What's the Better Business Model in Confectionery: Retail or Consumer Packaged Goods?
Confectionery brands often face a strategic choice: focus on retail with brand-owned stores or go the consumer packaged goods (CPG) route, selling through third-party retailers. Some companies attempt to do both. But which model works best? Let’s break it down.
Retail (Brand-Owned Stores) – Pros & Cons
✅ Control Over Customer Experience – Direct interaction with customers allows for stronger brand storytelling, immersive experiences, and premium pricing.
✅ Higher Margins – Cutting out middlemen means better gross margins per unit sold.
✅ Stronger Brand Equity – A well-run store concept can elevate brand perception and make the product feel more special.
❌ High Fixed Costs – Rent, staffing, and store operations make this a capital-intensive model.
❌ Scaling is Slow & Expensive – Expanding requires real estate investments and operational complexity.
❌ Traffic Dependent – A store is only as good as its foot traffic. Location matters, and shifts in consumer behavior (e.g., e-commerce) can hurt sales.
Consumer Packaged Goods (CPG) – Pros & Cons
✅ Scalability – Once a distribution network is established, growth can be rapid with lower fixed costs.
✅ Broader Market Reach – CPG brands can be found in supermarkets, convenience stores, and online—anywhere consumers shop.
✅ Lower Operational Complexity – No need to manage physical stores, just supply chains and production.
❌ Lower Margins – Retailers and distributors take a cut, reducing profits per unit sold.
❌ Limited Brand Control – Your product sits on a shelf next to competitors, and you rely on retailers for placement and promotion.
❌ Discount & Promotion Pressure – Retailers push for discounts and deals, which can erode brand equity and profitability.
Can You Do Both?
Some confectionery brands attempt a hybrid model—operating both retail stores and a CPG business. The idea is that brand stores create a premium halo effect, driving demand for CPG products while providing a direct-to-consumer revenue stream.
📌 Venchi has successfully blended brand stores with CPG, using its boutiques to elevate brand perception while maintaining strong wholesale distribution.
📌 Lindt & Sprüngli uses its retail stores for branding and experiential marketing, but its real scale comes from supermarkets and duty-free sales.
📌 Godiva Chocolatier struggled with this balance—shutting down its U.S. retail stores to focus on wholesale and licensing after operational costs became unsustainable.
For premium confectionery brands, owning retail can be powerful but expensive, while CPG offers scale but comes with margin and branding challenges. The best strategy depends on the company’s positioning and long-term vision.