
Sugar-Free
With a category as closely allied with consumer lifestyle and demographic trends as this one is, there’s every reason to expect consistent growth.
Overview
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.
Packaging
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.
Adjacencies
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.
Outlook
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.
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.