Business Monday

Maximizing Revenues: Candy companies use smart tricks to sell their treats

Adam Snitzer
Adam Snitzer

I live in the Lakeview neighborhood of Miami Beach, where Halloween candy is serious business. This year, like every year, hundreds and hundreds of trick-or-treaters streamed into our otherwise quiet residential streets.

As usual, we welcomed them with Halloween decorations rivaling those at Christmas and volumes of candy that surely registered on financial statements at Hershey’s, Mars and Nestlé.

I’m not kidding.

The more enthusiastic among us typically lay in $300, $400, even $500 worth of candy. This year, Halloween fell on a Saturday night and daylight saving time kicked in the next morning. So common wisdom among the most faithful was that they should spend an extra $100, just in case.

Perhaps that’s a little excessive. But across the country, annual Halloween sales top $8 billion, of which $5.5 billion is for costumes and decorations and a sweet $2.5 billion is for candy.

That’s a lot of sugar. And with so much of their annual sales on the line, the candy company marketing departments roll out some pretty smart pricing strategies. Their goal is to keep all their assembly lines running and also appeal to the needs of different customer segments.

At my local grocery store, it was hard to find large bags dedicated exclusively to one of the big-four candies: M&Ms, Reese’s Peanut Butter Cups, Hershey’s Bars or Snickers. Believe it or not, around Halloween, there’s not enough production capacity to meet all of the demand for these “top-shelf” candies. Dedicated bags of these perennial favorites were smaller and prices were higher. In other words, fine for private parties, but useless for the onslaughts that besiege the Lakeview neighborhood.

If you wanted the big bags — with a hundred or more pieces — you had to buy a “variety fun pack.” To level demand across their production assembly lines, Hershey’s bundled Hershey’s Bars and Reese’s with Kit Kats and Whoppers. Mars combined Snickers and M&Ms with Milky Way, 3 Musketeers and Twix. Nestlé combined Nestlé Crunch, Butterfinger and Baby Ruth.

I searched high and low for a dedicated bag of Peanut M&M’s. But all I could find was the loose, individual candies — again, fine for a private party, but inappropriate for handing out to other people’s children. In the end, I settled for a mixed bag of Peanut M&Ms (which I love,) milk chocolate M&Ms (which are OK,) and peanut butter M&Ms (which, to my way of thinking, have no purpose in a world with Reese’s Peanut Butter Cups.)

The candy companies’ bundling strategy is twofold. First, it enables them to steer production of their best-selling candies to the most profitable packaging configurations. Second, the value pricing of the variety packs spurs demand for their lesser brands and keeps those assembling lines running as well.

I ended up with Whoppers and Twix that I would never have purchased in stand-alone bags. But I was happy to stretch my Halloween candy dollars. And, in any case, only a few of my favorites will find their way into my own private stash for personal consumption.

I’m a sucker for my favorites, but some neighbors take a more industrial approach. They’re interested in volume. Rather than carefully doling out one or two pieces of the good stuff, they prefer to to pass out handful after handful from the bulk candy spectrum: Smarties, Tootsie Pops, Bubble Gum, candy straws and Tootsie Rolls.

One neighbor drives north to a discount store, and for the same $400 to $500, comes back with close to a cubic yard of sweets. He never has to utter the dreaded phrase, “Sorry kids, we’ve run out of candy.”

Adam Snitzer is a revenue strategy expert and president of Peak Revenue Performance, a consulting firm that specializes in designing and executing innovative pricing strategies. He can be reached at adam@peakrevenueperformance.com, or via the company’s website at PeakRevenuePerformance.com.

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