Value sales are up, but volume remains static. Are retailers capitalising enough on the move to higher priced SKUs? Aidan Fortune reports
Consumers are bored of the recession. The recent news that the economy has experienced a double-dip has meant that already jaded shoppers may be forced to forego a holiday in the sun, or put that new car on hold. Now, no one would ever claim that snacks are a substitute for two weeks on a sandy beach, but there is no doubt that consumers are seeking consolation in a night in with a DVD and some indulgent snacks as a treat.
The figures speak for themselves. Over the past 12 months in the impulse channel, the snacking category is showing 5.3% year-on-year value growth, slightly below the total market which is currently seeing 6.1% value growth (Nielsen). This is good news, especially compared with the previous year when impulse channel value growth was 1.3%, way below the total market growth of 5.8%.
The breakdown of pack sizes also makes for interesting reading: handy packs account for 58% of volume sales sharing 25% and multipacks 17%. While handy packs dominate, volume sales have fallen by 2.2% year on year, while sharing and multipacks are delivering growth (5.4% and 4.3% respectively).
Ivan Cross, snacks market strategy and planning director at United Biscuits UK, says the growth in the category over the past year demonstrates just how resilient the snacking category is. “Consumers have remained cautious about how and where they spend their money, but continue to consider snacks as a relatively inexpensive treat which they will continue to purchase,” he says. “This, coupled with the growth in the Big Night In trend, has helped to drive growth into the category despite consumers tightening their purse strings.
“People are eating out less and entertaining at home more to save money, and bagged snacks can play a central part in this,” he says. “Whether it’s a group of mates watching a Champions League match, or a night in front of The Voice with the family, people are grazing at home during these social occasions. It’s up to manufacturers to come up with the right products and formats that meet this need.”
Cross adds that the introduction of the new 150g sharing bags of McCoy’s is a great example of UB responding to this trend. “Hula Hoops Big Hoops were also introduced last year in sharing bags and, alongside our range of £1 pricemarked sharing packs, have sold particularly well through convenience outlets and have a strong rate of sale.”
While value and volume growth traditionally go hand in hand, the snacking category has bucked this trend. According to Nielsen data, value growth is being driven by pack price increases, combined with consumers trading into larger, higher priced bags such as grab bags and sharing, with no increase in the number of crisps and snacks packs being purchased.
Cross says that premium ranges are on the rise and retailers need to have these ready for consumers who are playing host. “Luxury snacks certainly have a part to play within the convenience channel, with sales of premium snacks accounting for £98m and growing by 2%,” he says. “Often a key choice for consumers hosting a dinner party or inviting friends round for the evening when looking to impress, premium snacks should be high on the agenda for retailers looking to maximise their core snacks offering. However, it’s important for retailers to take time to understand what their customers want to buy and do buy on a regular basis, and ensure they stock their products accordingly, especially if space is tight.”
Pipers Crisp Co managing director Alex Albone agrees that retailers need to be loading their displays with premium ranges. “Retailers are missing a trick if they’re not stocking high-quality, high-margin crisps,” he says. “Mintel’s recent figures show a continued strong growth in the snacks category. Interestingly, their report singled out the fact that there were further opportunities for growth in the premium end of the snacks market, particularly to the more discerning consumer who does not see price as an important factor in choosing them.”
Top 10 share size packs
3 Kettle Chips
6 Walkers Extra Crunchy
8 Private Label
10 Monster Munch
Source: Nielsen Scan Track, Total Impulse (YTD 22.10.11)
Top five multipacks
1 Walkers Assorted 6pk
2 McCoy’s Classic 6pk
3 Walkers Crisps ready salted 6pk
4 Mini Cheddars original 7pk
5 Quavers 6pk
Source: Synovate/Ipsos Mori March 2012
Kieran South, wholesale director PepsiCo UK & I, says that shoppers are being a little more adventurous and retailers can cash in on this, especially if they can tie in stock with an event.
“Consumers are increasing their repertoire of crisps so it’s still possible to unlock incremental sales opportunities and grow the category by identifying new occasions,” he says. “People are willing to pay more for something new and different, so innovation is the key to adding value.”
Cross agrees and urges retailers to be ready for the numerous events taking place this year. “Key social occasions throughout the year spent snacking with family and friends such as Easter, Christmas and New Year will always be an important time for snacks. However, there are impressive uplifts in sales around sporting events in the summer as friends get together to watch the various sporting events and host summer BBQs. During the 2010 World Cup McCoy’s sales grew by 23% and KP Nuts by 12%, as people gathered round the TV at home to watch the big games. With a whole host of sporting events planned for the summer, we’re expecting similar sales increases during 2012.”
Hitting the mark
Cross points out that retailers shouldn’t overlook those consumers who are watching what they spend. “While price will remain a key focus for the snacking category over the next year, added value will be of great importance,” he adds. “Pricemarked packs offer shoppers visible value for money and reassurance that they are getting a good deal, but in addition to low-cost treats consumers are increasingly looking for added value from the products they buy, such as the 25% extra weight being introduced on Hula Hoops, NikNaks, Wheat Crunchies, Skips and Discos.”
PepsiCo recently introduced a 49p price flash on single bags of its five core flavours: salt & vinegar ready salted cheese & onion prawn cocktail and smoky bacon. South says this will help to cultivate a better relationship between shopper and retailer. “Pricemarked packs can help to achieve positive price perceptions, with 44% of consumers more likely to purchase an item on impulse when pricemarked,” he explains. “This impact is even greater within crisps, snacks and nuts as purchases in this category are just as impulsive as confectionery.”
Display and pay
One proven way of souping up snack sales is to exploit their impulse nature and tempt shoppers by adding extra standalone displays throughout a store, often next to areas such as food to go or alcohol.
“Secondary display units (SDUs) are crucial for convenience retailers looking to boost their sales of existing brands and new products,” says United Biscuits UK snacks market strategy and planning director Ivan Cross.
“Consumers often act on impulse so standalone display units sited near the till point, or clip strips like the ones from KP Nuts, are proven to prompt incremental purchases. Clip strips also enable retailers to make the most of space that wouldn’t usually be utilised, such as clipped onto the till counter, or a newspaper shelf edge.”
SDUs can also be used to great effect in cross-category marketing. Last year PepsiCo introduced the ‘Fire and Ice’ campaign which linked Doritos Jalapeno Fire flavour with Pepsi Max Citrus Freeze. It was hailed as a huge success by the companies involved, with 380,000 households making a joint purchase of both brands during the four-week promotional period in October, and Pepsi achieving its highest market share in three years.
PepsiCo wholesale director Kieran South says that this practice is highly effective in boosting sales for brands and store owners.
“Cross-merchandising is becoming increasingly important, yielding substantial rewards for retailers and manufacturers alike, growing the category and increasing basket spend by offering consumers convenience and value for money,” he says
Kettle Foods has made a new range of smaller pricemarked sharing bags available specifically for the independent convenience sector. The 100g ‘Little big bags’ come in the brand’s top-selling seasonings: lightly salted, sea salt & balsamic vinegar, sea salt with crushed black peppercorns, mature Cheddar & red onion, and sweet chilli. To highlight their position as an affordable treat and prompt purchase the bags are being pricemarked at £1.29.
Albone advises retailers not to fill their store with flashed stock, but rather try offering a point of difference within the category. “The great benefit for retailers is that selling a premium product at a higher price gives a greater cash margin,” he says. “And because we’ve pledged never to price mark our packs, retailers can set their own selling price. We see the ability to set their own prices as a key advantage for a retailer selling a premium brand.
“This puts them in a position to determine their own competitiveness and decide what margin they make,” adds Albone. “Balancing prices and margin to give the best return is, surely, the art of good retailing. But it’s also about offering a point of difference - stocking something that’s not available in every supermarket.”
Good to go
It’s not just evenings that shoppers may need a treat. For early morning consumers who want something quick and on the go, it may be worth stocking a range of snacks that fill that breakfast-shaped hole. Kellogg’s UK head of specialist accounts Lee Doherty says the sub-category has experienced a strong 12 months. “The cereal snacks market is worth £68m and has experienced 2% value growth year on year,” he says. “This is extremely promising, especially when you consider the difficult economic climate retailers have been operating in.”
He says that this growth can be attributed to consumers looking for quick, healthy treats. “In terms of trends driving the market, there has been a shift towards healthier alternatives, especially snacks which help women to manage their shape,” says Doherty. “This has really helped to grow the snacks business as people are now looking for healthier options.
“You only have to look at the success of the Special K snacks range to see this in action. Special K is one of the biggest shape management brands in the country,” he adds. “Women have confidence in Special K and we’ve had some great results from this range, most notably with the introduction of Special K Double Chocolate bars. Convenience store sales of Special K Double Chocolate account for 36% of the total market share, which is above the usual rate.”
“Snacking is a major category for us and when we did a refit on our store we made sure to have a display that maximised its potential. We worked with a supplier to create a huge offering, close to the counter. It has the right balance between snack size and share sizes - they have definitely become more popular lately as people are staying in more.
“We also keep a selection of premium share-size snacks close to the alcohol section so that when people are picking up beer for the evening they can grab a bag of crisps as well. It makes it very easy for customers to pick up everything they need for a night in.”
Bhavesh Parekh, Kwiksave, Little Lever, Bolton
He says that retailers can use these products to capitalise on the breakfast snacking market. “It’s always a great idea to package things up for your customers as this will really help to draw them in to what’s on offer,” says Doherty. “For instance, you can promote breakfast snacks as being part of a meal deal, for example, sell a Nutrigrain bar and a coffee at a fixed price. These types of promotions work well with shoppers as they feel like they are getting a good deal and better value for their money. You can also place breakfast snacks on newspaper stands as these are more likely to be an impulse purchase and will ultimately help to drive sales for your store.”
Realising that consumers often don’t have time for a full breakfast, Kraft Foods UK last year created the Belvita Breakfast Biscuit, which achieved value sales of £27.7m. Kraft trade communications manager Susan Nash says: “For single, career-focused consumers and busy families with working parents, time is tight and breakfast then becomes a luxury rather than the most important meal of the day,” she says.
Customers who want to satisfy their hunger pangs quickly and cheaply often make a beeline for pot snacks.
The total market is worth £101.5m and is growing at 4.7%, helped by the fact that recession-hit consumers are choosing pot snacks as a convenient and low-cost lunchtime option. More than half (58%) of pot snacks are consumed at lunchtime and are often eaten on the go with a soft drink, making it a valuable category to retailers where lunchtime trade is high.
“Impulse sales are high because pot snacks are a quick and convenient hot snack option, that require no pre-planning, preparation or chilling, unlike a homemade sandwich or salad. They can also be consumed either out of home - in offices and work places such as building sites - or at home as a quick bite to eat,” says Tom Hazelden, Partners for Growth controller and retail execution manager c-sector, Unilever UK Ltd. “With the typical customer pushed for time and not wanting to spend ages looking for what they want, retailers can capitalise on impulse purchases by making sure pot snacks are highly visible and located in high traffic areas.”
Hazelden adds that it’s important to make sure your customers know that you’re stocking pot snacks as they’re more likely to pick them up on the spur of the moment. “Some 82% of pot snacks are bought on impulse, so if your customers can’t see them you won’t be maximising sales in this category,” he says. “Research also shows that specific flavours are important to customers and they won’t necessarily opt for a different flavour if their favourite is out of stock, so it is essential retailers give most space to best-selling flavour.”
“This has meant that manufacturers have been looking at new ways to cater for increasingly time-pressured households. It’s not so much about educating people about eating a nutritious breakfast, as most know that they should be, it’s about giving them convenient solutions that contribute to a balanced breakfast.”
Cuisine de France brand communications manager Laura Smith agrees there is a significant opportunity within the early morning snacking market. “About 55% of consumers leave home without having breakfast, presenting retailers with a key opportunity to attract additional footfall in the mornings with customers looking for a quick, tasty and filling snack on the go, often on their way to work,” says Smith.
She advises retailers hoping to capitalise on this to focus on freshness. “Freshness is key to ensuring strong footfall and repeat sales for any store market research shows that 78% of customers value freshness above product type and price when buying baked goods, and with Cuisine de France’s Bake-off range, it is easy to bring that freshness appeal into any outlet.”
The brand also recently unveiled a new counter-top snacking display unit that holds its range of wrapped snacks, making it easier for consumers to pick something on impulse while queueing at the counter.
From a premium offering for evenings in with friends and family, to the early morning rush to replace a missed breakfast, if retailers can provide a solid offering that covers all of the bases, then there’s no reason why their snacking sales won’t go down a treat.
Ones to watch
Crisps manufacturer Tayto has linked up with Heinz to create the flavours for its latest Golden Wonder range. Heinz Tomato Ketchup and HP Brown Sauce are available now in 75g single-serve packs with a 39p pricemark.
tel: 01724 281 222
Tyrrell’s has unveiled a range of premium tortillas. TorTyrrell’s is available in three flavours - Glastonbury Cheddar & caramelised onion, rather hot English chillies and Somerset sour cream - in 175g share bags.
tel: 01568 72044
McCoy’s now comes in share-size bags. The launch of the 150g bags in flame grilled steak, cheddar & onion and salt & malt vinegar variants is timed to coincide with the Euro 2012 football Championships.
tel: 0800 138 0813
Kraft Foods is to extend its Belvita breakfast biscuit range with a Yogurt Crunch variant. It features two wholegrain biscuits sandwiched together with a creamy filling. It is available from July in packs of five.
tel: 08702 400 861
Pringles football branding has returned for its second leg. After a successful debut in 2010, the entire Pringles share-size range will feature the limited edition ‘Pringoals’ branding to help consumers celebrate this year’s summer of sport.
tel: 0800 597 3388