Sweet treats aren’t just for pudding any more. Shoppers want an indulgent kick for breakfast, and sweet spreads are booming

Puddings were once reserved for after dinner. Nowadays, desserts are permissible first thing in the morning. Because sales of indulgent spreads – many of which sound more like a decadent treat than a breakfast item – are booming.

And the more they resemble gooey confectionery, the better. Spreads from Lindt, Hotel Chocolat, M&M’s and Cadbury Caramel are doing a roaring trade. Last autumn also saw the launch of Banoffee, Salted Caramel and Gingerbread spreads by Lidl, as well as a White Chocolate Hazelnut spread by Morrisons.

So powerful is the trend that even players from the dessert world are getting involved. Gü, for example, launched its Salted Caramel and Hazelnut & Chocolate spreads in 2018. The lines have already passed the £1m mark and have gained listings in all of the big four.

“Consumers are looking for ways to upgrade their simple treats and a generous dollop of our new spreads is just perfect for this,” said Gü global marketing manager Hannah Kehoe at the time of the launch.

The likes of Gü have helped the supers sell an extra 450 tonnes of chocolate spread in the past year [Kantar 52 w/e 6 October 2019]. That’s the greatest volume gain in the jams & spreads category.

All this flies in the face of the supposed healthy eating agenda and Public Health England, which has set an ambitious sugar reduction target for jams and spreads. So what’s going on? Have consumers not seen the polls that say they’re all trying to avoid sugar like the plague? And is this a sign that their passion for peanut butter, often marketed as the ultimate health food, is waning?

“Historically spreads has lacked innovation, focusing on chocolate and hazelnut”

There is one crucial factor at play here: innovation. Not long ago, peanut butter was at the epicentre of product development in the category. Now sweet spreads are catching up.

Premium popcorn brand Joe & Seph’s, whose new sauces are due to roll into Booths’ spreads aisle later this year (see p53), believes this level of innovation is unlikely to die down any time soon. “Spreads is a category that could still do with brightening up,” says co-founder Adam Sopher.

“Historically it’s lacked innovation, with brands primarily focusing on chocolate and hazelnut.”

Joe & Seph’s has certainly gone beyond that brief. Its sauces, launched after the brand was inundated with enquiries about the coating it uses on its snacks, include flavours such as Espresso Martini, Chocolate Orange, Banoffee Pie and Prosecco Caramel. Its “hero product”, the Salted Caramel Sauce, won a Grocer New Product Award.

None of these sound particularly virtuous. But the buzz around healthy eating doesn’t seem to be stopping consumers from buying into this indulgent fare. Sopher has a theory. “We’ve seen it in snacking and we’re seeing it in spreads: when consumers want to indulge, they really indulge, but for most of the time they’re looking to eat healthily,” he says. “It’s the products that sit in between that seem to be struggling more.”

What’s more, consumers seem willing to pay above the odds for a slice of this ultimate indulgence. Super premium lines such as Joe & Seph’s Chocolate Caramel Sauce (stocked in the spreads fixture in Ocado) and Hotel Chocolat Salted Caramel Pecan Chocolate Spread fetch £4.29 for 230g and £6 for 150g respectively. Meanwhile, Gü sells for £2.50 for a 200g pot (though Tesco and Asda have recently been running £2 promotions on Gü).

“It’s the products that sit in between indulgent and healthy that seem to be struggling more”

These all come at a premium compared with chocolate spreads market leader Nutella, which retails at £2.89 for a 400g jar. This means value is growing ahead of volume in branded chocolate spreads. While value is up, volume is actually down 1.6%.

The latter, less positive figure is down to Nutella. Because although chocolatey spreads are thriving as a whole, the beacon brand has suffered the category’s biggest volume loss. It shifted 1.8 million (8.9%) fewer pots, equating to a £1.2m drop [Nielsen 52 w/e 7 September 2019].

That’s in no small part down to the success of these aforementioned innovative brands, which are keen to give established names such as Nutella a run for their money. The competition isn’t just coming from higher-priced, ultra-premium offerings. Rival confectioner Mondelez waded in last spring with the launch of Cadbury Caramel Spread and Mars has seen strong growth for its M&M’s spread (Nielsen puts its value growth at 81.2% to total £570k).

Ferrero is also having to contend with an increasingly innovative own-label sector. The new Morrisons White Chocolate Hazelnut spread received rave reviews from shoppers, who likened its flavour to that of the manufacturer’s Kinder Bueno confectionery, for example. Considering own-label chocolate spreads are on average £2.58 cheaper than branded options per kilo [Kantar], these kind of lines are attracting price-sensitive shoppers. That has helped drive a 9.9% growth in the value of retailer chocolate spreads on volumes up 12%, the category’s biggest own-label gain by a long shot.

Ferrero customer development director Levi Boorer acknowledges that price remains an important factor in the spreads market. “Promotions in spreads are a key driver of growth,” he says. “Our fastest-growing SKU has been our 400g jar – our core product that has benefited from having a £2 price point when promoted, which has attracted consumers looking for high-quality products that give good value for money.”

At the same time, Ferrero can’t afford to ignore the innovation at the more premium end of the market. To that end, it has developed Nutella + Cocoa (see right), which claims to contain double the cocoa levels of the standard chocolate spread. “Off the back of the recent boom for richer, more intense flavours seen across a multitude of categories, we wanted to offer this new Nutella + Cocoa variant to our consumers,” says marketing director James Stewart.

“The UK has been chosen as a test market because we’ve seen a growing trend for richer and more intense flavour variants,”he adds. “This new alternative flavour delivers on that.” According to Stewart, taste tests ahead of the March launch date have been “really positive”.

 

Sticky and sweet spots: jams & spreads value sales

Spreads sector performance   
       
  Value (£m) % growth Market share
Honey   124.1 -6.6 23.4
Jam   111.8 3.7 21.1
Peanut Butter   105.2 3.5 19.8
Chocolate Spread   75.9 3.0 14.3
Marmalade   55.1 -3.3 10.4
Yeast Spread   44.7 -1.1 8.4
Other Sweet Spread   7.0 47.2 1.3
Curd   6.9 5.4 1.3
       
 Source: Kantar 52 w/e 6 October 2019      
  • For a market that’s only mustered value growth of 0.2%, there’s a surprising amount to talk about in jams and spreads right now. First, look at the sticky situation honey is in: value has slumped 6.6% but units have grown 1.4%.
  • This can partly be explained by a steep decline in sales of manuka honey. Given that the stuff can sell for more than £50 a pot, any decline in manuka will have a huge impact on category value. Kantar says another factor is a rise in brands’ reliance on promotions. Sales on deal have risen from 24.2% a year ago to 28.5%.
  • Premiumisation has been a key factor in the growth of value ahead of volume in peanut butter and jams. With peanut butter players expecting a return to stronger growth, fuelled in part by the veganism trend, the product could overtake jam as Britain’s second-bestselling spread in the coming year.
  • There could be difficulties in store for chocolate spread, the strongest-performing sector in volume. “Health will continue to be an important factor for sweet spreads in the year to come,” says Kantar analyst Chantel Kennaugh.
 

Peanut butter

Nutella isn’t the only major brand feeling the impact of fresh competition. A similar picture is emerging in peanut butter. Overall value sales grew 3.5%, driven by a 2.6% rise in prices that was pushed through by smaller brands. Meanwhile, the category stalwarts are being forced to either compete on price or face a hit to volume.

Market leader Whole Earth is a case in point. It suffered the greatest value loss in the spreads market of £1.4m (6.1%) on units down 6.2% [Nielsen]. That has partly been driven by fierce deals from rivals such as Sun-Pat and Meridian, which have slashed average prices per pack by 5.3% and 1.7% respectively. Meanwhile, Whole Earth’s prices have remained more or less flat.

Still, Whole Earth brand controller Kirstie Hawkins says the brand’s performance recovered in the second half of 2019. She believes there is room to trade on more than price.

“We are the official peanut supplier to Team GB for the Olympic year,” says Hawkins. “This is something we are really excited about for a number of reasons. It’s a really good opportunity to boost awareness of the healthiness of the product, which is something athletes use as a natural, healthy source of protein. There’s also a huge opportunity around the vegan trend so next year we will be driving the plant-based protein message to get new people to shop the brand.”

Hawkins is adamant the peanut butter boom is far from over, despite growth slowing down from the 9.5% value and 4.2% volume gains we reported this time last year [Kantar 52 w/e 7 October 2018]. “There’s still so much potential in peanut butter,” she says. “From the conversations we’re having with the trade, no one is expecting its growth to end now. We are still at just over 40% penetration but if you compare that to the States, they are at close to 70%. If we get all the elements right there is no reason why we can’t get there too.”

“Innovation plays a huge role: consumers are on the lookout for something exciting”

The question is who would benefit from such a growth in shopper numbers. Because smaller players are snapping keenly at the heels of Whole Earth and its ilk. One player that claims to have made huge progress in attracting new shoppers to the category is Pip & Nut, which has shot up a whopping 74.1% to £1.8m on units up 41.8%.

“We’re responsible for about 50% of category growth, so future growth in peanut butter is clearly about backing the right brand,” says founder Pip Murray, citing Kantar figures. “Seventy per cent of our growth is incremental. We’re a classic, millennial brand that is bringing in younger, healthier shoppers into the category.”

Many of these shoppers buy in bulk, which means the brand’s larger tubs are performing particularly well. “We launched our kilo tubs in Sainsbury’s at the end of 2018, which has driven our growth and increased spend per shop,” reports Murray. “Kilos make up 15% of the nut butter category, growing at £2.1m [IRI]. We’ve accounted for 60% of that growth. The amazing thing about our kilos is they’re incredibly expandable and have the highest frequency and repeat of our range.”

Flavour innovation is also crucial. Instead of promoting on price, Pip & Nut uses limited-edition nut butters to attract shoppers. These include the festive Pumpkin Spiced Almond Butter, launched in September and replaced this month with a Blueberry Trail Mix variant. According to Murray, these limited editions typically drive a 70% uplift on base sales.

Focusing on NPD seems to be working for other brands, too. Hawkins says the Whole Earth Hazelnut Crunch and Dark Roasted Peanut Butters have been key launches of the past year.

Then there is arguably the biggest launch of them all: Marmite Peanut Butter. The innovation helped the total Marmite brand rack up the second-greatest value gain in spreads over the past year of £1.3m (4.2%) on units up 1.7% [Nielsen].

Parent company Unilever is particularly keen to point out that half of Marmite Peanut Butter sales are incremental to the category, according to Aimia data. That was likely fuelled by the extensive media coverage (there was even a live taste test on This Morning). “The launch created a media frenzy with national newspapers reporting on the ground-breaking innovation and fans going wild on social media,” says Unilever marketing VP for foods & tea Hazel Detsiny.

Another brand looking to widen the appeal of peanut butter is Jackpot. Head of NPD Rupert Leigh wants to do this with innovative flavours such as wasabi and raspberry, functionality (the brand launched Britain’s first CBD peanut butter last year) and sustainable credentials. On the latter front, Jackpot is the only peanut butter involved in Loop, a global e-commerce platform that aims to reduce single-use packaging by encouraging shoppers to return bottles, tubs and pots for reuse.

“Since January 2019, we’ve been pioneering a closed loop reusable packaging concept at Broadway Food Market in Hackney,” says Leigh. “This has driven repeat purchase and closed the loop for 50-plus customers who return their packaging each week. Closed loop is something older generations remember and younger people understand.”

 

Spread unevenly: top 10 spreads brands by value

Top 10 Spreads brands  
     
  Value (£m) % growth
Rowse 54.0 5.0%
Nutella 48.4 -2.4%
Marmite 31.5 4.2%
Whole Earth 21.0 -6.1%
Sun Pat 18.6 4.8%
Meridian 12.8 -0.8%
Bovril 7.2 -0.6%
Princes 5.1 0.6%
Heinz Sandwich Spread 3.2 -3.5%
Cadbury 2.7 -5.8%
     
 Source: Nielsen 52 w/e 7 September 2019    
  • Spreads are in a jam. Value has inched up just 0.4% on units down 0.3%. Still, it’s not all flat – there are plenty of duckers and divers to be found when you delve deeper into the figures.
  • Rowse and Marmite have bagged the biggest gains of £2.6m and £1.3m respectively. Rowse puts this down to advertising investment and promotions. The April launch of Marmite Peanut Butter was key to the latter’s growth.
  • The trio of chocolate spreads launched by Gü in July 2018 have already racked up £1m. This proves two things: shoppers still have an appetite for indulgent spreads and there’s room for challengers.
  • That final point is reinforced by the growth of Pip & Nut, up £800k (74.1%), following major distribution gains for its kilo tubs and 400g jars.
  • The gains of Gü, Pip & Nut and fourth fastest grower Sun-Pat, up £900k (4.8%) thanks partly to deals that drove average price down 5.3%, have taken the shine off Nutella and Whole Earth’s (leaders of their respective categories) sales. They’re down £1.2m (2.4%) and £1.4m (6.1%) respectively.
  • Whole Earth says its sponsorship of Team GB for the Olympic year will return it to growth. “Team GB is really something that makes you proud to be British and it’s a great opportunity,” says brand controller Kirstie Hawkins. “It’s really something we can all unite around.” And isn’t that something we all need right now?
 

USPs

It’s increasingly important to have such a USP, says Hamish Renton, MD of consultancy HRA Global. He points to the jam market as further proof. Renton cites the decline of jam brands such as Hartley’s and Tiptree – down in value by 2.2% and 10.9% respectively – as evidence of the middle ground being squeezed.

Instead, retailers are pushing either cheaper own-label lines or more premium brands such as Bonne Maman, which is up 3.8% on units up 2.6% [Nielsen]. “It’s tough being an ‘ordinary’ jam right now,” he says. “The victims are undifferentiated jams with neither provenance nor taste USPs.”

Richard Duerr, marketing & sales director at branded and own-label preserves manufacturer Duerr’s, agrees. “Value growth in jam has been driven by consumers who are more and more discerning in their choices. Therefore, quality is increasingly important. Innovation also plays a huge part in this as consumers are on the lookout for something new and exciting to try.”

So the message is this: compete on price, innovation or a brand message. Just don’t fall into the middle of the road, or you might find yourself spread thinly.

 

Innovations in spreads 2020

 

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