For a dieter beginning a low-carbohydrate regimen, informed food choices are a must. The same can be said of a candy category manager confronted with the ballooning assortment of no-carb, low-carb and sugar-free products.

Which are the best products to carry? Where should they be located within the store? What is the most effective way to merchandise these products? How can they be worked into the plan-o-gram? Why haven’t low-carb labeling regulations been established yet?

The deluge of products formulated with reduced sugar and carbohydrate content has been documented by ProductScan Online, a new product database maintained by Naples, N.Y.-based Marketing Intelligence Service. In 2003, 352 no-sugar/low-sugar candies and 105 no-carb/low-carb candies made their debut, according to ProductScan. And the pace of product rollouts is even faster this year. (See the preceding story, “The Candy Community Has a Health Fit,” for more details.)

“We’ve always had the challenge of how do we handle the steady stream of new products,” says Brian Harris, founder and co-chairman of The Partnering Group, Playa del Rey, Calif., and a 25-year veteran of category management consulting. “But I honestly can’t remember another time when we’ve had so much activity in so many categories in such a short time,” he continues, describing the current low-carb boom.

Faced with such an explosive burst of new product activity, retailers need to think strategically, counsels Amira Rashad, vice president and leader of the food and beverage practice at The Valen Group, a Cincinnati-based health and wellness strategy consulting company. The first step is to understand how low-carb fits within the framework of a chain’s overall positioning. Rashad notes, for example, that Boulder, Colo.-based Wild Oats Markets, a natural/organic products retailer, carries only low-carb products with all-natural formulations.

A retailer needs to “research the needs of its client base in terms of low-carb,” Rashad continues. She suggests that category managers consider whether the chain’s stores will be a primary or a secondary purchase destination for low-carb products, and what factors will be motivating the purchases — weight loss, medical conditions or other factors. Arriving at the answers to these questions will help a retailer create its own niche and differentiate itself from the competition.

One of the nitty-gritty issues for any retailer that has embraced the low-carb category is where to house it in the store.

“Retailers are all over the board in terms of how and where they’re merchandising it — whether in the natural or organic section, health and beauty care or in the mainstream grocery aisle,” says Jon Hauptman, a vice president at Willard Bishop Consulting, a Barrington, Ill.-based retail consultancy.

There are two main options: establishing a separate low-carb department for products from across a variety of categories, or integrating low-carb products within the mainline product aisles on a category-by-category basis.

Harris suggests that retailers use a “consumer decision tree” analysis to help make such a decision. “Retailers — with the help of manufacturers — need to be very clear as to where it [the low-carb product] fits into the consumer need structure,” says Harris. “Where does it fit into the consumer decision tree? Is it a new branch on the decision tree? Or is it seen as something farther out?”

He explains that if research indicates that consumers see low-carb candy as part of the candy category, then it should be merchandised within the candy set. In fact, that’s his vote as to where low-carb confectionery items should be stocked.

Rashad, on the other hand, sees some advantages to setting up a stand-alone low-carb section. She points out that serious carb avoiders may never walk down the candy aisle, so they would miss out on carb-reduced candy sold there.

Marketers at Hershey Foods apparently were thinking along those lines early this year when they rolled out the Hershey 1 Gram Sugar Carb bar, for which they sought placement in the nutritional products department rather than the candy aisle.

“I think initially it’s important for retailers to have special separate displays of these items to alert shoppers to their availability,” says Hauptman. “However, over the longer term, it’s important for retailers to integrate [products] into the regular candy set and ideally to highlight them on the shelf adjacent to their regular candy counterparts.”

Joan Steuer, president of Beverly Hills, Calif.-based Chocolate Marketing, votes for the integrated approach as well, noting that it’s easier for consumers to accommodate their sometimes schizophrenic approach to food.

“One day, they indulge in their favorite super-gooey, chewy, caramel-and-nut, chocolate-drenched bar,” says Steuer. “And the next day, guilty but still craving a sweet treat, they come back to buy a low-carb option.”

The world’s largest retailer also favors the mainstreaming option. Wal-Mart, Bentonville, Ark., marked “resolution season” in January by creating dedicated displays of low-carb products, but the displays were used only during that month.

“We are always continuing to listen to our customers, and we found that for the majority of them, the most convenient location for our low-carb items was with the grocery items on their shopping lists,” says spokeswoman Karen Burk. “So Wal-Mart customers now find their favorite low-carb foods throughout the store as they always have,” she says.

“With a category like confection, which is predominantly an impulse purchase,” says The Valen Group’s Rashad, “the strategy boils down to being in as many places as you possibly can be!”

There’s another opportunity and perhaps even a responsibility that the proliferation of low-carb and sugar-free products affords retailers: the chance to serve as a voice of authority for consumers who are perplexed not only by the volume of product choices being offered, but also by the often-confusing ways in which the products are labeled. The U.S. Food and Drug Administration (FDA) has not yet established standards for labeling a product “low-carb,” and the terminology used to express carb content varies widely from one vendor to another. (Think sugar carbs, net carbs, impact carbs and net effective carbs — all terms that currently appear on confectionery product labels.)

“It’s still very much the Wild West out there in terms of what you’re really getting,” says Rashad. “The reality is that some low-carb products are not good for you,” she points out. “They pile up the fat content, thinking that only carbs matter and not looking at the overall picture.”

Product line manager Marie Read, of the suburban Philadelphia-based chain of Wawa Food Markets, is one candy category manager who takes the gatekeeper role seriously.
She is currently stocking only one low-carb candy SKU, and she uses point-of-sale “shelf talkers” to identify sugar-free items but not low-carb products, because the latter category has not been defined by the FDA.

“I’m not going to say whether it’s low-carb, when I don’t know for a fact whether it is or not,” says Read.

The wide array of ingredients used to concoct sugar-free and low-carb products is another source of confusion for consumers. In fact, some people are wary of these products because of the notorious “laxative effect” linked to several sugar replacers.
The last thing a shopper wants is to purchase a “sugar-free surprise,” says Derek Schmitt, candy category manager for Dallas-based 7-Eleven Inc.
“If we can’t eat a reasonable quantity of a product without it having the digestive effect, we’re not going to put it in,” says Wawa’s Read.

Besides shielding consumers from less-than-optimal product offerings, retailers can take it a step further and strengthen their competitive stance by positioning themselves as authoritative resources on healthful food choices.
The potential to serve as a valued resource is particularly great in the food category because consumers have such strong emotional connections to what they eat.

Shoppers are looking for “more than just a satisfying experience” with the products they purchase, says Rashad. “Their health is at stake. They are looking for information, and they are looking for a neutral source.”
That role naturally belongs to the retailer, she observes, because it’s not possible for a manufacturer to be unbiased about its own brand. Hauptman concurs. “Shoppers are looking to the store to help them figure out what they ought to be buying,” he says.

Is the current popularity of the low-carb lifestyle a major trend that will forever change the way Americans eat, or is it merely the latest diet craze? There’s little consensus on the matter. But the question is almost moot, some experts maintain, because even if Americans’ carb obsession goes the way of the low-fat fixation of the 1990s, retailers will need to offer a broader array of alternatives to full-sugar, mainstream confectionery brands in the years ahead.

“Health and wellness is not going to go away,” says Rashad. “Consider the skyrocketing rate at which the incidence of diabetes has been growing. That gives low-carb staying power and makes it less of a fad. And low-carb or no low-carb, the matter of addressing the obesity epidemic is not going to go away soon.”

“If you treat it just as a low-carb opportunity, it probably will come and go,” Harris reflects. “But there is an opportunity [for retailers] to get broader traction and leverage low-carb by educating consumers about healthy eating.”

And despite the relatively recent rise of retail chains dedicated specifically to selling low-carb products, the real opportunities await retailers in the traditional, “non-alternative” classes of trade, says Rashad.

“As the low-carb lifestyle has become more mainstream, consumers have been migrating to the mainstream, more convenient channels of distribution,” she says.
According to Rashad, Valen Group tracking shows that “the smaller niche players have started seeing major declines since January. The shakeout has started, so there are opportunities there for the larger players in the mainstream channels. Traffic economics are on the side of the larger players.”

Now all that’s required is for those players to make some smart choices — and to move relatively quickly.