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Boxed Chocolates Face Challenges

While the link between gifting and boxed chocolates remains strong, many challenges face the sector, which is getting competition in the form of smaller giftable bags that are attracting both consumers and retailers. Senior Staff Writer Adam Burroughs reports

BOXED CHOCOLATES REMAIN a holiday gift staple, though several trends are encroaching on the segment, which sources tell Candy & Snack TODAY remains relatively flat.

Positioned against this segment are giftable standup bags of single-variety chocolates. These follow two trends, according to sources: first, consumers seeking smaller portions; and second, the preference toward single, indulgent varieties especially for affordable self gifting.

While sources indicate boxed chocolates are a volume item during holidays, and they don’t see standup bags stealing thunder there, the smaller formats take up less space on shelves and merchandise better, offering another challenge for players in the segment.

Jeff Asher, vice-president of sales and marketing for Asher’s Chocolates, says on the rise are straight packs, or single-variety offerings, which are being led by salty and sweet items such as caramel, pretzel clusters, chip clusters and other non-traditional cluster pieces.

“For us, we’re definitely seeing a trend away from the assorted, traditional half-pound boxes to more straight pieces,” Asher says, adding he’s also seeing lighter pack weights, usually somewhere in the eight- to 10-ounce range.

The shift, according to Asher, is because of the rise in self consumption of boxed chocolates. He says the company is meeting this demand by packaging traditionally boxed chocolate truffles and clusters in single variety packs that resemble ice cream pint tubs.

Further, he says retailers are requesting more straight packs, a move away from boxed items that can be difficult to merchandise and otherwise take up considerable shelf space.

“When you get into places where every square inch of shelf counts, they don’t want a 10-inch square box taking up space,” Asher asserts.

Recently, assortments in boxed chocolates have moved to one or two flavors such as sea salt caramels and dark chocolates, according to Terry Mitchell, president of Fannie May Confections, which operates retail confection stores and has items available through specialty channels.

In the company’s retail Harry London line, Mitchell says customers are telling the company to develop single-flavor offerings, and Fannie May has added 70 SKUs in response. Items such as chocolate-covered pretzels and sea salt caramels are the focus in single-offering packs that address everyday consumption.

While the trend is to move to more targeted offerings at retail, he says the predominance of holiday sales are in broad assortments for gift giving. “People treat themselves daily and when they do they look for single products,” Mitchell says, but notes that the velocity is in assorted holiday gift offerings.

Mitchell says the box business is important, and consumers often look for those because of CONTINUED FROM PAGE 20

the nice presentation, use as a keepsake and value as a gift, which he says can’t be matched with gusseted bags. It’s the shape of the boxes that are changing, for example in more novel formats, he says, though the basic structure is the same.

Though he acknowledges standup bags are more often competing with boxed chocolates, Mark Eisenacher, marketing manager for DeMet’s Candy Co., says he doesn’t see these as a substitute for traditional gift boxes. “Bags are nice, but they’re more for personal consumption and not something you give as a gift. We think of gifting in seasonal terms, but in general the gift box presentation is much different than tearing open a bag,” Eisenacher says.

Martin Stoewahse, vice-president of marketing for Ferrero USA, Inc., says while format has a strong influence in the consumer decision process when buying chocolate, there are many other factors which in the end will drive their choice. He says brand equity, preferences of the gift recipient and the person making the gift, type of occasion, price point, and value are all factors that influence consumers’ choices. “In order to be successful in the category, a brand needs to be competitive on all of the above and to have a unique, differentiated proposition that will make it stand apart from the other,” Stoewahse says.

Competing On The ‘Wow’ Factor
Looking at the boxed chocolate market, George Puro, author of the Packaged Facts report, Chocolate Candy in the U.S., shared preliminary results with Candy & Snack TODAY ahead of the completion of the research. The survey of 2,000 adults shows nearly 40 percent had purchased boxed chocolates or chocolates packaged suitable for gifting. Around 37 percent of respondents had received such an item as a gift.

Puro says the survey results so far indicate consumers who give boxed or giftable chocolates tend to be frequent gifters.

Approximately half of adults surveyed gifted the item three or more times in a year, and nearly three quarters gave it as a gift two or more times.

Presentation is first and foremost when boxed chocolates are purchased as a gift, Elyissia Wassung, chick-in-charge, 2 Chicks with Chocolate, Inc., says, claiming the product is a reflection of the gift-giver. “People are looking for something unique and different that says ‘Hey, I really thought about you,’” she claims.

Inside the boxes, the chocolate selection and its quality are extremely important. The company operates a retail store where Wassung finds consumers are choosing dark chocolates for a gift box 70 percent of the time and scrutinize their choices in order to offer the most fitting selection.

“The days of pre-made boxed chocolates are phasing out. Now it’s about customization,” Wassung says, adding: “Customization shows you went the extra mile on the gift.”

Mike Cobb, president of Guylian USA Inc., says consumers want something unique and distinctive in the selection, “something that shows a little more care and thought went into the purchase of the chocolates. They are definitely looking for a luxurious and indulgent chocolate escape.”

The elaborate, ornate packaging of Guylian’s boxed chocolates are another key feature, Cobb says, admitting that often purchase is driven more by presentation and less by ingredients and chocolate quality. “In the end it is the chocolate’s performance in satisfying consumers that should be of the utmost importance,” he asserts.

Smaller boxes are becoming more popular, according to Godiva Chocolatier, Inc., and can be used as add-on gifts with another item.

“Consumers are attaching smaller, lower price point items to gifts for a personal touch,” the company says. Also, sharing has become an important aspect of boxed chocolate products and some consumers are buying the items for hostesses to set out at parties. For these sharing occasions, Godiva says individually wrapped pieces can be decorative.

At Godiva’s boutique retail locations consumers can put together their own assortments. There, shoppers can add bows with targeted messages for specific occasions and customize the selection of chocolates.

Norman Love, president and co-owner of Norman Love Confections, Inc., which operates retail confection stores and sells its boxed chocolates through traditional retailers, says offering premium to consumers involves many aspects. “It’s the whole experience,” Love explains, saying the visual presentation of the packaging and the chocolates are equally important. He says in an ultrapremium environment, consumer expectations need to be fulfilled or exceeded.

“Americans love to eat with their eyes,” he says, adding the company focuses on offering easily identifiable tastes that could be considered comfort foods and steers away from more exotic offerings.

Consumers are looking for the “wow factor” when buying boxed chocolates as gifts, Fannie May’s Mitchell confirms. He says beautifully designed, handmade products and packaging send a message to the person receiving the gift that can reflect on the gift giver, as more often the end user is not the consumer making the purchase instore.

While price can be a factor in the purchase decision, Mitchell says it’s brand strength and consumer confidence in the brand’s ability to symbolize quality that can tip the scales.

Christine Thoreson, marketing manager, boxed chocolates and gifting for Lindt & Sprüngli (USA), Inc., says the company’s consumer research shows 80 percent of shoppers decide the type of gift they want to buy before entering a store, but don’t make the final decision until they are in the store. “Because of this, packaging, shelf space positioning, in-store marketing and promotions are important levers to influence customer behavior,” she says.

“Premium boxed chocolate continues to be a key category as consumers seek premium options for gifting occasions and celebrations,” Thoreson says, adding gifting is the most common usage for boxed chocolates.

“Consumers are looking for brands they know and trust, brands that consistently deliver a quality product,” says Mark Sesler, chief marketing officer, Russell Stover Candies, Inc. He adds shoppers want a box of chocolates they can “be proud to give and can have confidence the recipient will appreciate and enjoy.”

Mona Maher, vice-president of marketing for Ghirardelli Chocolate Co., says the top consideration when choosing boxed chocolate is brand. “Because boxed chocolates are primarily purchased as gifts, ‘price’ is not as critical for most consumers, who are generally much more concerned with brand and quality,” she notes.

Trust in a brand is important, according to Jeff Beckman, director of corporate communications for The Hershey Co. Also, boxed chocolates are generally shared, so consumers are looking for assortments inside the product, he notes.

However, with some brands price is a strong determinant as consumers peruse boxed chocolates at retail, as is overall presentation. “Consumers look for packaging that is festive and relevant to the gifting occasion,” Beckman says, giving as an example the company’s Pot of Gold Premium Collection, which is available in heart-shaped boxes that align well with gifting occasions around Valentine’s Day.

Targeting Opportunities At Retail
While Love says the feeling is U.S. consumers are cash-strapped and have pulled back on spending, his business has grown during the past five years with sales this past Valentine’s Day and Christmas the most successful ever, and Internet sales are up 28 percent. “It’s growing uncontrollably. We can’t keep enough packs in the country,” Love say, and attributes this success to strong local and national marketing campaigns.

While marketing campaigns can draw attention to brands outside stores, in-store presentations are key to the segment and cross-merchandising is one option to draw attention.

John Kennington, vice-president of sales for Ferrero USA, says merchandising effectiveness for boxed chocolates is a key driver to its success in the drug and mass retail outlets. Optimizing consumers’ purchase decisions is heavily influenced by retailers’ ability to display or stage items in prime end aisle locations adjacent to high traffic areas of the store, he says. “Both drug and mass retail outlets have been able to leverage their core competencies for merchandising through diversifying range assortments and format expansion, building consumer equity by offering branded product innovation, and building shopper excitement via in-store POS execution.”

Further, Kennington says boxed chocolate sales are traditionally boosted by secondary display placements in prime locations throughout the store and have consistently been fueled through competitive price/value promotional activity. Promotion types vary based on the key category drivers and the degree of quality merchandising; mainly features that stimulate the greatest level of incremental consumer takeaway, he adds.

Specialty stores reach 2 Chicks’ consumers, who are often foodies who appreciate the handmade aspect of the product. Merchandising in these channels varies, but Wassung encourages the development of point-of-purchase displays that can help the brand stand out when in line.

She advises retailers to keep boxed chocolates together so consumers can see the different options and compare based on price and presentation.

Stover’s Sesler agrees: “A dedicated merchandising set is ideal.”

Specialty stores, department stores and Godiva’s retail stores are important channels for its boxed chocolates, the company says, noting: “These are locations where consumers are buying for others and willing to spend at a higher price point for quality items.”

Godiva’s shelving and other visual elements at retail mimic its presentation at its own boutique locations, the company says, in an effort to “recreate the emotional response consumers already have with the brand.”

While flowers and liquor can compete with boxed chocolates as holiday gifts, Eisenacher says these items are often paired together. “It certainly helps that when people think of this other stuff they think of boxed candy as well,” he says.

The variety of options in seasonal aisles isn’t going to squeeze boxed chocolates out, Eisenacher says. Instead, it gives consumers choices within the segment, such as price options to fit any number of occasions, and pairing options outside the segment, he says.

Boxed chocolates can be a fallback for many consumers who might have forgotten a gift for a special occasion and do so at the last minute, according to Asher.

The company offers the traditional boxed chocolate concept to retailers, featuring a two-piece top and bottom, cavity tray and a map in two types: one designed for mass grocery and another, more upscale version he refers to as the Majestic box that’s maroon with a premium assortment inside. However, Asher says the outlets for those products are declining as more traditional mom and pop stores close up shop and department stores shutter, merge or are simply less frequented by consumers.

“The places where those boxes are being sold are disappearing,” he says, adding the consolidation of department stores has often meant sections that had displayed boxed chocolates no longer exist.

“If you get out and see where people are shopping, it’s supermarkets, Bed Bath & Beyond — more non-traditional candy outlets, even office stores,” he points out.

At Bed, Bath & Beyond, Inc., Asher says the company has 15 SKUs, which includes its traditional 15-ounce assortments, though he notes that is a slower seller. Tubs and coffee bags have higher turns, he reveals.

The focus is on making relevant presentations in mass retail stores and boosting business wherever it can be had, Asher says.

Alternately, Mitchell says Fannie May’s business is growing at retail, and at its own retail shops where the focus is on artisan lines which are attracting new consumers.

Looking at FDM channels, Mitchell says the company is continuing to gain space by targeting specific products to specific retailers. “It’s all about how we can become more friendly to what retailers need and how they can be more productive. So we’re flexible when we talk to them about products and packs and can tailor packaging to them.”

Regarding promotions, Mitchell says pricing is key as is knowing when to conduct promotional pricing and when to return to front line prices. While $8.99 to $12.99 is the standard SRP for 10- to 14-ounce packs, the items are taken down to promotional prices for a few weeks during the boxed chocolate selling season, settling at $4.99 to $5.99 during high-velocity periods. He adds this is a well-established method.

Drug and mass are named as the more important channels for Hershey’s boxed chocolate products, and Beckman says the company encourages retailers to merchandise them in dedicated sections and on end caps. Stand-alone displays are also effective vehicles for driving incremental sales, according to Beckman.

To address personal consumption, Beckman says it offers a range of boxed chocolates that give consumers a variety of options, and periodically offers sampler packs with lower SRPs to engage new consumers and encourage trial.

Stoewahse says those who buy for personal consumption are likely to be triggered by personal preferences such as the taste and texture. “When usage is personal, the specific flavor is much more important,” he says. However, when consumers are looking for items they can give as gifts, image, trust in the brand, format and packaging, take on greater significance, he adds.

“We continue to see growth in the overall boxed chocolates segment and our own boxed chocolates,” Maher says. Accounting for this growth is the continued investment in multi-channel advertising and promotions, she says, as well as the company’s commitment to high-quality ingredients and creative pack design.

She also notes offering SKUs for each season that fill multiple gift-giving occasions and price points has helped the company gain distribution with many national retailers.

Facing Tough Competition Godiva says it has experienced growth in the boxed chocolate segment, in part because of the emergence of “casual gifting occasions,” such as teacher appreciation, and family and friend celebrations.

The rise of mass premium chocolate has led to a decline in boxed chocolate sales, according to Cobb, who says traditional retail outlet chocolates can be found across channels, which has made gift boxed chocolates “less special.” The key for products in the segment, he proposes, is “to offer a highly elegant, distinctive, unique product that performs with high quality — something different as opposed to more like all other chocolates.”

“The straightforward box with individual cavities is not a thing of the past, but it’s not as important as it once was,” Asher says.

Also contributing to the shift is the effort to keep costs down at retail. “It’s a lot less expensive to put eight ounces of pretzel nuggets into a tub than to individually fill cavities in an assorted box, even with robotics.”

Boxed chocolate sales through the past several years have experienced flat or moderate growth levels largely affected by stagnant sales in non-seasonal periods, according to Kennington. The key contributing factors have been holiday seasons where consumers are shopping based on satisfying gifting needs.

Noting a resurgence in boxed chocolate sales this past year, Kennington says: “Consumers who buy boxed chocolates for gifting are primarily concerned with product quality, perceived brand image, and innovation in packaging design. These segment influencers contribute to shopper satisfaction and ultimately boxed chocolate segment development and growth.”