Holiday Programs and Seasonal Strategies

Coyle_Seasonal Strategies 2014 

Executing successful seasonal programs is a cornerstone to building category sales, since seasonal business is crucial for both retailers and manufacturers. Overall, the NCA estimates seasonal items account for a staggering 50 percent of sales within a specific holiday period.

Illustrating the importance of holiday sales, last year they contributed $7.18 billion to the overall confectionery category, according to Information Resources, Inc., an increase of 3.2 percent, and representing more than 20 percent of the $33.6 billion confectionery market.

In 2013, Halloween was the frontrunner in seasonal confection sales with a 3.8 percent increase to $2.5 billion. Valentine’s Day had the next highest growth level of two percent and registered just more than $1 billion in sales. Easter brought in $2.2 billion with nearly one percent growth, meanwhile the winter holidays recorded a 0.6 percent uptick with $1.5 billion in sales. These data sets are defined by items unique to a manufacturer’s base product line and produced particularly for the season.

Period sales, by contrast is revenue generated in the six to eight weeks prior to the season. Certain indicators such as seasonal items, merchandising, price point, promotion and trade efficiency have a significant impact on sell-through and seasonal performance. Likewise, there are several factors that spur consumer traffic and influence purchasing decisions; a large contributor is the total possible shopping days in the period.

1. Celebrate Early and Stock the Shelves

The seasonal market is driven by the shopper experience and providing in-store occasions where consumers are incentivized to buy.  To boost traffic and attract customers, retailers rely on promotions and displays to engage the shopper and welcome the customer to the season.   As retailers fight tooth and nail for wallet-share, stocking the shelves and providing an emotionally rewarding experience is crucial. The world’s largest card issuer, American Express, published an article on its Open Forum advising retailers how to contend with competition and differentiate themselves in high-traffic seasons in a particularly competitive retail market. The September 2013 article encourages retailers to start celebrating the season early because sales prove that if product is available, consumers will buy. The report further corroborates the importance of providing the customer with reasons to return to the store like promotions and positive shopping experience.

While three out of four holidays are locked to a particular date, Easter varies each year, which can significantly lengthen or abbreviate possible shopping days, ultimately impacting sales performance. Furthermore, research shows the day the holiday falls on can impact sell through. For instance, historically when Halloween lands on a weekend, sales have outperformed years when it lands on a week day. This is attributed to the fact that consumers have the opportunity to make last minute trips on the weekend. Similar findings hold true for Valentine’s Day.

For retailers, managing inventory and the potential for insufficient supply is a delicate balance and requires a culture of flexibility and prudence from manufacturers and third party suppliers. To encourage a profitable sell-through and attract consumer traffic, merchandising and managing on-shelf availability are crucial elements for a healthy earning season.

Foremost, having the ability to modify orders to meet demand variability is critical, particularly during holiday surges. Without sufficient inventory for shelf replenishment, merchandising and displays fall to the wayside and consumers are left with fewer options, yielding lower sales. While there’s no formula for demand variation, retailers, manufacturers and suppliers must remain nimble and flexible with scheduling accommodations, product planning, and logistics to ensure on-shelf availability for consumers.

To alleviate the panic of last minute orders and fulfilling unplanned requests, food manufacturers and suppliers needed to find a way to produce locally and eliminate the six week – at a minimum - timetable it takes to manufacture overseas. This has resulted in a recent influx of U.S. manufacturing programs creating a more efficient road to market and a more competitive value stream for retailers and manufacturers.

2. Make It Closer to Home: Reshoring Programs

In order to satisfy the oscillating nature of the seasons, flexibility and geography have become significant strategic advantages for food manufacturers and suppliers. Overseas production, however, is burdened with 30-day minimum transportation cycles, which make it nearly impossible to modify orders and lengthen the time to market substantially. Consequently, the retailers are left with warehouses full of unsold products, or worse, insufficient inventory and missed sales opportunity.

As a result of expensive transportation cost, recent increase in overseas labor, and the need to fulfill last minute orders, seasonal items, particularly those with a novelty component, are being reshored to the U.S. for production. In 2005, for instance, creative werks developed plastic five-inch eggs designed to meet a $2.99 price point for the Easter aisle.   Using relatively inexpensive molds, creative werks outsourced to China, mitigated financial risk, and to boot, we were able to explore a relatively new product segment. At a cost of six cents each, the eggs represented nearly 25 percent of the total cost of the plastic component.

The sell through was phenomenal and the next year we shipped more eggs. In year three, with significant price pressures, we made the decision to manufacture the eggs in the U.S. and save on transportation costs while reducing the program’s total carbon footprint. In addition, if orders went up or down, we were able to respond to client requirements up to the last minute.

As the Chicago-based Reshoring Initiative attests, companies that have historically produced high volumes overseas are re-examining their supply chain model and insourcing programs stateside. As wages in emerging economies continue to rise, energy grows more costly and freight reduction becomes more important, reintroducing production to the U.S. is becoming a common reality. Even more relevant for the food industry, companies that have joined the Reshoring Initiative caution food makers with the inadequate level of quality standards so rampant overseas, especially in China.

For suppliers like creative werks, while cost is always an influence, it’s less the culprit than factors like speed-to-market and trade efficiency, which have shaken the retail landscape and served as a catalyst to look for solutions closer to home. The seasonal channel, in particular, is especially vulnerable to last minute demand changes and it necessitates the convenience of local production.

In an economic culture where demand variability is the only constant, retailers want the ability to satisfy last minute consumer demand resulting in a shortened planning schedule and just-in-time delivery. With the US economy becoming a more competitive labor market, taking 30 days of transportation out of the equation was a no-brainer when trying to plan for a six-week season.

3. Less Is More: The Evolution of Seasonal Packaging

With the repatriation of more and more seasonal novelty manufacturing, the product cycle and composition has also evolved to a simple, slimmer, more-for-less design. What’s more, eliminating the thousands of miles and time to transport and manage the programs has extended the possibilities for retailers and manufacturers. Now, manufacturers can develop proprietary, retail-specific items to attract a distinct store demographic and provide unique offerings for consumers.

In 2010, creative werks responded to a client request to a Halloween offering exclusively for Target. Specifically, Target wanted a novelty item at a $1 price point to diversify its seasonal offerings. To satisfy this request, a pumpkin topper was developed, manufactured and packed at creative werks’ U.S. headquarters. The program’s successful sell-through was repeated for three more seasons and was sold exclusively at Target stores nationwide.

This is an example of an item that would have traditionally been manufactured offshore but we challenged ourselves to offer a “100% made in the U.S. novelty item.” It took design and manufacturing ingenuity to create a product with shelf appeal to compete with highly decorated offshore items.

“By taking overseas production out of the equation,” explains Mark Miller creative werks’ Design Director, “we have to think differently in how we design a product. We cannot rely on colors to bring out expression on an Easter bunny. Instead, we have to use embossing and shaping to compensate for the colors and still create outstanding shelf presence.”

For a number of years novelty packaging production was greatly reduced because it was by and large manufactured overseas. It was too expensive, the lead time too long, and the inflexibility of production was too risky. However, with the onset of U.S. novelty production, more and more companies are participating in this segment and while the appearance of the product has changed, the value perception of the product has sustained.

4. Appropriate Items for Seasonal: Be Counterintuitive

While confections dominate the seasonal marketplace, the types of products that consumers have to choose are becoming more diverse. Many more confection brands and other food items are jumping on the seasonal bandwagon. And they’re doing it successfully. Across seasons, consumers are buying a broader mix of products and more than ever the market is responding to health-conscious consumers. Even despite the celebratory tradition of seasonal candy, consumers value portion-controlled serving size and front of pack calorie count — a trend now inherent in the everyday confection aisle. To find appropriate items for seasonal, we look at rituals, trends in every day confection items, price points, gaps and opportunities.

Rituals, in particular, inform our decisions and drive our design process. Understanding how consumers celebrate the season is important, and furthermore, finding packaging solutions that fit with these occasions is critical. With rituals in mind, it’s also important to study the everyday marketplace trends and keep current with the packaging fashion that’s performing well in the everyday confection aisle. For example, stand up pouches and tins are two packaging formats that have performed well across brands and in the non-seasonal segment. To be sure, novelty items are a strong category contender in seasonal - and there’s tremendous potential for growth - however, it’s also important to offer simple, familiar packaging, with little to no financial investment.

In addition to finding packaging formats that are in keeping with trends and rituals, maintaining an open mind to products and brands is essential when considering the seasonal category. A decade ago, savory snacks were nowhere to be found in the Halloween aisle. In 2013, snack items were a significant player in the Halloween mix as manufacturers realized that just as candy can be seasonalized, so can snacks. Likewise, baking has also penetrated the seasonal aisle with tremendous success and now cross-brand partnerships are opening doors for confection companies and baking to collaborate.

With the introduction of non-traditional SKUs – like portion-controlled confections and snack packs - into the seasonal aisle, there is the potential for a new season entirely: Summer.   After Easter, there are a number of holidays – Mother’s Day, Memorial Day, 4th of July, Labor Day and the high-volume traffic of back-to-school. In 2014, there’s 27 weeks, over half a year, of incremental sales opportunity. How do we work with our clients and the retailer to tap into that opportunity?

The idea, as aforementioned, is to target the rituals and traditions that consumers celebrate across summer, and the holidays therein. Hand-to-mouth and on-the-go eating solutions are key for the busy, on-the-run consumer and fit well with the months between Easter and the start of Halloween. Imagine the incremental revenue that could be generated with an additional Summer aisle, a season that’s opulent with traditions and occasions surrounded by food, snacking and desserts.