Sweets & Confectionery - Sweeten the deal for your customers(PDF)

Sweets & confectionery
Chocolates
take charge,
but sweets and
confectionery
are not far
behind
By Simone Armer
Although the majority of
consumers are still feeling the
post-recession pinch, chocolate is
an indulgence everyone is finding
spare change for. Sweets, gums and
snacks may be trailing behind, but
forecourts as well as cash & carries
are still finding ways to sweeten
the deal for customers.
Chocolate’s chunk
“With winter on the way, chocolate sales
will more than double, even four-fold,” says
Nadeem Ebrahim, store manager of Sweet
Hypermarket in Crown Mines, Johannesburg.
Sweet Hypermarket sells chocolates, sweets
and snacks to a customer base of traders
and wholesalers (40%), hawkers (30%) and
retail clients (30%).
Chocolate is a big seller at Sweet
Hypermarket all year round, but sales
increase in the cold months. Dipping
temperatures cause an increased desire
in consumers to indulge and also keep
products from melting on hawkers’ tables.
“Chocolate is a risky choice in summer
for traders who walk with their stock.
Holidays like Easter, however, drive sales
at the beginning of the year, followed by
the winter peak and then Christmas,” says
Ebrahim.
Festive and occasional sales are the
principal drivers for the South African
chocolate market, according to Sarah
O’Carroll, industry analyst at Frost &
Sullivan. “Chocolate is seen as an affordable
luxury, one that consumers can afford all
Sweeten
the deal
for your customers
year round, no matter how cash-strapped
they are feeling,” she says.
Overall, South Africa’s chocolate market
is doing very well. According to Frost &
Sullivan, it is expected to grow at an annual
rate of more than 10% in the next five
years. Currently valued at R5.03 billion, the
market exceeds the global average, making
South Africa a major international player.
Leading chocolate company Mondelez
International has identified South Africa
as one of eight markets that will lead the
world’s confectionery growth. Mondelez
attributes this to the young population
and growing middle class in the country.
Consumers’ increasing disposable incomes
further drive the market, according to Frost
& Sullivan.
Consolidated market
The market is still highly consolidated with
Cadbury, Nestle and Beacon controlling
85% of retail sales. “The large manufacturers
will continue to try and strengthen their
position in the market, increasing competition
between players,” says O’Carroll.
According to Euromonitor International’s
February 2013 report on the South African
sugar confectionery category for 2012,
Cadbury led chocolate confectionery with
a 42% value share. Cadbury’s leading
countline is Cadbury Dairy Milk, followed
8 wholesalebusiness Issue 3, 2013

Countlines and slabs are popular in forecourts
and tuck-shops.
Festive
and
occasional sales are
the principal drivers
for the South African
chocolate market
compared to those with less money to
spare. “These consumers have a greater
disposable income and are therefore less
price-sensitive. Higher income consumers
have also travelled more extensively and
have been exposed to premium chocolates
available in other markets and will therefore
pay more for high quality chocolates,” says
O’Carroll.
Cash & carries with a more affluent
customer base might want to consider
stocking artisanal chocolates, as these
customers are developing preferences for
unique out-of-the box products.
Chewing and bubble gum sells well in
convenience stores and the informal sector.
The Simba Group led the snack pack category
in 2012 with a value share of 49%, including
brands like Simba, Lay’s, O’Grady’s, Cheetos,
Fritos and Doritos.
by Lunch Bar, PS and Chomp. Nestle South
Africa ranked second in 2012 with brands
like Bar One and Kit Kat contributing to
its 27% value share. Beacon Sweets &
Chocolates came in third with a share of
11%.
Countlines and slabs are popular in
forecourts and tuck-shops. “The 100g
Cadbury Top Deck slab is still one of my
biggest sellers,” says Peter Masuku, owner of
Sasol Atteridgeville near Pretoria. “People are
also really taking to Cadbury Mini Eggs.”
Cadbury and Nestle minis take centre
stage on hawkers’ tables. A box of 24 mini
chocolate products sells for just around
R37.99 wholesale. Chocolate-filled straws
are also proving popular on the playground.
Extended product ranges
Cadbury, Nestle and Beacon are extending
their product ranges to capitalise on the
success of their most popular products. At
the same time, consumers are provided
with a wider range of flavours and sizes,
notes Frost & Sullivan. Nestle Kit Kat, for
example, is now available in a bite size value
pack, a two-finger bar, a three-finger bar, a
four-finger bar, a chunky bar or a family size
pack. Consumers can also buy white and
dark chocolate versions of the product.
“Income levels do not have the same
impact on the chocolate market as they do
in other markets as chocolate is viewed as
an affordable luxury,” says O’Carroll. “This
results in consumers across different income
levels purchasing similar products,” she says.
However, higher income consumers
do purchase more premium chocolates
Lollipops last longer
and are more value
for money – they are
aggressively marketed
through road shows
and school promotions
Sweet-toothed customers
For LSM groups 3-7, sweets remain the
most popular choice. “Beacon Smoothies,
Cadbury Chappies and Cadbury Halls
are popular on every street table – they
are competitively priced and are of good
quality,” says Ebrahim.
Volume growth dropped in the sweets
category from over 3% to just above 1% in
2012. Beacon Sweets & Chocolates leads
the category with a value share of 47%.
Candy Tops ranks second with a value share
of 8%, followed by Kraft Foods South Africa
with 7%.
“Although the market is quite saturated
at the moment, lollipops always come out
on top,” says Mohammed Moosa, marketing
manager at Marburg Sweets. Masuku
says that lollipops are also doing well in
forecourt stores, with Fizz Pops being a
popular choice.
wholesalebusiness Issue 3, 2013 9

Sweets & confectionery
“Lollipops are aggressively marketed
through road shows and school promotions.
Kids want to get the most out of their R5 –
lollipops last longer and are more value for
money,” says Ebrahim.
The latest craze on the playground is
Ferrero’s Tic Tac Mini – a tub of six Tic Tacs
for just R1.00. The product has not yet
officially launched, but Ferrero is allowing
Ebrahim to test the product as a wholesaler.
It’s doing very well with schools and is also
proving popular for functions, due to its size,
and as an after dinner mint.
Old-fashioned sweets like humbugs,
traditional boiled sweets and bon bons are
making a comeback, according to Richard
Robison, member of sweet manufacturer
Shooga Shooga.
“Nostalgia sells and reminds us of a
bygone era when things were so much
simpler, and fun times in many childhoods,”
he says.
According to Robison, tailored and
branded boiled candy products are popular
with retailers and corporates while lollipops
are most popular with wholesale cash &
carries and the informal sector.
Fizz pops also are a popular choice in forecourt stores.
Gums and chews
The pastilles, gums, jellies and chews
category was the only category to achieve
significant volume growth in 2012, due to
the fact that it appeals to slightly higherincome
consumers than boiled sweets
and lollipops do. “Maynard’s Wine Gums
are becoming increasingly popular. I think
the chewing provides stress-relief for
customers,” says Masuku.
Although the chewing and bubble
gum markets are the smallest in the
confectionery sector, both showed growth
in 2011, according to BMI. Sales growth
was attributed to increased advertising and
promotions and the revival of the classic
‘stick’ version of the product. The category
saw added focus on changing packaging to
cardboard to meet growing environmental
demands by both society and government.
The latest craze on the playground is Ferrero’s Tic Tac Mini
– a tub of 6 Tic Tacs for just R1.00. For LSM groups 3-7, sweets remain the most popular choice.
10 wholesalebusiness Issue 3, 2013

Sweets & confectionery
Chewing and bubble gum sells well in
convenience stores (C-stores) and the
informal sector. “Chappies are still hugely
popular, despite chewing gum being
banned from most schools,” says Ebrahim.
Masuku agrees. “Chewing gum is a big seller,
especially Stimorol’s Infinity.”
Low-end products do
not really cater for the
health-conscious as
consumers of these
products are more
concerned with flavour
and value for money
than ingredients
Healthier offerings
In the informal sector, price is a far bigger
priority than health and nutrition. “Low-end
products do not really cater for the healthconscious
as consumers of these products
are more concerned with flavour and value
for money than ingredients,” says Theo
Bakkum, MD of Awesome Snacks. Despite
this, sweet manufacturers are tapping into
the growing health trend.
“We are currently developing a vitamin
sweet range with an international nutrition
company,” says Robison. The range will
include three different blends – an immune
boosting blend containing vitamins and
minerals that assist in achieving an active
immune system, a ‘vitalise’ formulation with
B vitamins for energy and a beauty blend
with calcium and biotin for healthy skin,
hair and nails.
Shooga Shooga also manufactures sugarfree
‘flu lollies’ that encourage children to
boost their immune system. These contain
Echinacea, a natural immune booster, and
Hawkers sell bubblegum, sweets and chocolates to schoolchildren and passers-by.
many vitamins. ‘Preggi lollies’ contain
a ginger booster that helps to alleviate
morning sickness for mothers-to-be.
Sugar based products account for over
90% of total sales in the sugar confectionery
category, according to Euromonitor
International. Sugar-free products are
growing yet remain within a niche market,
consumed mostly by diabetic and healthconscious
consumers as opposed to the
masses.
Snack time
Retail volume and current value growth
rates for sweet and savoury snacks were
down in 2012, according to Euromonitor
International. The reading of this category
seems to dispute the reality in the informal
sector, where snack sales are stable and
slightly growing.
“Snacks have recently picked up because
suppliers are reducing their pack sizes.
A 50 x 16g pack is now available which
hawkers prefer to buy – they can sell it
at the same price and earn more profit
because customers prefer smaller packs of
chips,” says Ebrahim.
Simba Group led the snack pack in 2012
with a value share of 49%, including brands
like Simba, Lay’s, O’Grady’s, Cheetos, Fritos
and Doritos. National Brands was the
second leading player with a value share
of 23%, offering brands like Willard’s, Baker
Street, Cheese Curls, Jumpin’ Jack and Big
Korn Bites.
In the informal sector, price and
consistent quality drive consumer
purchases. Snacks like naks and puffs are
largely purchased as tummy fillers and
lunchtime treats. There is a big drive by
12 wholesalebusiness Issue 3, 2013

different shapes and two different flavours
in one bag.
Sweet Hypermarket’s approach to
merchandising is simple: “The more stock
there is, the more products will sell.”
Ebrahim also believes in quality control,
competitive pricing and maintaining good
relationships with his suppliers.
Sweet Hypermarket in Crown Mines sells sweets, chocolates and snacks to
a customer base of traders, wholesalers, retailers and hawkers.
The bottom line
At the end of the day, consumers will always
indulge their sweet side – whether they
have R1, R10 or R100 to spare.
Wholesalers and forecourt stores sweeten
the deal for customers and retain a share
of the market by offering value-for-money,
good quality products.
some manufacturers to reduce the fat
and salt content of these snacks in order
to market healthier product offerings for
consumers.
Cheese is the most popular flavour of
snacks, according to Bakkum, although
different regions enjoy different flavours.
“Smoked Beef is most popular in Natal
whereas the Western Cape prefers Cheese &
Onion,” he says.
Securing future market share
Despite the growing value of the chocolate
market and the stability of the sweet, gum
and snack categories, the confectionery
industry in South Africa still faces
challenges.
The ever-increasing price of fuel, energy
and raw materials continues to drive up
costs for sweet manufacturers. Wholesalers
and forecourts face the challenge of
successfully selling products to consumers
who have less disposable income. Innovative
merchandising and quality control is key to
securing future market share.
Wholesalers and forecourt stores will do
well to ensure their sweet offering at the till
contains the most popular countlines. “For
impulse purchases it is the best position –
every merchandiser is pushing for this spot,”
says Robison.
Products that offer customers something
different without added cost will also
sell well in wholesale and forecourt
stores. Awesome Snacks, for example,
manufactures its products under the Marvel
Comics and WWE Wrestling brand licenses.
The company has also launched two
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