories in the candy basket.

“Retailers should place candy next to adjacent categories like beverages,” said Hershey, adding that c-store retailers should not forget about the candy shelves—67% of sales come from the shelf, according to the confection company. Also, having multiple pricing strategies drives basket increases. “Three for” offers have great consumer engagement, the company said.

Sweet Innovations

When it comes to innovation within the category, some say it’s stagnant, while others say it’s as strong as ever. According to Mayssa Chehata, founder of BEHAVE, a better-for-you candy company, many of its customers had left the candy category but returned because of healthy innovations and products like BEHAVE’s.

“There are so many people who left the candy category entirely, either for health or lifestyle reasons, who are finding their way back through better-for-you options,” she said, adding that she’s seen excitement from customers and retailers for novel flavors, like passionfruit, lychee and pink pineapple.

’Tis the Season

The novelties/seasonal subcategory is a smaller contributor to overall sales in the candy category, but these candies are a margin generator, bringing in 50.0% in gross margin profit in 2022. But selling seasonal candy can be tricky. Here are some tips from the experts:

“The first step is making sure that you planned for each of your stores accordingly. Once you set a plan in place, it’s important to engage your personnel so that they can engage with the consumers and get them aware of all the different offerings.”
Joe Bortner, senior category manager, Rutter’s

“Having good signage and keeping on it—there’s only so much space on the register that you can use, but we try to have [seasonal] on the register and proper signage for it, and usually we give [the candy] a deadline, like a 60-day deadline that it should be gone.”
Dan Razowsky, director of operations and marketing, Rmarts

“Just get it out there and don’t be afraid to get it out there early. … I get Halloween candy out there in July. … We sell more in July and August than we do September and October.”
Noah Sanders, category manager, High’s

“Bringing flavors not traditionally found in conventional candy has driven a ton of excitement and affinity from our customers as well as retailers,” said Chehata.

If you ask Sanders, innovation has slowed due to the pandemic and hasn’t completely caught up to pre-pandemic levels. He recommends focusing on core brands and trading customers up to larger pack sizes through promotions or repositioning products in the store.

You’ll find something goes viral on TikTok, and all of the sudden it becomes a top performer in your store.”

Bortner says that innovation is happening on social media, and it has a major influence on consumer products. “You’ll find something goes viral on TikTok, and all of the sudden it becomes a top performer in your store,” he said, using the example of Toxic Waste Slime Licker, which is sour rolling liquid candy. “We had carried them for a couple years, but it wasn’t until this past year that we saw explosive growth [because of social media].”

Social media engagement is a must, according to Hershey. “We are seeing consumers shift from traditional media to social media, and brands must engage consumers on all platforms.”

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