A Premium Boost

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A Premium Boost

By D. Gail Fleenor

Dark chocolate versions of candy favorites and super-indulgent premium bars are boosting chocolate sales in the U.S. Since convenience stores sell about 40 percent of the unit volume for chocolate candy sold in the U.S. across food, drug, mass and convenience retailers (excluding Wal-Mart), according to Nielsen scan data, satisfying customers' chocolate cravings can be a healthy sales proposition.

While premium chocolates command hefty prices compared to traditional candy bars, what makes a chocolate bar "premium" is that it's made in small batches with single-origin beans and other organic ingredients, according to Chocolatier magazine.

Today's top candy manufacturers are creating premium chocolate items similar to those previously sold only in gourmet stores. In addition to its own line, Cacao Reserve, Hershey has recently bought several premium chocolate companies, including Scharffen Berger, Joseph Schmidt Confections and Dagoba Organic Chocolate.

"Dagoba organic chocolate has really caught on at our store. We have to reorder it more often than others," said Rick Moore, store manager at Tiger Fuel Co.'s Forest Lakes Market in Virginia. "Dagoba comes in interesting flavors like lavender cherry. We do carry the dark chocolate versions of traditional candy bars, but in our gourmet market stores, we carry a wider variety of premium chocolate." Individual Lindt truffles are his most popular premium item. "We sell these at the register. They're just right for the person who skipped dessert."

Sales of premium chocolate increased 129 percent from 2001 to 2006, reaching $2.05 billion or about 13 percent of the total chocolate market, according to Mintel International. Since major candy companies are becoming interested in premium chocolates, the possibility of sales growth in the category is strong.

"Consumers are becoming more aware of the antioxidants that occur naturally in dark chocolate. They are trading up and looking for high quality or premium items. Many times, dark chocolate fills this desire," said Jody Cook, spokeswoman for Hershey.

Most major candy companies recognize that c-stores are a crucial outlet for dark and premium chocolate sales. "Across all channels, including convenience stores, the premium chocolate segment is experiencing double-digit growth -- outpacing the growth of total chocolate," said Margaret Asselin Woods, marketing director of Dove at the Hackettstown, N.J.-based Mars Snackfood USA. "The major trend we're seeing today is consumers' desire for quality instead of quantity of chocolate."

"Our top three dark chocolate candy bars are 3 Musketeers Mint, Milky Way Midnight and Dove Dark," said John Kelly, chief operations officer of the Johnson City, Tenn.-based Roadrunner Markets. Under that banner, Mountain Empire Oil operates 50-plus stores, with more than 40 units in northeast Tennessee and the rest in southwest Virginia and northwest North Carolina. Roadrunner also carries M&Ms Dark and the Hershey Special Dark Chocolate king-size bar.

At Forest Lakes Market, other popular premium bars include Ritter Sport, a German premium chocolate and Santander, a dark chocolate espresso bar from Colombia. The market also sells Ghirardelli brand bars, "but our selection has been trimmed. We used to have different fillings, but now there aren't as many," Moore said. While the store offers bulk candy, the majority of premium chocolate sold at the market is either in bar form or grab and go items like Lindt truffles.

A key component in marketing premium chocolate, Moore said, is to do something to encourage the more timid customer to try new items. "You can't just tuck premium chocolate away in a corner," he said. "It must look good and be in a strong spot." He attracts customers' attention by using an artisan-made metal rack with three 4-foot shelves devoted to premium chocolate, directly across from the registers.

"You can only do so much in the category before you risk losing regular customers," Moore said. "We keep our customer favorites, but also provide new things for them to try. Some suggestions for new items come from associates, but a fair percentage comes from our customers. We take one person's suggestion and hopefully it will tempt another 50 customers."

To Stock or Not to Stock

Before carrying a wide line of premium chocolate with premium prices, c-store category managers must consider who shops their stores. "We don't think we have the customer base right now to sell any premium chocolate other than Dove in our stores," said Scott Wolfe, category manager of Appalachian Oil Co. (APPCO), based in Blountville, Tenn. "Our stores are in rural areas, so we just stock the major brands and don't want to try something that costs more."

However, Dove is APPCO's most popular chocolate bar, Wolfe said. "In merchandising, it's important to get chocolate out where people can find it easily. We had a Dove dark chocolate counter unit at our registers. It was a popular impulse item -- we had to reorder in two weeks."

Dark chocolate is also doing well at VERC Enterprises' 19 c-stores in Massachusetts and New Hampshire. "Milky Way Dark is by far our best seller, followed by Hershey's Special Dark and 3 Musketeers Mint," said Ed Oliveira, category manager at VERC. The Duxbury, Mass.-based chain also carries dark versions of M&Ms and Snickers, and Oliveira is open to adding additional dark chocolate items. "They are forecast to become more popular," he said.

VERC also began recently carrying a small assortment of premium Lindt, Ghirardelli and Dove Chocolate. "We put these in some of our stores during the holidays to try them out," Oliveira said. If these premium chocolate items sell well, he said he might add them to his candy set.

Other operators are not seeing the need to upgrade their chocolate line based on customer needs. At Tiger Fuel Co., the lineup depends on location.

"In our traditional c-stores, we see only about five to 10 import/specialty chocolate items, and they generally are not top sellers for us in those stores," said Paul Sisk, general manager of Tiger Fuel Co., based in Charlottesville, Va. "Milk chocolate and peanut outsell dark chocolate by wide margins in those stores."

However, the company has 11 market locations in and around Charlottesville, including several with an upscale, gourmet format where premium chocolate sales are big, such as the Forest Lakes Market where Moore is the store manager. "Dove Dark actually outsells milk chocolate in our gourmet stores, and M&Ms dark chocolate is now No. 2 in that mix," Sisk said.

What's on the horizon for chocolate lovers? Two new Dove chocolate bars will hit shelves in first quarter of 2008, both designed with health in mind. Dove Beautiful includes ingredients for healthy skin, while Dove Vitalize supports cardiovascular health and lower cholesterol.

Hershey plans to draw on the expertise of Artisan Confections Co., a wholly owned subsidiary of The Hershey Co. that includes Scharffen Berger and Joseph Schmidt truffles, and a partnership with Starbucks.

"We will be launching a new product with Starbucks at the end of February," said Tom Joyce, vice president of customer and industry affairs at Hershey.

While details weren't available at presstime, the two companies announced an alliance in July 2007 to launch a premium chocolate platform.

For comments, contact Gail Fleenor, Contributing Editor, at [email protected].