Once a dust-covered corner of the store filled with regional players catering to a select few, the diet-candy category has grown roughly 70% over the last year to a healthy $250 million in supermarkets and drugstores alone. But while such sought-after growth has leaders Russell Stover and Hershey Foods pushing forward, others, such as Nestle, are more tentatively eyeing the space for fear the fervor may be short-lived.
Russell Stover eschewed diet candy roughly five years ago due to the difficulty of making a product that tastes good, but re-entered the category in response to a request by a diabetic executive at one of its biggest retail customers. Since then, the number of diabetics in the U.S. has roughly doubled (recent estimates peg the group at more than 18 million). Russell Stover's many sugar-free varieties, together with its low-carb offerings, grew 162% over the last year to $100 million in the food, drug and mass outlets that Information Resources tracks (excluding Wal-Mart).
While Russell Stover president Tom Ward acknowledged that the segment still "doesn't represent an overwhelming amount of our volume," he said, "it's a growth opportunity for us, so we're pursuing it." Russell Stover will expand its entries in the space with a line of nutritionally fortified candy bars for diabetics under the Russell Stover's Diabet-X and Whitman's Sucratrol, both supported with dedicated advertising created in-house this fall.
Hershey, too, is pushing ahead with its lineup of sugar-free Hershey's and Reese's chocolates and reduced-carb versions of some of its top brands, which have collectively grown since launch last year to $30 million.
But a top executive from Nestle-which has put its toe in the water with Sugar Free Turtles, Nips and Nestle Crunch and which plans to launch two more sugar-free versions of existing products-showed less enthusiasm` for the category. "Well over half of the sugar-free success is due to the carb craze and we will see a lot of that volume disappear as dieting trends change," he said.
In fact, sales growth for diet candies has already slipped somewhat from its January high of 95%, according to Jim Corcoran, VP-trade relations for the National Confectioners Association, who said of course the category will not maintain current growth rates as it matures. But, if other sugar-free or diet categories are any indication, he said, the diet-candy market will still have longevity given the improved taste afforded by new sweeteners.
In other categories, "diet" has proved to have staying power. Beverage Digest predicts diet soft drinks will surpass regular soft drinks by 2016, and Mr. Corcoran pointed to the chewing-gum category, where sugar-free gum dominates with a 65% share.
The number of new sugar-free entries from mainstream players continues to rise. Tate & Lyle, which recently became the sole seller of Johnson & Johnson's McNeil Nutritionals' Splenda brand sucralose to food and beverage marketers, said increased demand has required a $75 million expansion of its plant.
Kraft Foods earlier this year relaunched its Sugar Free LifeSavers Delites with new better-tasting varieties that have been the focus of a TV and print effort from Interpublic Group of Cos.' Foote Cone & Belding, New York, and a tie-in with fitness center chain Curves. Kraft also has sugar-free varieties of its CremeSavers and Sugar Free LifeSavers Sorbets. Masterfoods USA earlier this month launched Sugar Free varieties of its Ethel M gourmet chocolate and a Sugar Free version of Aqua Drops, but has yet to develop sugar-free varieties of its top chocolate brands. "We want to make sure we do it right," a company spokesman said.