Sweet Spot For Retailers?

Originally printed in the July 2018 issue of Produce Business.

Putting coated nuts and fruit in produce has an upside … tempting those who can’t resist treats.

Americans want what they want, even if pursuing it takes them somewhere they didn’t expect.

Dried fruits and nuts are present in nearly all produce departments in North America and Canada. But the product extensions from the basic dried fruit and nut items to confection-coated dried fruits and nuts have been proliferating. More and more of these popular products have yogurt or chocolate coatings, with some even sporting strawberry-flavored coatings.

This counter-intuitive and all-too-human nexus, where healthy eating meets indulgence — especially when it comes to snacking — has fascinated health professionals and sociologists for years.
Sally Lyons Wyatt, executive vice president and practice leader at Information Resources, Inc., told attendees at SNAXPO 2017 that while Americans want health and wellness, they’re not willing to give up indulgent items.

As Bloomberg reported last year, “Americans are obsessed with eating healthy — and with Twinkies. Consumers find eating well and eating sweet snacks compatible.” An example is New Hope, MN-based Waymouth Farms Inc., which markets its Kracker Nuts line, cracker-like snacks made with peanuts coated in a delicate dough.

Luckily, snack makers are coming to the rescue, easing Americans’ consciences by using healthier ingredients, such as superfruits and whole grains.

‘Tie In Well’

Chad Hartman, director of marketing for Tropical Foods in Charlotte, NC, points out the produce section is a highly visible place, and thus great for generating interest and sales. “In addition, these items are related to their uncoated counterparts, and tie in well with the right selection.” On the other hand, he adds, “They give a false sense of ‘healthy snacking’ when they are located in the produce department.”

Produce retailers generally evaluate sales of these types of items similarly to other line items, Hartman says, “or in comparison to the line it is part of.” Typically, he adds, they are merchandised in crates below fruit tables or on a stand-alone rack.

Tropical Foods is a second-generation, family-owned business founded in 1977 by Jerry and Betty York, and is now run by its two daughters, Carolyn Bennett and Angela Bauer, and son-in-law John Bauer. It has sales and distribution offices in Orlando, FL, Atlanta, Memphis, TN, Washington DC, Dallas and Charlotte, NC.

There are a few combinations of confection-coated dried fruit and nuts that do better than others, Hartman has found, such as chocolate-coated nuts (peanuts, almonds, cashews, pecans), followed by chocolate and yogurt raisins. “They sell well; they are a great addition to round out a solid selection of nuts, dried fruit and snack mixes.” Hartman says he thinks that healthy halo still exists, “but it is not true. The healthy nature of nuts and dried fruit definitely goes out the window when you add the chocolate, yogurt or sugar coating.”

He says the packages of sweet-covered nuts and dried fruit have nutritional information and ingredients on the labels, which he sees as “a big piece of education. Also, if the sweet coating does have true nutritional or dietary requirement value, that would be information that is shared with the consumer.”

Hartman recommends retailers merchandise these products in a highly visible spot. “Merchandise them with their uncoated counterpart. Get a strong [temporary price reduction] program to promote them. Use high-quality product; there are inferior products out there.” He adds that he does not see retailers going wrong when it comes to merchandising this class of products. “I think in all produce sections, there are visible and less-visible spots, and merchandising the product to be as visible as possible is always your best bet.”

Visibility And Impulse

“The pros are that the items bring in additional sales revenue to our company,” explains Stephanie Blackwell, president of Aurora Products, LLC in Orange, CT. “As far as the stores, the produce department offers more visibility to the sweets for the impulsive buyer.”

The con, as far as Aurora Products is concerned, is that the market for these items is more seasonal “and we have to watch our inventory carefully in order to not get stuck with items such as chocolate- or yogurt-covered items in the summer.”

Aurora markets a popular line that includes dark chocolate-covered almonds, coffee beans, cranberries, cashews, raisins and more. Other items include organic dark chocolate almonds, cherries, cranberries and banana chips. The company only carries all-natural and/or organic items. According to Blackwell, this pretty much limits Aurora to chocolate- and yogurt-covered nuts, fruits and pretzels.

“It’s better than gummy bears but still candy. Some adults do buy those items … With everyone being health-conscious, it’s a tough sell. ”

— Marc Goldman, Morton Williams

“The pretzels are the best seller, since they are less expensive and less caloric,” she says. “Chocolate sells better than yogurt.” The items are merchandised plainly, on the shelves in produce, and sales are described as “steady but not growing.” Promotions are generally effective in moving more product.

Blackwell is convinced sweet-covered items fall outside of the so-called healthy halo, “or at least that is my opinion. However, I do believe if it is known the chocolate or yogurt is made from all-natural ingredients, the consumer perceives the increase in value.”

The halo around nuts is an especially strong one for retailers to play up in advertisements, merchandising displays and promotions. People who regularly eat nuts have a lower risk of developing cardiovascular disease or coronary heart disease compared to people who never or almost never eat nuts, according to a study published late last year in the Journal of the American College of Cardiology.

Blackwell advises retailers not to mingle these items with fruits and nuts, but rather to have a separate rack or section with which to market them. “Otherwise they get lost, since they have not traditionally been sold in the produce department.”

‘Chocolate Anything’

Keith Tsuchiyama, senior category manager for Lazy Acres Natural Market based in Carson, CA, says this line of products enjoys strong impulse sales, as well as additional sales. “Customers who may not necessarily like raisins may purchase a yogurt-covered option instead.” They also represent a higher ring. “We push them as a healthier option to candy.”

On the flip side, Tsuchiyama sees them “muddled in with the candy, and they may get overlooked or lost. Items take up valuable real estate. Sometimes a chocolate version may be too expensive when compared to the non-chocolate offering, especially in the organic world.”

Executives at Lazy Acres, a sister company of Bristol Farms, have found consumers love “chocolate anything,” in Tsuchiyama’s words, “but I’m trying to push more into a healthier, yogurt-based option. Usually chocolate covered nuts are at the top of my sales reports.”

Flavored product extensions are merchandised in multiple ways in Lazy Acres stores, Tsuchiyama says, including gravity-fed bins, scoop bins and packaged product. “I prefer the packaged product myself; the covering comes off on the bins and makes them look dirty.”

Promotions and demonstrations are helping maintain volume. “Get the product in the mouths of your consumer,” he advises, “and let the product win them over.”

Tsuchiyama says he sees no obstacle when it comes to appealing to health-conscious consumers. “I think it helps the health-conscious to keep a clear conscience, especially if they’re giving these snacks to their kids.”

Great For Kids?

Not everyone agrees.

Marc Goldman, produce director for Morton Williams Supermarkets in New York City, says that “as soon as dried fruit or nuts are coated, they become candy. It’s better than gummy bears but still candy. Some adults do buy those items.” He admits that, “with everyone being health-conscious, it’s a tough sell. If you merchandise it well, you will sell more.”

At the same time, Goldman points out the sweet-coated items “are great for kids. We sell much more of the nuts, mixes and dry fruit, but the sweet-coated items do sell.” Sales volume, of course, varies by store. “The dark chocolate has increased. It’s more healthy.”

Morton Williams’ merchandising strategy aims to get consumers’ attention. “We like to break the color on all the displays,” says Goldman. “For example, a chocolate-covered item would be next to a yogurt-covered item. The color makes the display pop.” Store managers regularly merchandise these items on a lower shelf so they are eye-level for kids, often the true decision-makers, as much as possible. They also group all the candy together.”

Jay Schneider, produce sales manager for Acme Markets in Malvern, PA, says, “We really don’t do much here at Acme with sugar-coated items. What I found in the past is when you have high-sugar-type items, they do not perform well. Health-conscious customers in the produce department are not looking for those items, as they can go into the grocery candy department if they are.”

Sugar-coated candies, Schneider continues, “tend to dampen the produce department with an unhealthy halo effect that belongs in the grocery department.” In his opinion, such products “need to get segregated, and not mixed in with the natural dried fruit and nuts. This way the customer can clearly distinguish it.”