Despina Kotsapouikis is giving the candy industry a good fright. The Chicago mom of two does at least 20 percent of her shopping on Boxed.com and Amazon, where there's no spur-of-the-moment temptation to pick up a Snickers bar at the supermarket checkout.

That is, if Kotsapouikis, who has an 8-year-old son and a 6-year-old daughter, buys candy at all.

"I allow fruit snacks and some homemade treats on a daily basis," says Kotsapouikis. "Prepackaged sweets I limit to just special occasions."

Both these scenarios amount to a nightmare for the $35 billion candy industry, which sees storm clouds on the horizon. "This is probably the hardest time to be in this category that I've experienced in the last 20 years," says Tom Schoenwaelder, principal at Deloitte, where he heads up the strategic growth transformation group, citing the rise of online shopping and interest in better eating.

Thirty percent of online grocery spending in the U.S. is now done through Amazon, according to Brick Meets Click, an advisory firm focused on grocery and technology's impact on the way consumers shop. Put another way, Amazon has about the same share of the U.S. online grocery industry as all supermarkets combined.

The National Confectioners Association—which notes that sales have remained relatively steady over the past few years—says most people in the U.S. consume chocolate and candy two to three times a week. But not all of that is planned. As any parent who has argued with a child in a Stop & Shop checkout lane can tell you, candy is very often an impulse buy.

"All the companies that play in the space have very well-honed playbooks for how to drive impulse," says Schoenwaelder. "The challenge that they all have is they drive impulse in a brick-and-mortar world based on a marketing model that predates digital."

Quite simply, the industry must redefine impulse. Mars Wrigley Confectionery, which is the world's largest confectionary company and ranks just behind Hershey in the U.S., has been trying out a number of ideas. These include the issuing of online gift certificates to reward a friend with candy, and having sweets readily available in places where people are likely to have the munchies, like in a Lyft or Uber.

The gift certificates were tried out earlier this year, when the company offered Skittles as a way to turn online social behavior—friendly comments, tagging and virtual high-fives—into a gift picked up in a physical store. In the pilot, a Facebook ad would target a person to suggest giving Skittles as a present to a friend. The giver clicked on the ad and reached a Skittles-branded site, where he or she paid for a bag of the candy on the friend's behalf. The recipient then received an email with a digital coupon for a bag of Skittles, redeemable at convenience stores.

Mars Wrigley also ran two pilot campaigns with Spotify, serving customized audio ads for Snickers within the Spotify platform (mobile, desktop and app) based on what people's moods might be. It inferred moods from the music they were currently listening to or shifts from their normal listening habits. Click-through results for the pilots, tied into Snickers' long-running "You're not you when you're hungry" marketing, were significantly above benchmarks, the company says.

Mondelez International is also experimenting with new ways to reach consumers. It's mining data, for one, to predict exactly when people will crave a sweet and then hitting them with an ad—whether via social media, on TV, in a video game, etc. And Schoenwaelder suggests it may be possible to send prompts at opportune times—for example, nudging people who order chocolate bars online with an occasional email reminder at night.

And Mondelez is using a proprietary tool, Demand Spaces, to understand specific usage occasions for its brands like Sour Patch Kids and the specific "needs" around certain snacks, says Jason Levine, North America chief marketing officer. First, it looks at specific combinations of who, what, when and where people are snacking, then armed with that information, a brand tries to deliver targeted messages to hit very focused segments, ideally when it believes people are receptive to snacking.

"What we would then do is lean in on those needs to get the right message to the right consumer at the right time, so that an impulse type of purchase isn't so impulse," says Levine. "We're reaching them at a moment we know they're going to want to enjoy that snack."

Cargo, a startup that places treats in console-sized boxes in Uber cars, says more than 2 million various items, including Mars Wrigley's Extra mints, have been purchased during rides so far in a limited number of markets. Riders don't use cash to buy them—they check out online using a mobile wallet like Apple Pay or Google Pay, or their credit card, and the driver hands over the purchases once the car stops. Uber drivers who sign up for Cargo earn 25 percent of all sales and a $1 flat fee per transaction, and can earn other incentives and bonuses.

Isolating when someone will have a craving is one thing. Getting them the candy they want in short order is another. "The 'fulfillment time' keeps shrinking," says Todd Tillemans, president of Hershey U.S. "Amazon Prime Now got it down to 30 minutes. We're now talking with retail partners that see in the near future getting it down to a nine-minute delivery." Tillemans declines to name which retailers are touting such stunningly rapid delivery times.

Before that, however, a product has to draw consumer attention online, or as Tillemans calls it, "thumb-stopping power." About a year ago, Hershey began updating its packaging, using bright bands of color for each type of candy in a variety pack, clearly calling out the brands and the number of pieces in the bag to catch people's eyes as they search on sites such as Amazon. As a bonus, that packaging does very well in stores, he says.

More traditional marketing—banner ads, pre-roll videos, paid results and giving brands sharp voices on Twitter—is also key to earning virtual "shelf space" in people's minds.

Private-label threat

For now, only about 1 percent of U.S. packaged food is bought online, a rate that could reach 5 to 6 percent in the coming years, according to Bernstein analyst Alexia Howard. And while familiar brands can do well online, they face a new threat in the influx of private-label brands from Amazon.

Indeed, Amazon has recently started showcasing its own brands. For example, searching for candy on Amazon's website brings up sponsored ads from the likes of Hershey's Twizzlers and some Mars Wrigley brands, but scroll down a little farther, and the next series of sweets one sees is a variety of Tara's caramels, an Amazon in-house brand. Howard says the effect on the big branded players is potentially huge. Private-label brands hold 16 percent of shelf space in chocolate online, versus just 3 percent offline, according to research Howard released this month. (Marketers have long worked with retailers to command shelf space in grocery and convenience stores.)

Brand marketers, at least for now, aren't running scared, citing the emotional connections they feel they've created with shoppers through decades of advertising and marketing.

"You're not going to necessarily look at a private-label offering to fulfill those emotional need states that are present," says Paul Chibe, president and CEO, Ferrero North America. "On an overall basis, confectionery is insulated."

Hershey, for example, is trying to reposition candy as a way to spread kindness. In September, it released a video telling the story of Bob Williams, a 94-year-old who has been handing out big Hershey chocolate bars to people in his small Iowa town for nearly two decades. The video quickly went viral.
Tillemans says the approach aims to show how a Hershey bar can play a role in "heartwarming the world" or, to be more chocolaty, "melting the distance between people."

Old-school advertising and in-store displays still matter in the category, but in some cases, marketers of treats are incorporating online tricks.

Mondelez's Levine gets excited talking about "phygital" displays, which mix physical and digital elements. It works this way: Say a recipe starts trending online on a platform like Tasty. A WiFi-
enabled screen in a store could be programmed to show some of the same content and offer product suggestions. Compare that with a cardboard display that takes months to create, ship and get to the right spot in a store.

Health scare

Still, confectioners need those impulse buys, especially since consumers are eating fewer sweets than a decade ago. NPD Group says the average person in 2018 eats sweet snacks 373 times a year, down from 386 in 2007. Darren Seifer, food and beverage industry analyst at NPD, says more than 70 percent of people say they want to reduce sugar in their diets. "It's one of those few things where consumers say they're going to do something and actually do it," he says.

Hershey's results highlight the pressure the candy industry is feeling. Hershey's sales rose 9.3 percent in 2012 but by just 1 percent in 2017. The company expects so-called organic sales to be up just slightly this year—but that's excluding acquisitions, which have been buoying its overall sales as the company pushes beyond sweets into the broader snack space. Industry-wide, while the number of sweet-snacking occasions is declining, price hikes and a growing population have helped lift dollar sales.

The candy industry is responding to health concerns with a strategy it has used for years: all things in moderation. According to the NCA, the industry plans to sell half of individually wrapped treats in packs that contain 200 calories or less by 2022.

It has been pitching smaller servings, though that is sometimes a matter of perspective. New M&M's Chocolate Bars, which are milk chocolate bars that include M&M's Minis, have a graphic on the front of the package noting there are 150 calories per serving. Each bar, though, is meant to be four servings, meaning that consuming the entire bar equals 600 calories. Overall, however, Mars Wrigley Confectionery says it's offering products with fewer calories and less sugar, including through different portion sizes.

The company is even positioning some of its products in the health arena, stocking Orbit sugar-
free gum in the oral-care aisle in some stores as a cavity preventative.

And, of course, companies are adding more better-for-you products for those times when people are trying to choose less guilt-inducing snacks. Mars took a minority stake in Kind, which makes bars featuring nuts and chocolate that straddle the line between something fit for a meal and something that's more of a treat. And Hershey is emphasizing non-candy brands. It just bought Pirate Brands, maker of Pirate's Booty, and already acquired SkinnyPop maker Amplify Snack Brands.

That doesn't mean Hershey is ignoring its chocolate business. Over the past few years, its new products have included putting Reese's Pieces into Reese's Peanut Butter Cups, the type of product mash-up that helped the brand build buzz online. Now it's mashing together two of its best-sellers: a Hershey's milk chocolate bar with Reese's Pieces candy, which hits the market in November. And Hershey plans to introduce a thinner version of one of its classics, which will have fewer calories than the original size. A lot of the candy industry's pitch is the same as it always was: Our products are a way to treat yourself, or as Seifer calls it, "permissible indulgence."

That's especially true for Halloween, for which the NCA predicts candy sales will rise 1.2 percent this year from last year's $4.4 billion. That continues a string of increases going back to at least 2014 (the last year for which the NCA has data).

Even Kotsapouikis's kids go trick-or-treating. But they don't get to eat all their treats. After mom saves the M&M's and peanut butter cups she'll use for baking, she sets the rest of the candy out on the porch. It's all gone by the morning.

"Does that make me a bad mom?" Kotsapouikis wonders. "I told them a few years ago, the witch comes around and takes the candy back."

Candy from strangers

By Judann Pollack

Parents from Pittsburgh to Pascagoula are readying for the annual ritual of minutely examining their kids' Halloween haul. But is your Almond Joy really out to kill you?

Not likely. Joel Best, a professor of sociology and criminal justice at the University of Delaware, has tracked 80 cases of supposed Halloween poisonings since 1959 and almost all were hoaxes, according to myth-debunking site Snopes. There was one heinous Halloween death in 1974, but it did not come at the hands of a stranger: Houston-area resident Ronald Clark O'Bryan murdered his 8-year-old son by stuffing cyanide in his Pixy Stix in hopes of collecting insurance money. O'Bryan, dubbed "The Candyman," was executed in 1984 by lethal injection.

This did not deter Hollywood, however: In the 1981 movie "Halloween II," a trick-or-treater dressed as a pirate lands in the fictional Haddonfield Memorial Hospital emergency room, bleeding profusely after biting into an apple containing a razor blade.

The fear of deadly candy can be traced to suburbanization, according to Samira Kawash, the so-called candy professor who wrote the book "Candy: A Century of Panic and Pleasure."

"Even though it's since been established that the Halloween sadist was an urban legend, there was a sense of loss of small-townness," she said in a 2010 interview on Smithsonian.com. "The neighbors were strangers for the first time. Fear of the neighbors' candy sort of captured that sense of loss of community." (Kawash could not be reached for additional comment; her website says she is "no longer answering candy-related inquiries," so don't even think about trick-or-treating at her house.)

But in the kinder, gentler 1950s, Halloween was a more trusting affair. Look no further than Life magazine's Oct. 26, 1959, issue, which carried a Kool-Aid ad featuring an enticing punch bowl and cups surrounded by loose doughnuts, apples, jelly beans and candy corn. Propped up against it, a handwritten note reads: "If the doorbell rings before I get back, here's the loot for the trick-'n-treaters." It's signed, "Mom."