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Checkout bans could kick confectionery while it's down: Euromonitor

By Annie-Rose Harrison-Dunn+

02-Jun-2014
Last updated on 02-Jun-2014 at 15:43 GMT

“If alarm bells were ringing after the Lidl move in January, they’ll be deafening now,” says Euromonitor analyst.
“If alarm bells were ringing after the Lidl move in January, they’ll be deafening now,” says Euromonitor analyst.

The recent flurry of retail checkout confectionery bans, joined last month by retail giant Tesco, could hurt impulse-driven sales, but present high margin opportunities to supermarkets, according to Euromonitor analysts.

Two weeks ago Tesco became the first UK grocery retailer to commit to a blanket ban of confectionery at checkouts across all its store formats. Its move followed the likes of Lidl, which announced a similar pilot in selected store earlier this year. 

Euromonitor food research analyst Lauren Bandy told ConfectioneryNews the move was likely to put pressure on other retailers to follow suit, in which case this could add a sizable challenge to a growing list of confectionery predicaments including reformulation and plateauing volume sales.

Discussing the decision with Bandy, Euromonitor research analyst Jack Skelly said: “If alarm bells were ringing after the Lidl move in January, they’ll be deafening now.”

Bandy said if other retailers jumped on the bandwagon manufacturers were likely to see impulse buying – which represents a key driver for the segment – hurt. According to Euromonitor data, 'countline' smaller format confectionery products are expected to plateau at just 1% growth in the UK over the next five years. 

Conversely she said this could present a high-unit price and high-margin opportunity for supermarkets if they were to replace confectionery with own-brand health foods like nuts.

An inconvenient loss

In a podcast  by the research firm, Skelly said convenience stores account for 21% of chocolate/confectionery sales in the UK, and the same amount for sugar confectionery. Within this he said Tesco holds a 20% share of the country’s total convenience store sales. “Therefore the removal of confectionery from Tesco [checkouts] seriously hampers sales for manufacturers depending on where the company decides to move these products within stores,” he said.

Euromonitor countline figures

2008-2013:

UK value: -0.2%

UK volume: -0.3%

Western Europe value: -0.2%

Western Europe volume: 0.3%

 

2013-2018:

UK value: 0.6% 

UK volume: -1.2%

Western Europe value: 0.1%

Western Europe volume: 0.1%

Bandy said it was important to remember that the effect was far from including all retailers and all store formats and said long-term impacts on manufacturers would dependent on this. However she added: “I think we’re going to see announcements from others following suit pretty soon.”  

She said this was likely to come from high-end retailers and said it would also be interesting to see how the situation plays out in other regions, for example Poland where Tesco has a significant presence.

To the aisle?

Bandy said in the event of other supermarkets following suit, confectioners would have to find new ways to stand out in the crowded aisle. “It’s possible we’ll see a battle of the main aisle. We may see a shift towards end-of-aisle promotions,” she said.

Tesco said it would be piloting healthy replacement products at checkouts over the coming year, before the ban is completely enforced at year's end.

Bandy made an example of nuts as a health food with particularly high margins that could present a profitable opportunity for grocers. “It could be great for retailers,” she said. However she added checkouts were traditionally targeted at children, with so-called ‘pester power’ dictating choices. “Do nuts really appeal to kids?”

She said this could be the beginning of a different demographic being targeted at checkouts – with greater focus on health. 

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