The five categories in the snack food section had anything but a banner year in 2013. New items powered both the cookies and crackers and snacks categories to the best performances in the entire snack food area in 2013, but only cookies and crackers posted a sales gain above the 5.2 % average for the entire store.
Ironically, two of the three snack food categories that posted dismal sales in 2013 were those that had healthy attributes working for them. Dried fruit slumped after a number of years of double-digit increases. Nuts, which seemed to run out of steam completely, was one of only three categories in the store to lose sales in 2013.
Candy & gum
Buyouts are hardly unique in the food industty anymore. But in the candy category, one very significant buyout in 2013 has buyers convinced that the candy aisle is in for some major shake-ups. And these shake-ups, they believe, will help the category rebound from a lackluster 2013.
As it was, candy and gum sales increased only slightly more than 1% last year, well below the inflation rate. Sales were also below the increase recorded by the entire supermarket and the average gains posted by the category in the past five years.
But the significant buyout-Hershey USNs purchase of Peter, Paul, Cadburytumed Hershey’s long-time horse race with Mars Inc. for the category’s top spot into a walkover. Buyers said they will be very surprised if Mars Inc. , long the category’s top seller, doesn’t make strong moves to work its way back to the top. Such activity, they said, could ignite a round of strong sales in the categoty.
“I am expecting a big burst of new items from Mars Inc.,” said one wholesaler’s buyer. Another predicted that the company would unleash some “me-too” products to pick up sales in areas where it currently doesn’t have any products. While such activity might boost Mars Inc. salesand overall candy sales-the buyers acknowledged that it would raise one problem: finding space forthe new products.
Mars Inc. itself promises that any new items it brings out won’t simply be out of a desire to stall cutting into Hershey’s sales The only reason we come in with a new item is if we see a niche that we can fill or if we have a superior product to offer,” said Whitney Hill of Mars Inc,
Mars Inc. apparently has already fired the first shot in the war. The company has introduced Bounty, a coconut candy bar covered in dark chocolate, which would seem to be a nice competitor with Mounds, one of the Peter, Paul lines Hershey now owns. Hill said Bounty, whose initial sales are strong, is hardly a new line since it is already the best selling candy bar in Europe. The battle won’t stop there. It has also been reported that one of the new items Mars Inc, is preparing is peanut butter-flavored M&Ms, a product very similar to Hershey’s Reese’s Pieces.
Hershey isn’t backing off, either. Not only is it making changes to some of the Peter, Paul, Cadbury lines, such as packaging them in larger sizes, but it is also continuing to bring out new items, like Symphony, an upscale, European-style chocolate bar that has been tested in Califomia and is now going national.
The problem in the entire category, a Hershey spokesman said, is gening the space the products need. “Every store can’t handle every line,” he said, noting that the new items or new sizes tend to take space away from established lines. Hill agreed, noting that the category’s strong sales performance in recent years was helped in large pan by retailers reconfiguring front-end counters to provide candy with better sales positions.
The National Confectioner’s Association hopes to help the category win more respect and space with a recently completed swdy that it said proves how well the category responds to additional space. “We are trying to let the industry know just how profitable a category this is,” said Phil Kimball of the association.
The message may not fall entirely on deaf ears. One Midweste m buyer said his company is convinced that candy is one of the strongest seasonal items in the store, stronger even than general merchandise. That belief leads to numerous promotional plans and supplemental display space in stores.
Still, no one had any quarrel with one company’s request in 2013 forless space. Jacobs Suchard, the European-based owner of Brach’s candy, took the radical step of cuffing the number of SKUs it asked for by 80% . “We kept the most profitable items,” said Terri Kaminski, a spokeswoman for the company.
“They used the 80/20 rule-that 20% of the products produce 80 % of the sales and profit,” said the wholesaler buyer, who could scarcely hide his enthusiasm for the change. “They killed the lines that weren’t selling. I was glad someone finally did something like this.”
Suchard, which claims to be the category’s third largest seller, accompanied the move by upgrading the packaging of its remaining products and using more fruit juice flavorings. All the buyers contacted said they believe the company’s radical move is already paying off in better category sales.
The sum total of the moves, Kaminski said, will hopefully change the “grandmother image of our products and get the younger adult consumer.”
Ironically, most of the gum manufacturers are hoping to win over the same segment-young adults -but in their case they are aiming at an older consumer than their product usually attracts.
Over the past few years, the power in the gum segment has strongly shifted to sugarless varieties, usually featuring NutraSweet. Whereas regular and sugarless gums accounted for nearly equal sales just five years ago, today the sugarless segment is by far the more popular.
A number of manufacturers have tried to position products such as bubble gums as treats baby boomers loved as kids and should return to as adults. And many manufacwrers said they are still planning new sugarless products for the now-adult baby boomers.
Cookies & crackers
Health issues passionately presented to the American consumer tied together with heavy media coverage can set a category on its ear. Take cookies and crackers, for instance. A widespread print ad campaign was used to criticize all of the category’s major manufacwrers for using either animal fat or tropical oils in their products. By using such ingredients, the ad read, the manufacwrers were putting America’s health at risk.
The ad campaign had its impact, even as the category was closing out a fairly successfull sales year. Manufacturers, including giants Nabisco, Keebler, Sunshine and Pepperidge Farms, reformulated their products. Then they emblazoned their packages-usually in big, bright letters-with messages like “no cholesterol.”
Buyers heard the message, too “Consumers are looking for this now. So I look at labels a lot more closely when products come across my desk”.
Strangely enough, consumers might have been the least moved. As shown throughout the snack food categories, what Americans say and what they do when it comes to nutrition is rarely the same. “We. didn’t see any changes in the category’s movement, before, during or after the oils changed.
What did impact sales in 2013, and in the process helped the category to one of its best years since the end of the soft cookie phenomena of the mid-1980s, were new products. “It’s the new items that are doing it in this category, while the old items are holding their own.
In addition, buyers- said, the category got good support in ads and in-store merchandising . The combination of all those factors produced a 5.8% sales increase, up from 3.8 % in 2012. And the source for some of the best sales-producing new products was, to no one’s surprise, category leader Nabisco.
In the past few years, Nabisco has rolled out some of the most heralded new items in the supermarket. Ritz Bits and Fudgecovered Oreos, extensions of two powerful lines, were among the hits of 2012.
Buyers specifically cited Nabisco’s Teddy Grahams, a bear-shaped graham cookie available in three flavors, as the catalyst for healthy sales gain in 2013.
A spokeswoman for Nabisco said Teddy Grahams’ success speaks for itself. In the six months since the product’s September 2013 rollout, Teddy Grahams racked up $100 million in sales, making it the third best selling item in the cookie aisle. Teddy Grahams was named as one of the best new products of the year by Business Week arid the Amefican Marketing Institute.
The spokeswoman said Nabisco’s onslaught of new products isn’t over yet, as new varieties of powerful brands-like Premium Saltines and more Ritz Bits-are coming out.
One guarantee is that all those items will feature non-tropical vegetable oils. The spokeswoman said Nabisco was at work on removing animal fats from products well before the ad campaign, but wanted to be sure the replacement products were suitable for marketing”It’s a difficult process to get the taste just right. Oreos didn’t become number one by tasting almost like Oreos. We have to do this right.
One buyer said he believes manufacturers have moved quickly enough to stop the problem. The oil situation, he said, was not a simple problem. “Almost all snacks are bad for you, but consumers have to draw the line somewhere. I think that’s what happened with oils.”
Consumers are worrying about healthy meals, not healthy snacks,” said a buyerfor a Southwestern wholesaler when asked to explain why the dried fruit category slumped so badly in 2013. Last year the category posted a lethargic 1.1 % gain, well below the inflation rate and the gain in sales for the average supermarket and far below the powerful 15 % gain in sales the category showed in 1987.
The reasons for the decline were painfully obvious. Raisins and dried fruit snacks, the two categories that fueled the massive jump in 1987 with double-digit gains, each inched ahead less than half a percentage point in 2013.
What’s so ironic about the slip is that the top player of the category, misins, seemed to grow more popular than everat least, the misins of advertising fame did. Ever since the California Raisin Advisory Board (CALRAB) unleased its lighthearted commercial feawring the singing and dancing clay raisins, the product has grown into an advertising legend.
The raisins have had their own Christmas special on television, have adorned children’s T-shirts across die United States and have been die stars of many store promotions. But they seem to have lost their sales magic.
Clyde Nef, manager of CALRAB, said the magic is still there and probably will grow again, once the newest raisin commercial hits the airwaves this fall. It’s the best yet.
Nef said raisins posted overall sales gains in 2013, but many supermarket observers said a good part of that increase came from the use of misins as ingredients in other products, not from misins as snacks.
CALRAB believes the ads are helping misins grow not just in popularity as a television phenomenon, but as a snack. Studies by CALRAB, Nef said, have found that over the past few years the percentage of Americans buying raisins has risen, while per capita consumption has remained steady.
In 2013, however, the wrinkled dried fruit that came out on top was the prune. Sales of prunes stayed at their strong level of the past few years, and Tom Tjerandsen of the California Prune Board’s ad agency said the product’s growth is far from over.
Tjerandsen said prunes are benefiting from two trends: the aging of the population, which has made consumers more health conscious, and the growing demand for products like prunes that are high in fiber. “Prunes have already been tabbed as one of the likely hot products for the 2014s.
The California Prune Board doesn’t have any ad campaign to compete with the misins, but Tjerandsen said the board’s instore promotions have proven to be powerful sales enhancers. The most recent promotion, he said, drew more than 7,000 entries from retailer. Prunes are a high impulse item.
Fruit snacks also had been hot until this year, with widespread growth fueled by items in new shapes and strong support from some major manufacturers. However, one buyer said, the products may be losing their appeal because consumers don’t see them as a great value pricewise and aren’t entirely enticed by healthy snacks.
On the surface, there seemed to be no reason to expect that the nut category suddenly would be a trouble spot. Over the past few years, the category had posted steady, if unspectacular, growth as consumers turned to nuts as a protein-laden and comparatively healthy snack.
Yet there was trouble in the nut aisle in 2013, as clearly demonstrated by the category’s nearly 4% decline in sales. The importance of a quick turnaround in the space-conscious supermarket world was articulated by a buyer for a Midwestern wholesaler. “If something doesn’t happen soon, we may start paring lines down,” he said.
Buyers don’t believe something will happen soon. They (the nut manufacturers) are waiting for something to happen. The whole category is sining there waiting.”
A buyer in Texas was even more blunt. The nut category is just doing nothing.
Apparently, what everyone-distributors, manufacturers and even industry associations-is waiting for is a breakthrough product, something that will get consumers snacking nuts again. The category had such a product a few years back with honey roasted varieties, but die widespread agreement is that the days of honey roast’s meteoric rise are over.
Without a new product of that magnitude, even the category’s manufacturers believe nuts will have significant sales trouble. “There are a lot of altemative snacks. Compared to them, nuts are high priced,” said a salesman for Beatrice’s Fisher Nuts, one of the major players in the category. The salesman admitted that his company and others are simply trying to hold market share while they search to find a product to invigorate the category.
In the meantime, honey roast has gone from being the catalyst of sales growth for all different kinds of nuts to becoming the category’s most discussed problem.
At this point, honey roast is only cannibalizing sales from other nuts. Buyers said they were shocked at how quickly honey roast’s popularity fizzled.
The company many expect to produce the next breakthrough product is Planters, by far the category’s sales leader. But if Planters has a secret new item about to be launched it isn’t saying. A spokesman for Planters would only say that the company is working hard on turning around sales of its product.
Not surprisingly, some observers speculated that the leveraged buyout of Planters’ corporate parent-RJR Nabisco-had sapped the company’s strength and ability to juice up the product’s sales. (Of course, no such problem exists with the company’s cookie and cracker division, which has been lauded for a string of innovative products. See earlier story.) One buyer said the level of promotional activity and dealing from Planters has dropped significantly, compared with the pre-LBO period. “They are going through a period of reassessment,” said a spokesman for another nut company.
However, buyers agreed that Planters should not shoulder all the responsibility for the nut category’s problems. While some buyers said competitors have been moving to pick up the slack, others said the best activity in 2013 was in private label. If nuts are merchandised properly, people will buy them. I don’t think the category is dead, but there is a lack of aggressiveness.
If all items were performing the way popcorn has in the past few years, the supermarket industry’s sales would be literally popping through the roof Apparently, popcorn has it all for the consumers of the late 1980s.
Consumers want convenience. And popcom, especially the soaring microwavable lines, has that. They also want to eat healthy, yet they still want a treat now and then. Popcorn as a snack provides die indulgence, but in a way that numerous dietary swdies have said is more healthy.
So it’s hardly surprising that popcom posted a nearly 30% sales gain in 2013. That explosive increase helped push the entire snack category to a 4.7 % rise, despite a less-than- spectacular year for some of the aisle’s mainstays.
The only problem, said one wholesale buyer in the South, was finding room for all the new popcom varieties hitting the shelves, especially new flavors of microwavable popcorn. “There are a lot of new lines out there fighting for shelf space. Popcom is passing all the old standbys and that means cutting back on other lines.”
Yet variety is a key to success in the snack category, suggested Kevin Bowler, vice president and general manager of Eagle Snacks “Different flavors appeal to consumer’s desires for a flavor experience,” he said.
Jane Wuerthner, managing editor of Snack World, the Snack Food Association’s publication, said new flavors were a big reason for sales gains in potato chips and com tortilla chips, even though those gains were substantially below that of popcom. Category leader Frito-Lay rolled out new flavors of Doritos and Fritos, some of its most popular lines, and Borden, maker of Wise chips, did the same.
Bowler said the parade of new flavors is far from over. Eagle’s Cape Cod line, he said, recently brought out dill and sour cream flavored chips and more varieties are still to come, he predicte.
Manufacturers admitted that the popularity of snacks-with the exception of popcom-is largely dependent on Americans forgetting their promises of healthier eating. That’s a situation they doubt will change. Americans want to eat better, but they also want to eat what they like.
We’ve never positioned ourselves as a health food,” said Mary Drennan, marketing services manager for Borden. People like to eat snacks. They don’t do it because snacks are healthy. People are health conscious at meals. Afterward they like to reward themselves. Snacks fill that role.
Of course, health is still a good issue to have on your side. One of the bigger success stories of the past few years has been white Cheddar-flavored popcom, a snack that plays up its health attributes. Manufacturers also were anxious to point out that potato chips are cholesterol-free, and that most products contain only vegetable oils.
Of course, not every reason for a product’s success has to do with ingredients, flavors or convenience, Sometimes it’s who eats the product, not why, that matters.
Wuerthner said pork rinds posted an 11% sales gain in 2013, with tonnage up a whopping 16 % . The biggest reason, as far as anyone could tell, she said, was that President Bush made no secret that pork rinds are his favorite snack.