Candy makers brace for bittersweet Halloween
Mondelez faces hit as pandemic forces it to pull back on production this season
Martin Parent was thinking about Halloween last spring. By late April, his team at the Canadian headquarters of Mondelez International Inc. — the candy and cookie conglomerate behind the Cadbury and Maynards brands — had to make a final decision on how many mini chocolate bars and little bags of candy its factories would make for the annual occasion.
At the time, the complex forecast models that food manufacturers and retailers use to predict demand had been thrown completely out of whack by the pandemic and resulting economic lockdowns.
“We didn't know what kind of environment we'd be in, you know, whether we'd be in complete lockdown or not,” the president of Mondelez Canada said.
The Mondelez candy and chocolate factories in Toronto and Hamilton, Ont., were already dealing with more demand, as shoppers snacked at home more, and reduced capacity, due to social distancing rules on the production floors, he said.
To prep for Halloween, the production team needed enough advance warning in order to buy the supplies, all the different little packages for Caramilk, Mr. Big, Wunderbar and Sour Patch Kids, as well as retool the production lines to make bite-sized versions.
At the end of April, Parent said his team decided to pull back on Halloween and only produce the company's bestsellers. He reached out to executives at Canadian grocery companies to suggest they cut their orders.
“We called them to say, `Well, you should reduce it by 20 per cent, 25 per cent,'” he said. “It was a tough decision. Naturally, there's consequences financially.”
Halloween is one of the biggest holidays of the year for Mondelez's candy and chocolate segment, he said. The event is included in the “back-to-school” segment that accounts for 20 per cent of annual sales.
If they guessed wrong and made too much, boxes of Halloween candy would be left in stores in November, forcing retailers to liquidate the products.
In making the decision, Parent said Mondelez used Easter as a guide, when chocolate consumption was apparently strong, though people purchased it differently.
“We didn't expect trick-or-treating to be as big as usual,” he said.
Instead, they expected to see the rise of what he called “self-treating,” with people only buying candy for themselves, their kids, close friends and family. That may be even more popular in cities where governments are advising against a traditional Halloween, such as in COVID-19 hot spots in Ontario and Quebec.
“Your kids, you don't give them a 10-gram fun treat. You give them a full bar,” he said, adding that sales of large chocolate bars are up roughly 10 per cent in the past eight weeks, compared to a year ago. “I'm not saying that it's fully related to (Halloween), but people are buying more treats for themselves in bigger formats, or expect to give (them) at Halloween to their kids or surrounding neighbourhood ... because it's people they know.”
Mondelez Canada also decided to focus on smaller boxes of Halloween treats, guessing that fewer kids would go trick-or-treating. The company said it moved away from 115-piece boxes of assorted Cadbury or Maynards products and is making more 24- and 45-piece boxes.
In all, the company reduced its Halloween-related stock keeping units (SKUS) — an industry term for a specific product in a specific package — by roughly one-third, and pulled back its total production volume of Halloween-specific products by around 20 per cent, the company said in a statement.
That doesn't mean the company made less chocolate and candy, just fewer small bars and bags.
Parent said the company's overall chocolate and candy output in
Canada for the season is “about flat” compared to last year. And by cutting some of the Halloween SKUS, the company was able to deliver to stores earlier for shoppers who wanted to avoid any potential rush or just treat themselves.
The company's sales were actually higher than normal earlier this month.
But the real test is happening now. “Usually, about 70 per cent of Halloween is sold between this week and next week,” Parent said on Thursday. “We're in the middle of it.”
Loblaw Cos. Ltd. — the largest grocery chain in Canada, which also owns Shoppers Drug Mart, Real Canadian Superstore and No Frills — on Thursday said it had expected lower-than-normal candy sales, but has been “pleasantly surprised” by sales so far.
“We expected that there could be a reduced demand for Halloween candy this year, given all the discussions of a second wave of COVID and potential incremental lock downs this fall, and we reduced our stock accordingly,” Loblaw spokesperson Catherine Thomas said in an email.
“More Canadians seem to be buying candy early and enjoying it at home. That said, we expect to have more than enough supply come Halloween, for however people choose to celebrate.”
With Halloween looming, Parent said he was expecting overall candy and chocolate sales to be “a little bit less” than previous years.
“I don't know yet because the season is not finished. We planned to sell less this year, and so we're basically on the forecast we expected to be on,” he said. “But, overall, it was a decision that we made and we're happy with it.”