With a category as closely allied with consumer lifestyle and demographic trends as this one is, there’s every reason to expect consistent growth.

Sugar-free confections are moving and shaking — and not just at the retail level, but within the category itself. Recently, the various sub-segments have been trading places in highs and lows. Two years ago, the low-carb craze brought a surge in the chocolate side of the business, but now, growth in that has declined, while the sugar-free non-chocolate segment is experiencing double-digit growth, as is sugar-free gum, according to the latest industry stats and reports.
But instead of getting bogged down on any particular declines, the thinking is to pay attention to the category as a whole and to highlight the shifts. Right now, in fact, non-chocolate sugar-free candy is considered one of the fastest-growing segments of the entire confectionery business, often delivering incremental sales to those giving it due respect.
But the chocolate side of the business is not dead by any means; new innovations, in keeping with dark chocolate and premium chocolate trends are also adding more consumer interest and profit margin to the entire category.
Target Audience
It has been stated that there is no way this category is not going to grow, given the current demographic trends of baby boomers aging and caring more about their health, along with the increase in diabetes. Indeed, diabetics have always been, and are still, the natural target of this category, but especially now that there are, unfortunately, more of them. The occurrence of new cases of Type 2 diabetes has doubled over the past three decades, according to a recent health report.  
But when targeting this confectionery category to consumers, there is also very much a mainstream angle to serve — namely, the millions of Americans who are just dieting and/or concerned about their weight, as well as those who are limiting sugar intake for health reasons and/or seeking out “better-for-you” snacks and treats.
The more mainstream approach in the category also makes room for a younger audience. Sugar-free options have already been expanded to reach kids and teens, both directly and through their parents. It goes hand-in-hand with the overall food industry efforts to reduce childhood obesity, as well as the goal of many schools to incorporate “healthier” food programs.
Product Innovation
There is one aspect of product innovation that consumers will never tire of in the sugar-free category, perhaps more than in any other confectionery segment where it is typically thought of as a given. That is good taste/after-taste. And so, sugar-free manufacturers are perpetually experimenting with new sugar substitutes and combinations of substitutes to come up with the “sweetest” sugar-free candy.
Additionally, more and more mainstream players are offering up their sugar-free versions of strong candy brands. Some have taken it a step further and pumped up the no-sugar platter with even more premium selections such as dark, high-cocoa-content chocolates, as one example. The idea is to not sacrifice anything but the sugar with the most supreme sugar-free candies. In addition, now that it’s clear that diet candy is not merely a fad, even some major players are introducing new seasonal sugar-free options.
As sugar-free selections become more premium, so too, is the packaging, particularly in boxed and gift chocolates — with gilding, unique shapes, foil linings and individual wrappings — just as is found in sugared counterparts.
From another perspective, peg packaging is hot, particularly in gum and non-chocolate sugar-free confections, signifying the consumer’s desire to buy their favorites in a multi-pack, value format. Retailers from mainstream channels report an expanded, profit-growth presence of sugar-free gums and sugar-free pegged candies in the multi-pack section of their basic candy planograms.
“In-house” packaging is also adding to the sugar-free success; creative use of sugar-free private labels is generating more business. Apparently, with the value pricing that goes along with private label, consumers are more apt to try a sugar-free product that has no taste guarantee compared to the alternative.
Retailers that want to stress a “better-for-you” section in their stores may do very well to merchandise sugar-free confections near 100-calorie snack packs and other portion-controlled treats. Grouping sugar-free candy adjacent to other sugar-free products is another outpost option that experts say would result in incremental sales.  
One research firm predicts that the sugar-free candy segment will exhibit a strong growth pattern — at least five percent annually — over the next five years. Wider distribution is, of course, part of that, but not just domestically. China is believed to be the next up-and-coming market for sugar-free products, having experienced a 146 percent growth rate of sugar-free gum in 2005 over the previous year, according to one report.
There is also “impressive sales potential” in new markets such as Poland, Russia, Turkey, Greece and South America. U.S. manufacturers are therefore taking an increasing interest in new sectors such as these, where demand far exceeds supply.
Sweetener innovations, including natural and organic options, will continue to give rise to product formulation advances in the category.
$102.6 million
Sugar-Free Chocolate
Estimated U.S. Retail Market Size*

$78.6 million
Sugar-Free Non-Chocolate

*In food, drug and mass merchandisers, excluding Wal-Mart
Source: Information Resources Inc.

Merchandising Musts
• Shake out a sugar-free home. Research shows that best-practice retailers establish a sugar-free section within the regular candy department, rather than positioning them next to their brand counterparts. This approach is based on the theory that most shoppers are looking to compare one sugar-free product to another, rather than merely looking for the diet equivalent of an existing favorite. Another bonus in doing this: The National Confectioners Association reports that retailers who set sugar-free up as a separate section are showing significantly higher sales in the category.
• Then set up secondary highlights. Beyond its fixed position in the regular candy set, the sugar-free category also lends itself to secondary locations and off-shelf presentations. Near the pharmacy (and diabetes-care products) is a natural, but retailers should also consider sugar-free candy displays in cosmetics, the cereal aisle, weight loss, oral care and at the checkout.
• Join sugar-free hands. Drug stores have a special opportunity to promote the category, especially in conjunction with health and wellness platforms and programs, which many of them are already initiating.