As Joey P stated, simple economics. Every square inch of retail space is valuable, sometimes paid for by distributors who in turn want to also see the highest return on their investment. No matter the market share, retailers and distributors don’t see it as money they’re making for that retail space used, but money lost by not using it for a more popular product.
There’s also the proper marketing of the product. If retailers place the sugar free version next to the regular product, there’s a chance that some consumers will accidentally pick up the sugar free version, not like it and switch to another brand. If retailers were to place them in a separate section, sugar free consumers would complain that they’re being isolated and discriminated against.
The one section I see that usually has the sugar-free version next to the regular product is in the cough drop aisle. However, as I said above, sometimes my Mom would buy the sugar free version of Ricola and complain about it, usually tossing it after buying the regular version. If there was a direct alternative, she’d probably switch brands.
A Google search for “market size for sugar free candy” brings up a lot of links, mostly purposefully vague and leading to calls for purchase of the reports, but this 2017 article (free for first time viewers) https://www.candyindustry.com/articles/87619-sugar-free-trends-reducing-sugar-expanding-the-category states that while sugar free gum accounts for 80% of the gum market, sales of sugar free candy overall was down. Also note that while sugar free chocolate brought in ~115mil dollars, it’s a tiny drop in the ~22bil dollar sales in 2017:
https://www.google.com/search?q=chocolate+sales+2017&rlz=1C1MSIM_enUS785US785&oq=chocolate+sales+2017&aqs=chrome…69i57.6448j0j4&sourceid=chrome&ie=UTF-8.
"Long heralded as a way to reduce overall sugar intake without cutting indulgences altogether, sugar-free confections give consumers a way to have their sweets and eat them, too.
And they have been eating them. Recent data from IRI, a Chicago-based research firm, shows sugar-free gum accounted for more than 80 percent of the $3.12 billion U.S. gum market in the previous 52 weeks ending Oct. 30. Meanwhile, sugar-free chocolate pulled in nearly $115 million, and sugar-free diet candy brought in almost $100 million during the same period.
Despite occupying considerable chunks of their respective market segments, sales of sugar-free confections are flat or sliding downward. Sugar-free gum dollar sales dipped 1.57 percent and unit sales dropped 4.82 percent over the last year.
Sugar-free chocolate hasn’t fared much better. Dollar sales sagged 3.17 percent and unit sales fell 14.11 percent in the same period. Sugar-free diet candies posted a small gain in dollar sales — 1.04 percent. However, unit sales shrunk 3.2 percent."