Shaking It Up In Sugar-Free

By Paul Waldron, Gladson Interactive

Non-chocolate sales are coming on strong.

Retailers who feared that the sugar-free/diet candy category was shrinking away can rest assured that the business is merely shifting, not declining. In fact, non-chocolate sugar-free candy currently is one of the fastest-growing segments of the candy business. This is welcome news since sugar-free has been a segment delivering sweet gross margins and often incremental sales.
Statistics from ACNielsen for the 52-week period ended September 9, 2006 (for food, drug and mass excluding Wal-Mart) show that non-chocolate diet candy sales rose 6.7 percent to $97.2 million. In fact, the non-chocolate portion of sales is catching up to sugar-free chocolate, which is valued at $122.7 million and exhibited a decline of almost 30 percent for the tracked period.
Sugar-free products, when merchandised properly, provide great opportunities to enhance the bottom line. The research firm Euromonitor predicts sugar-free products will record a strong growth of nearly 5 percent over the next five years. With non-chocolate sugar-free making steady gains, retailers might want to examine diet candy planograms to ensure merchandising reflects consumer demand.
There are many reasons, including the following, that have contributed — and will continue to contribute — to the success of the sugar-free product market.
Health concerns. Diabetes currently affects 7 percent of the U.S. population, and about one-sixth of the population (54 million people) has pre-diabetes. It’s not surprising then that many food and drug retailers are actively engaged in diabetes education.
But consumers’ sugar-free choices are not driven only by diabetes or the fear of it. More Americans are watching their health, especially as they age. Also, there is ongoing interest in reducing the obesity rates of kids in America.
Improved products. Today product formulators have an expanded array of sweetener options, which has contributed to upgraded product taste profiles. Consumers have taste-tested new sugar-free offerings and have come to recognize that being sugar-free and tasting great are not mutually exclusive. Shoppers are more educated about sweeteners, and branded sweeteners can influence purchase decisions.
More products. Now that retailers and manufacturers know sugar-free is not a flash in the pan, there are more items debuting bearing the label. An example of a product with huge initial consumer acceptance in the sugar-free non-chocolate segment is Sugar-Free Twizzlers. The next trend could be healthy additions such as vitamins or antioxidants to diet candy.
House brands. Creative use of sugar-free private labels is turning more shoppers into fans. With value pricing, consumers aren’t afraid to try a product they may not be sure will taste as good as the alternative. Retailers are creating whimsical departments with clever signage and boutique-within-a-store approaches.
Sugar-free gum. There’s no denying sugar-free gum has helped draw attention to non-chocolates. Sugar-free gum sales are rising in double-digit averages from year to year.
Going for younger audience. Low-carb, no-sugar was first positioned to the diet conscious and has been expanded to reach kids and teens. This dovetails with overall efforts to reduce teen obesity as well as working with healthy school food programs.
Seasonal options. Now that manufacturers see diet candy is not a fad, more are creating seasonal options such as sugar-free conversation hearts and limited editions.
Leading Vendors: Sugar-Free Non-Chocolate
Wm. Wrigley Jr. Co.
Private Label
Storck USA
Nestlé USA
The Hershey Company
Perfetti Van Melle
Simply Lite
Brach’s Confections
American Licorice Co.
Best Sweet Inc.
Note: For 52-week period ending Oct. 8, 2006
Source: Information Resources Inc.

Leading Vendors: Sugar-Free Chocolate
Russell Stover Candies Inc.
The Hershey Company
Whitman’s  Chocolates*
Arkins Nutritionals
Nestlé USA
Simply Lite
Private Label
Ross Products
Fifty 50
Masterfoods USA
Note: For 52-week period ending Oct. 8, 2006
* Part of Russell Stover Candies, but broken out by Information Resources Inc.
Source: Information Resources Inc.

Doing the Best by Sugar-Free Sweets
Give it a home. Research from the National Confectioners Association shows that best-practice retailers establish a sugar-free section within the regular candy department, rather than positioning these products 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.
Beyond the fringe. Healthful candy is no longer a fringe category. Thus it just doesn’t make sense to merchandise sugar-free products only near the diabetes-care products, for example. For retailers who haven’t already done it, now is the time to add sugar-free, non-chocolates to the traditional mix as well.
Mix it up. The mix needs to be recalculated to reflect the almost 50/50 nature of the business. Since diet non-chocolate sales growth is faster than many other candy categories, it could be time to add some more inches in the set for such products.
In the aisles. Although diet items need to be in the traditional candy mix, they also lend themselves to secondary locations and off-shelf presentations. The diabetes set is a natural, but retailers might want to consider displays in cosmetics, the cereal aisle, weight loss, oral care and at the checkout. Bagged programs can work very well for the off-shelf presentations.