Candy in SA: Treats in trouble?

It would be expected that sweets – with their very low price points – to have weathered the recession storm well. However, consumers seem to be cutting back on these little luxuries in favour of saving up for more expensive treats like speciality chocolate, writes Laura Durham of Supermarket & Retailer magazine in a detailed review of this sector.

Recession resilient?

To cope with the rising costs of living, consumers have had to cut down on luxuries, right? However, nothing beats the blues like a takeaway treat or after-work drink so it is, in fact, the little luxuries – like sweets – that have been pushed out the shopping trolley.

“Sweets is such a large and well-developed category but in fact we are seeing it slowly decline as South African consumers are able to afford more expensive snacks and treats, such as chocolate,” comments Meredith Kelly, head of candy at Kraft Foods.

The sweets category has not been resilient in the recession. In fact, the market has actually contracted from a volume perspective. According to Nielsen, the category as a whole (including sweets, chocolate, moulded slabs and assortments) has declined 6.7% year-on-year. Up to February 2012, the value of the category has also decreased, albeit at a slower rate due to increasing prices (-2.2%).

Many sub-categories of sugar-based confectionery saw their largest ever price increases in 2011, according to a BMI report on sugar-based confectionery.

People therefore seem to be eating fewer sweets than before or are moving out of the sweets category altogether. Companies that have traditionally targeted the mass market with their sweet brands have certainly noticed the lower demand as this consumer segment has been worst hit by the recession in South Africa.

“We’ve seen consumers decrease how much they spend on sweets,” says Kelly. “So for lower LSM consumers that means purchasing fewer single sweets in a purchasing occasion and for higher LSM consumers, we’ve seen them buying fewer bags from supermarkets, as well as buying items that offer greater value.”

Interestingly, super premium chocolate, such as Lindt, is showing growth despite the general market decline of the last two years.

Generally, it seems that slightly premium categories – like alcohol, cigarettes and quick service restaurants (QSR) – are doing well because consumers are choosing to save a little each day (which might have previously been spent on a bag of sweets) and buy something a bit more substantial on the weekend. Also, consumers seem to be cutting back on ‘unnecessary’ treats like sweets faster than they are foregoing, say, biscuits which have a tummy-filler aspect.

Loads on lollipops

Despite the general sweet category declining, some sub-categories have seen impressive growth in 2011. “Probably the most notable was the healthy increase of 14.4% for lollipops,” comments Jan Wegelin, head of research at BMI.

Llewellyn Ramsagar, marketing manager at Aldor Africa, says that innovation is the key driver in this category. “All the key players are very active in innovating their brands – from flavour, product concepts, pack size to packaging design.”

According to BMI, the majority of the drive in this category is price and sizing with certain players, primarily in lollipops, having brought in a larger pack size into the mix. “It is hoped that this will bring back nostalgic views of the product, and may help in outweighing the competition,” comments Wegelin.
“Lollipops is probably the most hotly contested category in confectionery, especially in the bottom end,” says Ramsagar. Lower end consumers are choosing to buy lollipops for a number of reasons besides them being a tasty energy boost at a relatively affordable price.

Firstly, it is a bigger treat, with a 2-in-1 bonus as the centre is usually a chewy or bubblegum. Secondly, the sweet satisfaction lasts much longer – between 20 and 40 minutes – as opposed to the five minute enjoyment of a 30c sweet. Thirdly, and very interestingly, it is perceived to be an aspirational product.

“Lower end consumers are very brand conscious and even though they often can’t afford to wear the brands, they will buy one of the popular lollipops to visually express their individuality,” says Ramsagar…..

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