The confectionery category in the petrol and convenience (P&C) sector continues to demonstrate strong growth, with a notable 6.8 per cent increase in value for the first half of 2024, revealed in the 2024 AACS State of the Industry Mid-Year Report. This follows a +12.8 per cent rise in 2023, solidifying confectionery as one of the top-performing categories in the industry.
However, this positive performance comes with caveats, as rising costs and inflation pressures have significantly impacted unit sales, leading to a more complex landscape for retailers.
While the value of confectionery has grown, unit sales have experienced a decline, especially in the second half of 2024. This shift, according to Theo Foukkare, CEO of the Australian Association of Convenience Stores (AACS), is indicative of growing consumer caution and price sensitivity.
“The ongoing cost pressures, particularly from rising commodity prices, are creating a complicated environment for retailers and suppliers. The challenge is balancing the need for price increases while maintaining consumer demand,” Foukkare explained.
The rising cost of ingredients such as cocoa and sugar has particularly affected chocolate, the category’s most valuable segment. Despite value growth of 7.9 per cent, unit sales of chocolate have been negatively impacted by higher prices, reflecting the consumer trend toward purchasing less volume as budgets tighten. Sugar confectionery has seen similar trends, with a 6.2 per cent increase in value but a sharp decline in unit sales.
As Foukkare notes: “Consumers are purchasing fewer items, but those they do buy tend to be higher priced.”
In contrast, nutritional bars have not fared as well. After experiencing nearly 30 per cent growth in 2023, they saw both a decline in value and unit sales in the first half of 2024. This may point to a broader reassessment of consumer priorities, with health-conscious snacks becoming less of a priority as price sensitivity grows.
Opportunities for growth in the sector
Despite these challenges, the confectionery category presents substantial opportunities for growth within the P&C and independent grocery sectors. Retailers can look to innovative strategies to manage cost increases without losing consumer interest. Packaging, promotions, and bundling tactics are all potential avenues to maintain demand amid price pressures.
Foukkare highlights the importance of staying agile in the face of evolving consumer behaviours.
“The ability to offer value through smart pricing, loyalty programs, or limited-time promotions could go a long way in securing ongoing consumer loyalty,” he noted.
Retailers who can adapt their offerings to match the shift from larger purchases to smaller, premium-priced items will be well-positioned to capitalise on this trend. Bundling smaller treats or introducing high-quality, value-for-money options could be key to meeting consumer demand while addressing margin pressures.
One such new product making waves in the market is Allen’s Berry Bunch, a launch from Allen’s that debuted in early 2025. This vegan-friendly confectionery features a unique soft-jelly texture with a sugary coating and bursts with the flavours of ripe raspberry, sweet strawberry, and blackcurrant.
The Berry Bunch offers a fun new take on the classic berry flavour trio, providing plant-based fans with a tasty, guilt-free indulgence.
“Lolly lovers will be thrilled to see a reimagination of the Allen’s iconic berry flavour trio,” said Melanie Chen, Head of Marketing Confectionery at Nestlé.
In-store placement and marketing also play an essential role in driving confectionery sales. Consumers continue to make impulse buys, with confectionery often positioned near checkout counters or in high-traffic areas. According to Alexa-Jane King, General Manager Merchandise at Reddy Express, confectionery sales peak during early mornings and late afternoons, especially in locations near busy roads.
“Convenience really plays a big role in when and where these products fly off the shelves,” she says.
Retailer strategies
When it comes to selecting confectionery for their stores, retailers are increasingly focusing on both popular, well-established brands and new, niche products. King explains that Reddy Express keeps a balance of tried-and-tested favourites like Cadbury, Mars, Nestle, and Haribo, while also testing new products that align with consumer trends.
“If a new product is getting buzz, we’ll test it out in select stores, and if it resonates with our customers, we expand the offering,” she says.
Similarly, Sarah Robertson, Category Manager at APCO, emphasises the importance of offering a varied range.
“While evergreen confectionery lines are still bringing in sales, we’ve seen growth in a number of local and international niche brands,” she says. “These are utilised to highlight and create interest on the shop floor.”
Both King and Robertson highlight the importance of offering a range of options that cater to evolving consumer tastes, with a growing demand for healthier, lower-sugar, or plant-based treats. The shift towards health-conscious choices is particularly noticeable among younger customers, with items like protein bars and functional snacks becoming more prominent in confectionery aisles.
Another key aspect for retailers is strategic in-store marketing. According to Nick Talevski, Managing Director at Pump Group, positioning confectionery in high-traffic areas and near the checkout is an effective strategy.
“We conduct our own in-house promotions of healthy snacks and our barista-made coffee,” he explains. “We also look to get suppliers on board with promotions for new or niche products.”
Consumer trends shaping the category
In terms of consumer trends, the confectionery category is evolving rapidly. Rising health consciousness, coupled with growing price sensitivity, has led to a shift toward healthier alternatives and indulgent treats in smaller quantities.
As Talevski notes: “We’ve certainly identified a shift to more health-based confectionery – low-sugar lollies, protein/plant-based bars, etc.”
This trend is particularly evident among the younger generation, who are influenced by social media and global trends.
According to Louis Cannatelli, Sales Manager at GC Brands: “Social media has played a big role in driving demand for products like HI-CHEW, which has seen significant growth in Australia.”
HI-CHEW, a chewy candy with a bold flavour profile, is marketed as an alternative to chewing gum, catering to a slightly older demographic with a taste for unique and high-quality products.
Additionally, there has been increased interest in international confectionery, such as American brands like Herrs Cheese Curls, which are being launched in Australian stores by GC Brands.
“We’ve seen a rise in interest for USA confectionery in recent years,” says Talevski. “This is a great opportunity for retailers to tap into new, exciting trends from overseas.”
Confectionery in the P&C future
Despite ongoing inflation and cost-of-living pressures, confectionery remains a vital category within the P&C sector. As consumers continue to look for small indulgences and affordable luxuries, there is ample opportunity for retailers to continue innovating and adapting to their needs.
As Foukkare states: “Retailers who understand the balance between pricing, product mix, and consumer preferences will be best positioned to thrive in this evolving market.”
The key to long-term success will be a combination of innovation, strategic pricing, and targeted marketing. As consumer demand for health-conscious options rises, alongside their desire for indulgent products, retailers must be agile enough to offer a diverse range of products while managing margin pressures.
As King sums up: “Confectionery is a fun and dynamic category to manage. It’s all about offering variety, staying in tune with customer preferences, and keeping things fresh with new products and flavours.”
This article was written by Deb Jackson and originally published in the February/March issue of Convenience and Impulse Retailing Magazine.
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