Chocolate pricing

A closer look at the current convenience store landscape

Q: What changes have retailers seen in the way consumers shop at convenience stores? Are store visits shorter? More orders placed online? Are consumers using apps more frequently? Is it true that visits are down but cart rings are up? Why?

A: During the pandemic, buyers were using the proximity channel in different ways. Store proximity has become a bigger decision in choosing a retailer than before. Convenience stores got credit for being easy to get in and out of, and are smaller stores than mass or grocery chains, so they had fewer shoppers. Convenience stores also offered constant in-stock products that were not available in larger big-box stores, and were more likely to be clean and maintain a level of security due to the size of the store. Fill-and-stock trips became more common in the channel for these reasons, while shoppers continued to have impulse and “treat me” moments. Cart Rings were a bit higher due to some of these Travel Missions and the larger pack types associated with them across all categories. The ability to easily enter and exit the store remains one of the main advantages of the channel, although travel time has held up from one point to the next.

While commuting is still impacted by ongoing work-from-home scenarios, loyal convenience store customers who were previously morning commuters can still shop the channel later in the day for a treat or a meal. Those whose jobs or lifestyles have not been impacted by COVID-19 have maintained their commutes and routines at the convenience store. Online and app ordering continues to grow within the channel. There has been directional adoption of this technology, but it still represents only a minority of transactions. Shoppers note that the store is still the preferred way to purchase the channel because they needed an item immediately and couldn’t wait for an order online or were already on the go and it was easier to enter the store .

Q: How does this affect the candy category?
A: The candy, mint and gum category is still a top category in the channel in terms of dollar sales and exceeds the central store, excluding lotto, in terms of percentage change in dollars and percentage change in transactions. Throughout the past year, larger packaging types have increased significantly, matching the storage mission and the increase in basket sizes. Today, as mobility increases, the trend is returning to instant consumable packtypes.

Q: How important are candies to creating a basket on this channel? How Do Candy Purchases Raise the Dollar at Convenience Stores?

A: Candies are very important for creating baskets in the channel. Research has shown that sweets are often purchased together with another item. This is a very impulsive category with high household penetration, so the combination makes it a great basket builder. Data shows that the average convenience store cart ring increases by about $1 when candy is in the cart.

Daily multiple pricing also had a positive impact on the category and baskets. Travel may be down, but multiple daily prices entice consumers who come to the store to buy more. Retailers that apply daily multiple pricing on King and/or Standard candies see approximately 100% unit conversion, which is significantly higher than retailers without daily multiple pricing.

Q: How important is merchandising in driving impulse purchases?

According to IRI, the average consumer purchase time for the candy, mint, and gum category is 27 seconds and 58% of purchases in the category are partially planned or not planned at all, hence merchandising effective in inducing impulse purchases is very important. About two-thirds of candy, mints and chewing gum purchases are picked up in the aisle, so one-third are picked up elsewhere. Strike Zone Optimization merchandising in the aisle is rooted in the consumer’s decision-making process, helping them find what they want quickly. Off-aisle merchandising throughout the store, such as a branded corrugated display, can entice shoppers who previously hadn’t thought of the category to buy something. And merchandising the highly impulsive category at checkout gives consumers one last chance to indulge.

Q: Is there a Strike Zone approach for convenience stores? How has it increased sales for retailers who have used it?

A: Yes, Strike Zone Optimization merchandising is best in class. Convenience store buyers are fast; if they can’t find the candy, mint, or gum they’re looking for in the time they’re willing to spend (average is 27 seconds), they can leave the category. Retailers who have converted to Strike Zone Optimization see a strong initial increase in the first year, and a smaller but continuous increase in subsequent years. The delta between retailers using Strike Zone Optimization and those not using it has increased over the past year, likely because consumers wanted to spend less time in-store to reduce potential exposure to the virus and Strike Zone Optimization helped them find what they wanted quickly.

Q: What are the co-location strategies (i.e. Kit Kat near cafe, take-out displays near soft drinks)?

A: When it comes to co-location strategies, think about the different slices of the day and the natural affinities between candy, mint, gum, and other categories. In the morning, the coffee is a premium category and pairs well with Kit Kat, Ice Breakers and Reese’s Snack Cake. For afternoon and evening daytime parties, the top franchise in the candy, mint and gum category, Reese’s is expected to be marketed with fountain drinks, soft drinks, a cooler of charcuterie and a nearby catering service.

Q: How about merchandising near order kiosks?

A: Convenience stores have experienced an annual growth rate of +10.5% in food prepared on-premises over the past 9 years. Overseas research and examples have shown that consumers are looking for a meal package, especially at lunchtime. When it comes to the sweet part of the combo, 93% of combo meal shoppers would prefer a Standard candy bar over a King candy bar.

Q: Are there other merchandising techniques that convenience stores can easily activate in-store?

A: One of the easiest techniques is to sell products from the candy, mint and gum category on or under the checkout counter. This is the only place in the store where all paying customers will be when they visit. Customers expect certain items at checkout and gum, mints, chocolate candies and non-chocolate candies are some of the most “must have” items. The specific items that should market there perform the best, as these are the brands and items that shoppers love and will impulsively add to their cart.

Q: How do new and limited edition products help drive category sales?

A: New products and limited edition products help drive category sales as they create excitement and encourage consumers to enter the category. They also improve the conversion of pack type units; on average, the unit conversion of King and Standard, including innovation and limited editions, is 900 basis points higher than when not included. Strong Innovation and Limited Editions have off-aisle display merchandising units that include new and essential items, so these call out the innovation or limited edition and remind shoppers to also grab their favourite.

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This post is sponsored by The Hershey Company