Putting Packaging First

Candy, gum and mint dollar sales at convenience stores hit $6.71 billion for the 52 weeks ending July 30, 2022, up 11.4%.

Beacon & Bridge also is relying heavily on multiple promotions and new items.

“The one thing the supply chain issue has done for us is it frees up space in our in-line candy section when those new innovations come out, so that we can roll it right into our in-line, and I can carry them as everyday items,” said Patterson.

He added that doing that had been challenging in the past because that space was already allocated.

“Our strategy continues to be just to focus our energy on what the customer wants,” he added. “The customer wants value out of the candy segment, and then for us to bring in new innovation when we see it.”

At the end of the day, the heart of candy sales remains impulse buys, noted Bortner.

“Through great innovation from our suppliers and disruptive merchandising through queues, endcaps and displays, we’re able to maximize that impulse throughout the store,” he said. “We’ve had success introducing new points of disruption in 2022 that only help drive units and dollars through the store.”

SWEET OPPORTUNITY

With the holiday season approaching, a secondary supplier is providing a lot of specialty candy for Beacon & Bridge.

“There’s more premium candy as opposed to traditional candy bars, such as bags of premium salted caramels,” said Patterson. “It’s something the customer really likes to see during the holidays. They use them as gift-giving options.” In the past, “candy has always been one of those areas where we generally set it and forget it,” he noted. “You can’t do that anymore. The customer expects more out of convenience stores.” CSD

fast facts:

• Candy sales are up across subcategories, and retailers are seeing the rebound at store level.

• As supply issues and out-of-stocks continue to disrupt candy sales, suppliers are focusing on core sellers in their brand portfolios.

Rebirth of CBD in the Convenience Channel

Consumer acceptance of CBD remains strong, but to grow in-store sales, c-stores need to highlight the category.

Don Burke • MSA

In-store cannabidiol (CBD) sales have been trending downward as more shoppers buy online, but c-stores have an opportunity to grow the category by elevating their CBD selections, especially as customers return to pre-pandemic CBD preferences.

During the pandemic, cannabis growth was strong due to many consumers fi nding themselves at home and not restricted in their use of the product. This freedom of usage, as well as the pressures and stress of the pandemic, likely encouraged more consumers to become users of cannabis.

In studies researched by Management Science Associates (MSA), it has been observed that a greater acceptance of cannabis leads to a greater acceptance of other cannabinoids, such as CBD. Unfortunately, due to less in-store visits during the pandemic, many consumers turned to purchasing items such as CBD online and, as of yet, it does not appear that consumer CBD purchase habits have returned to prepandemic in-store levels, despite the potential for greater demand.

PURCHASE TRAJECTORY

As shown in the graph of CBD dollar shipments to retail below (“CBD Dollar YOY Trends”), at the start of the COVID-19 pandemic in March 2020, consumers increased their in-store purchases of CBD for wellness and stress relief. However, as the pandemic continued throughout 2020, and consumers became more wary of shopping in-store, volumes dropped throughout the rest of the year.

In 2021, in-store purchases of CBD remained below the 2020 levels as more CBD purchases continued online. CBD shipments to retail did not increase until late in 2021, when a few major retailers added several new lines of CBD.

This encouraging shipment volume increase at the end of 2021, which continued into early 2022, was viewed as a possible sign that consumers may be returning to in-store purchases of CBD. Unfortunately, this does not appear to be the case.

As seen in the graph, CBD dollar shipments continue to fall below 2021 levels in the most recent months, signaling consumers may need more time to change their purchase patterns to in-store purchases, or will need more encouragement from convenience retailers to revert to their prepandemic purchase habits.

CONSUMER ACCEPTANCE GROWS

This is likely discouraging news for CBD retailers, but there are positive indications that among certain product forms consumer acceptance levels are strong, despite the overall CBD category decline.

As shown in the graph on p. 72 (“Top CBD Product Forms”) that compares dollar category share levels by product form for the last three years, vape and topicals are exhibiting strong consumer interest.

The CBD vape category is interesting as it was signifi cantly impacted following the illegal tetrahydrocannabinol (THC) vaping crisis that occurred at the end of 2019. This crisis caused sales of CBD

CBD Dollar YOY Trends (Graph 1)

© 2022 Management Science Associates, Inc. All rights reserved. Source: Wholesale Shipment to Retail data through 7/2/2022 1

Top CBD Product Forms (Graph 2)

© 2022 Management Science Associates, Inc. All rights reserved. Source: Wholesale Shipment to Retail data through 7/2/2022 2

vape to drop to almost nothing in 2020, but as consumer awareness grew that it was illegal products that caused the crisis, and as more time passed, CBD vape volumes improved considerably in 2021.

Most notably, the CBD vape product form is one of the few that is continuing to show increased consumer acceptance in 2022, and it is the top-selling item in the CBD category today.

CBD topical products also have an interesting story. This product form benefi ted from the illegal THC vaping crisis of 2019. This crisis not only caused the CBD consumer to severely limit their purchases of CBD vape, but also produced a negative impact on the purchase of all CBD items that are consumed internally. This consumer caution encouraged the CBD purchaser to buy topicals, which were viewed as less risky as the product is only applied externally.

While this consumer caution abated in 2021 and the CBD consumer began to purchase more products consumed internally, the topical product form is again showing strength in 2022 and is second in dollar share of the CBD category.

Interestingly, it appears the CBD category in the convenience channel is undergoing a rebirth following the pandemic.

When CBD items were introduced in the convenience store channel, vape items initially gained the most consumer acceptance and were one of the strongest selling product forms, followed by topicals.

As is happening today, where vape is once again the leading CBD product form, we seem to be repeating the initial development phase of this category.

For retailers to regain in-store purchases of CBD in the convenience store channel, they will likely need to apply the same attention to product placement, signage and promotion that initially built their CBD business prior to the pandemic.

Don Burke is the senior vice president of Management Science Associates (MSA), a data management and analytics fi rm. Burke has 20-plus years of CPG experience working across the cannabis, tobacco, grocery, confectionary and beverage categories. He can be reached at DBurke@msa.com.