The weak economy has not taken much of a bite out of meat snack sales.
Americans are loathe to sacrifice edible indulgences, even in times of financial crisis. All three NACS snacks categories—salty, packaged sweet and alternative—showed increases in average sales per store from 2008 to 2009, and showed gross-margin percentage and average gross-margin-dollar-per-store gains.
The Snack Food Association of America’s (SFA) 2010 State of the Industry report, in association with Information Resources Inc. (IRI), showed meat snacks among the handful of winners in an environment of conservative shoppers. Along with refrigerated appetizers and salty snacks, meat snacks price per volume rose 7%, behind only chocolate candy (11%) and microwave popcorn (13%). The industry average was a 4% bump in sales.
One curious finding in SFA’s industry report was that grocery stores’ sales of the top five snack categories (salty snacks, ice cream/sherbet, yogurt, crackers, cookies) surged while Wal-Mart’s fell. The convenience channel’s snack sales grew 1.7% in dollar sales, but fell 6.7% in volume sales.
Other shopping behavior findings from the SFA report include:
• More than 80% of consumers actively look for the best value when buying snacks.
• Approximately 26% are trying to make household snacks last longer.
• 31% are snacking less frequently.
• 42% are cutting back on money spent on snacks.
• Nearly 22% are cutting back on unplanned snack purchases.
Category sales are aided heavily by product placement in the store, said Mark Stepp, retail general manager for Beach Oil Co. in Clarksville, Tenn., which operates 15 BP Shop and ExxonMobil On the Run stores. “The category has been holding its own, but customers of these products tend to be very loyal. That helps boost the category’s overall value.”
Beach Oil advertises the category and runs occasional brand specials. Each store merchandises the three brands they carry: Slim Jim, Jack Link’s and Frito-Lay—on one of its main end caps. His strategy with the category is relatively simple: “Just keep it looking good, maintain stock levels, and it will sell,” Stepp said. Accordingly, no changes are planned. “I think we’re in pretty good shape like it is. We’ll evaluate new products as they become available, but it’s a solid category as is,” he added.
The bad news for an impulse-heavy snack, such as meat snacks, is that during the recession, more consumers each year have decided what to buy before they leave the house. In 2007, the number was 60% and in 2009 that number surged to 85%. Sixty-four percent of consumers said they work from a homemade list, and though that is related more to grocery shopping than convenience store purchases, the caution is bracing for any retailer.
The meat snacks category tends to appeal to consumers both as a planned purchase and an impulse buy, which is why having multiple products with varying price points is so important, as well as stocking items in heavy impulse areas, like the front counter.
“Maverik’s meat snacks are a major profit center which we give prime location,” said Rich McKay, category manager for the 215-store chain based in North Salt Lake, Utah.
Prime location for McKay means dedicated end caps—large bags are on one or two power panels of a two-foot to four-foot inline section. A large bag brand is on promotion each month in a shipper, or beer tie-in. Typically, McKay said, Maverik features promotions of two bags for $7 or one for $4.99.
Meat snacks dominated the alternative snacks subcategory in the 2010 NACS State of the Industry data, accounting for almost 63% of its sales. While that number was slightly down from 2009, average store sales rose, as did gross profit margin dollars and gross margin percentage.
“In 2009, and thus far in 2010, we promoted very hot retails with a major partner to produce very sales high increases in meat snacks,” McKay said, adding he expects a double-digit gain in 2011 as well. One of Maverik’s successful promotions in the past two years has been the bundling of fountain drinks with Jack Link’s beef jerky: get a free large fountain drink with the purchase of a three-ounce (or larger) package.
“Our focus is on giving our customers value,” McKay said. “They’re definitely looking for value, but we offer values on the large bags that make it easier for customers to pay a little more because they are getting twice as much for their dollar or even more.”
Maverik consumers are also on the prowl for new varieties. “Our customers are looking for mostly natural jerky in bulk or large bags, and for sausage sticks in bulk as opposed to packaged sticks. Unlike 10 years ago when original, teriyaki and peppered were close to the same in terms of sales, now the teriyaki is 38-42% and almost double that of peppered.”
On the same side of the country, Lon Audet of Boise, Idaho’s 48 Stinker Stores, has a few unique twists to his meat snack business.
In August and September, to capitalize on the Boise State football program’s national fame, Old Wisconsin packs 72 1.75-ounce snack sticks in a tin decorated with Boise State’s logo. Whoever buys the last stick gets the tin, said Audet, the chain’s marketing and merchandising manager. Audet has also found a quirky product to complement his big three brands—Jack Link’s, Oberto and Tillamook: a two-pound bag he sells for $6.99 or two for $12. Still, the meat snack customer is hard to pin down price-wise.
Audet, like McKay, said contrary to the economic times, smaller packages for less price are not making waves. Audet discontinued a smaller Jack Link’s product because of slow sales. A 3.25-ounce bag of an established brand retails for $6.49 in Audet’s stores, but he does offer a brand in that size for $4.99 or two for $9. On the other hand, Audet pulled an Idaho-based jerky that was low-priced (for a 3.5-ounce bag) because it “failed miserably,” and also was unhappy with the performance of a one-pound bag that sold for $9.99.
To take advantage of jerky’s strong impulse performance, Audet displays his meat snacks in a three-foot end cap supplied by Jack Link’s that also has side racks. Bulk sticks are featured on the POS signs, and every month there is a promotion for the product that provides a margin of 38-40%. He said he sees meat snacks’ margin as a bolster for the lower margin, but high volume, of Frito Lay snacks, including Matador.
In Tennessee, Roadrunner Markets, owned by Johnson City’s Mountain Empire Oil Co., also does brisk business with meat snacks. John Kelly, chief operating officer and vice president of operations, said meat snacks have risen between 5% and 10% each of the past couple of years. Kelly does see a trend to smaller packages.
“I think the customers come to expect smaller packages,” Kelly said. “As costs rise, there is little room for retail to go up.”