Speaking at the US National Confectioner’s Association State of the Industry Conference in Miami this week, Fred Morganthall, president and COO of Harris Teeter Supermarkets, said consumers were increasingly reliant on online shopping, which only represents 2.3% of Harris Teeter’s business in food but is expected to grow significantly by 2016.
According to The Online Grocery Shopper report from the Hartman Group, 18% of US households went online in the past three months to buy food, beverages or groceries.
There are concerns that the rise of online could cause problems for the confectionery industry. “It eliminates impulse purchasing from checkouts,” said Morganthall, adding that on-shelf visibility would disappear and early purchasing of seasonal items could diminish.
He said the benefit of online was that you can find out who buys certain types of candy and direct offers to them in online shopping platforms. You may even be able to encourage them to trade up, he said.
Harris Teeter uses an ‘e-vic’ system to send email offers to customers. Using platforms such as these to send electronic communications such as telling shoppers seasonal items are now in-store, could encourage sales in-store and online, said Morganthall.
Improve in-store experience
When people actually go to stores, there is now a greater incentive to blow them away. “We need to improve the in–store shopping experience,” said Morganthall.
He said seasonal displays should be “show stoppers”. “Seasonal candy needs to upgrade. It can get pretty boring in a grocery store,” he said.
Supermarkets need the help of the confectionery industry on best merchandizing practices around key seasonal periods, he continued.
Value and quality
The supermarket chief said that the recession in 2008 had helped to build a value-orientated retail sector as customers sought more products on deal.
He said that supermarkets were seeing a recovery from high income families, but it was taking longer for those with lower incomes to revive spending to pre-recession levels.
“We are in an hourglass economy,” he said. The middle is shrinking and “we all play too hard in the middle,” which is why grocery growth is flat, he continued.
According to Morganthall, two supermarket formats are winning: Value and quality, and there are opportunities in both.
He said that dark chocolate was performing well as people became more health-driven, while flavors such as raspberry, blueberry and pomegranate were also proving successful.
Higher margins for confectionery
Supermarkets want to sell more confectionery as the margins are better, he said.
At Harris Teeter, candy sales rank tenth of all items in stores, but they have the third best gross margins.
He said that retail gross margins for candy (41.21%) were better than the average for grocery (28.73%), meaning supermarkets make large operating profits with confectionery.