Outlook Strong for Salty Snacks

The recession of the past couple of years has not swayed consumers from their salty snack habits.

In almost every type of data, salty snacks continue to thrive. According to NACS’ 2010 State of the Industry report, convenience store salty snack sales climbed 3.4%, while margin dollars climbed 4.8%. Since 2007, sales of salty snacks through all retail channels has risen 15%.

According to sales numbers from Chicago-based Mintel International, the top performing subcategories—potato chips and tortilla chips—rose 22% and 19%, respectively, from 2007 to 2009, and sales are forecasted to continue growing at least through 2012. Indeed, the rough economy may be the impetus for the strong snacks showing.

Another Mintel study revealed that 15% of adults questioned said they were “taking bagged lunch/food to work more often,” and 17% said they were “buying more ready-to-eat foods.” Also according to Mintel, in early 2010, nearly six of 10 survey respondents said the economy was forcing them to spend less at restaurants than they had the previous year. As a result, these customers are spending more on packaged snacks that they can bring to the office.

“The consumer seems to be looking for more and more value,” said Dan Powers, category manager for salty snacks for Tedeschi Food Shops, Rockland, Mass. “Convenience stores are well-positioned to meet this demand, especially given our core focus on category management.”

Powers, whose salty snacks sales rose 6% year-to-date as of August, is referring to enhancing value. The first is the reason margin dollars have increased: larger-sized packages are selling well. As more people eat at home, snacks are no longer for immediate consumption, but complements to home meals for the whole family.

Cater to Consumers
Powers can also attest to the fact that bargain hunting topped brand loyalty during these tight times because Tedeschi has a strong private label store brand in salty snacks, water, bread, soda and pastry. These products are boosting his margin dollars and growing brand loyalty.

A study on consumer packaged goods (CPG) brand loyalty among American shoppers, conducted by Catalina Marketing’s Pointer Media Network in conjunction with the Chief Marketing Officer (CMO) Council, analyzed the individual buying patterns of more than 32 million consumers in 2007-2008, across 685 leading CPG brands. It found that for the average brand in the study, 52% of loyal customers in 2007 either reduced their loyalty or completely switched brands in 2008.

Tedeschi’s ratio of direct-store delivery (DSD) to warehouse-delivered snacks shifted from 78-22 in 2008 to 72-28 in 2009, as warehouse snacks provided 38% of the category’s profit. Tedeschi’s offers six-ounce nuts and trail mixes and five-ounce bags of potato chips, with more options and sizes upcoming.

Powers places the private-label snacks next to the DSD on the gondola, to show the price difference, a fact that is also bolstered by bright-orange stickers on the private-label bags. DSD has the edge in brand strength, of course, as well as variety. Stores also will not highlight DSD if there is a promotion that is a better value than its store brand.

End Results
The company also uses multi-vendor endcaps (MVE), the warehouse-delivered sets of top-selling brands and flavors that have swept the country since 2006. Walter Ryan, director of marketing for K&G Petroleum of Littleton, Colo., in August was nearing approval for an MVE program for his 35 stores.

Ryan likes many things about the MVE—write-offs are guaranteed, no labor and the latest products are sure to be included. The use of the MVEs also fit with K&G’s policy of uncluttered aisles, favoring promotions over shippers.

MVEs grew from research by the warehouse delivered snack committee of the Fairfax, Va.-based American Wholesale Marketers Association (AWMA). The distributor-driven committee wanted to try to reclaim the valuable space owned by DSD. The result of the brainstorming was a collaborative distributor/manufacturer combination of secondary placement for impulse items, top-selling brands, different flavors and sizes, and fixtures paid for by the manufacturers.

The distributor typically does the category management, ensuring that top performers stay and slow-sellers are replaced. New products are thus given a natural chance. A typical display might feature products from Jack Link’s, Hershey, Proctor & Gamble and Kellogg, though the mix can be different regionally.

McLane Co., of Temple, Texas, began its MVE program a little more than a year ago. It offers free fixtures (valued at up to $400) and 15% discounts on display items. There are two sizes of endcaps, and retailers can earn $150 per year in planogram compliance incentives.

“It’s a win-win for the distributor, a win-win for the manufacturer and a win-win for the retailer,” said AWMA vice president of marketing, membership and industry affairs Robert Pignato.

Less DSD Dependence
Garber Brothers Inc., of Stoughton, Mass., is a convenience store distributor that serves the Northeast region, including Tedeschi Food Shops. Jody Garber, vice president of purchasing, said Garber Brothers has partnered with its vendors to offer its own MVE since 2008. The program, based on product movement, is serviced once a week, and has added additional sales to Garber Brothers as well as the retailers. Her MVEs are dominated by salty snacks and are typically anchored by Pringles and Planters.

Garber said the initial appeal to her company’s retail partners is that an MVE would lessen the influence and space of DSD in their stores. After test marketing the program, retailers stay for the full-service marketing and incremental sales provided by the impulse engine of the secondary placement.

“It’s keeping DSD vendors out of their stores,” she said.

Garber said the retailers who have yet to embrace MVE either have a restrictive merchandising policy or don’t have the space. Most of her MVE customers are chains, she said, not independents.

Like Garber, Ryan of K&G, said that the trends are toward spicy and bold flavors and larger-size packages. Ryan is always looking for something new, and is lucky to have a local supplier that makes and packages popcorn that is selling well.

The Rocky Mountain Popcorn Co. not only makes a snack that has grown in popularity in recent years, it makes flavors such as white cheddar, kettle corn, caramel, jalapeño, butter and red chili. Also, it has designed a 1.5-ounce package it calls Grip n’ Pour that Ryan says fits well into a convenience store—long and narrow bags, five to a caddy, and peggable.

K&G also features Boulder, Colo.-based Boulder Canyon Natural Foods snacks, like kettle chips, tortilla chips, multi-grain puffs. Sold in compostable bags, these may be a harbinger of another trend in salty snacks—organic ingredients, green-production policies, low additives and preservatives. Powers of Tedeschi said his chain plans to focus on a healthy-for-you snack section for the remainder of 2010.

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