Food service confectionery sales are worth 15% of the total market, so why does it feel like the major brand owners are overlooking the catering sector? John Porter examines how caterers can sell more confectionery.
Nobody likes to feel taken for granted, and the catering sector could put forward a good argument that its needs are overlooked by the major confectionery brand owners. New product development, on-pack promotions and point-of-sale support tends to be focused on the retail market, with caterers expected to fall in line accordingly.
According to internal research commissioned by Cadbury, food service confectionery sales reached £651m in 2009. With the total UK confectionery market valued at £4.9b by IRI Infoscan, that gives food service a share of the total market approaching 15%. That may be peanuts, chocolate-covered or otherwise, compared with supermarket sales, but it's still business worth competing for.
Even so, the food service confectionery market has declined, with the education sector now expected to be fully compliant with the Government's standards for school food, administered by the Schools Food Trust. These are unequivocal: "Confectionery such as chocolate bars, chocolate-coated or flavoured biscuits, sweets and cereal bars must not be provided as part of school lunches, or at any time of the school day."
Still, there are undoubtedly opportunities to build sales if caterers and brand owners can co-operate.
The food service market is more fragmented than the retail market. Cadbury's research gives it a 22% share of food service confectionery sales, which compares with a market-leading total share of UK sales of 30.9%, according to IRI. In the total UK market, Mars has the second-biggest share and Nestlé the third.
While Cadbury declines to say what its research said about its rivals' market share in food service, citing the need to protect its commercial position, Mars points to Kantar Wordpanel figures, which give it a 38.1% share of the food service confectionery market.
One reason why Cadbury is less dominant in food service is that many customers are clearly tempted by products that complement a hot drink. Mars has the biggest selling confectionery brand in food service with Twix, according to TNS statistics, with Nestlé's KitKat second (see below).
Bep Sandhu, Mars chocolate trade relations manager, says: "Confectionery is the most impulsive category in any outlet and the most important one to the snacking market. With long-term sales growth, the confectionery market is worth more than the crisps and fizzy drinks markets combined."
There are clear peaks for confectionery sales, which for caterers typically focus on the between-meals opportunity. Research into consumers' snacking habits shows peaks between 10.30am and noon and between 3pm and 5pm, with a third peak at around 10.30pm. Mars estimates that 42% of food service customers buy a snack before lunchtime, "but confectionery is consumed at different times throughout the day to fulfil all sorts of different need states, from ‘peckish' to ‘hungry'," says Sandhu.
Stephen Minall, director of consultancy Moving Food, makes the point that some sectors of the industry look down their nose at the sales potential of branded confectionery. "Most small coffee bar chains prefer their own brands, although contract caterers recognise the power of branded confectionery at till level in business and industry sites," he says.
However, he adds, "confectionery is hard to sell into hotels as some chefs and managers see it as eroding their GP, or offering customers an option other than the menu."
THE LITMUS TEST
Very few hotels conduct what Minall calls the litmus test - "check the rubbish bins in the rooms, and see how much branded confectionery their guests are bringing in." Hotels tend to rely on vending machines, "but why they do not see their customers as consumers I will never know - the best they do is the Toblerone in the minibar," he adds.
With pub chains working hard to encourage families, Minall believes that operators in this sector should also look at stocking confectionery more widely. "Pubs all work overtime to get coffee drinkers in, so why not sell branded confectionery too?" he says.
One issue is the GP that profit sector caterers look for would lead to them charge substantially higher prices when applied to chocolate. "There's a need to think more like a retailer and mark up by 25% to 40%, rather than chase a food GP," Minall adds.
Minall's view that pubs can generate extra revenue with confectionery is supported by Mitch Adams, licensee at the Thatcher's Arms in Mount Bures, Essex, who found an unexpected market when the pub started stocking confectionery. "We introduced a range of sweets we thought would be popular with children, such as strawberry milk bottles, Dairy Milk bars and Belgian chocolate drops," explains Adams. The pub has a busy family food trade, especially at weekends, and Adams expected the playground favourites to be bought by parents for their offspring. "However, we quickly realised that far more adults than children were buying them," he says.
The sweets are displayed in jars on the back bar alongside more traditional snacks such as olives and nuts, and served in a bowl to order. "When we saw the adult appeal, we decided to stock some varieties that we thought might have more of an adult appeal, such as toffee bonbons, but they didn't sell nearly as well - it was the children's sweets people liked."
Although the Thatcher's Arms regulars seem happily indulgent, many customers are looking for healthier snacks.
"Healthy eating and healthier alternatives continue to be significant profit opportunities for food service operators," says Nick Stuart, commercial manager of United Biscuits UK.
"Food service operators that don't stock the right mix of healthy products will see their business suffer as customers will go elsewhere to get what they want.
"While historically women have been seen to be the main purchasers of healthier alternatives, we are witnessing strong growth among men, and food service operators should be stocking products that cater for them accordingly."
This opportunity has also been recognised by Cranberry Enterprise, which has adapted the product range from its kiosks at London stations into packaged confectionery for food service, such as yogurt-covered cranberries. It offers grab bags, which range from 125g to 175g depending on the product, designed to appeal to customers who want to have something on their desk to pick at, as well as 40g snack packs, which target impulse customers looking for something to eat with their coffee.
Trevor Stroud, director of sales, says: "If you ask people if they'd like to eat more healthily then of course they say they would, but that's not always what happens in reality. There are some products out there that are too healthy. We're trying to bridge the gap for caterers with what we're calling healthy indulgence.
"For operators there's definitely a need to balance the expectation that there will be healthier options, with the operational need to make a profit from products customers will actually buy."
TOP 10 CONFECTIONERY BRANDS IN FOOD SERVICE 2009
In 2009, UK Fairtrade chocolate sales reached £92m, an increase in value of 140% on the previous year. One big factor in the high rate of growth is the move by major brand owners into the sector.
July 2010 saw the first Fairtrade Cadbury Dairy Milk bars roll off the production line, the first mass market chocolate to gain certification from the Fairtrade Foundation. Cadbury has just announced that Buttons is its next brand to go Fairtrade.
Cadbury's move has tripled volumes of Fairtrade cocoa from Ghana, opening up new opportunities for thousands of growers. The move into the mainstream for Fairtrade was reinforced when Nestlé sold its first certified KitKat four-finger bars in January 2010, benefiting farmers in the Ivory Coast.
Divine, the Fairtrade chocolate company that is 45% owned by the farmers, has experienced double-digit growth and while national account manager David Greenwood-Haigh cites packaged meal deals, till point and vending as offering the biggest opportunities for confectionery sales in food service, he says the company's hospitality neapolitans are widely used by restaurants for bill treats.
The Fairtrade Mark on products that meet international Fairtrade standards is now recognised by 72% of UK consumers, and 70% of households now purchase Fairtrade goods.
WHY DO WE SNACK?
The reasons consumers give for buying snacks
To keep me going until the next meal 37%
Meal replacement 10%
Treat or reward 5%
Source: RSGB Omnibus 2009
KNOW YOUR CUSTOMER
KitKat owner Nestlé has defined "need states" to develop its product and differentiate the types of customers. By applying these to the food service sector, caterers can ensure they stock ranges that will appeal to their customers.
Snack: A portionable, lighter bite consumed between meals, often matched with a hot drink as an elevenses treat or as part of afternoon tea
Suitable for: Coffee bars and B&I sites
Hunger & energy: A heavier eat that is filling and high in energy, aimed at consumers who have taken part in intensive physical activity
Suitable for: Sports clubs and leisure centres
Pleasure: A more indulgent eat perceived to be a little bit naughty, an occasional rather than an everyday treat and often portionable to last longer or be shared
Suitable for: Anywhere groups meet to relax, such as shopping centres, wine bars and social clubs
Passing the time: Sugar-based confectionery usually delivered in bite-size pieces to provide an energy hit and serve as an alternative to chocolate confectionery. Often lighter and consumed over time or shared
Suitable for: Travel sites where customers are likely to be waiting around, or B&I caterers for people to eat at their desks
Play: Usually chocolate, bite-size products
Suitable for: Leisure, travel and holiday sites
Fix it: Products that serve a purpose such as mints (to freshen breath) or sweet throat soothers
Suitable for: B&I sites where there are plenty of meetings and presentations
Kids: When catering for children, confectionery products should have nutrition, health and wellness credentials, which appeal to parents, as well as a high-impact element of fun for the kids. Products within this sector often have no artificial colours or flavours
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