Locked-down Brits are turning to the comfort of streaming services and snacks. So what has been the impact on sales?
- PDF, Size 3.98 mb
Forget Netflix and chill. Under the lockdown, Brits have only one thing on their minds: Netflix and crisps. Because if there are two things prevailing in the pandemic, it’s streaming services and snacks.
After Britain was warned to stay at home on 16 March, Netflix cut the streaming quality of its content to allow more people to view without it crashing. Some estimates now suggest Netflix is raking in an extra £15m a month thanks to lockdown.
The pandemic has also proven an unexpectedly apt time for the European launch of Disney+. The streaming service reportedly attracted five million downloads across seven countries in its first day of operation at the end of March.
And snacks are proving the perfect companion for these binge-watching sessions. Year-on-year crisp sales have skyrocketed 21% in the past month [Kantar 4 w/e 22 March 2020]. Nuts and popcorn sales have shot up 16% and 14% respectively.
That effect was particularly pronounced in the week Britain went into lockdown. KP Snacks group sales director Andy Riddle says the week ending 21 March was the “eighth largest for bagged snack sales ever recorded”, according to IRI data. “Category sales hit £77.2m, an increase of 27.5% year on year.”
So what snacks are proving most popular as Brits go into hibernation? Which formats are selling fastest? And what, if anything, is being left on shelf?
Larger formats are the most obvious winners from Netflix binge sessions. The sharing bag trend has accelerated as Brits slump in front of the TV with family (or simply crunch through a pack on their own). Indeed, sales of sharing bags grew 16.2% in the four weeks to 21 March and 32.1% in that final week [IRI].
“In-home consumption is fuelling growth while the on-the-go occasion has declined”
So brands that deal primarily in larger packs are seeing the highest uplifts. Walkers Max, Walkers Sensations and Pringles delivered the largest percentage gains in the past 12 weeks, according to Nielsen.
This ‘bigger is better’ mantra has also boosted multipacks. Sales of these grew 15.2% in the four weeks to 21 March and 43.7% in that final week [IRI], as consumers move towards larger shops.
Which leaves one obvious casualty: single packs. Sales fell 4.1% in the four weeks to 21 March and 10.6% in the final week before that date. Essentially, the lockdown has left on-the-go formats such as these in limbo.
“The government advised against all non-essential travel on Monday 16 March, therefore on-the-go and hospitality sales declined significantly from this time,” says Riddle. “In-home consumption is currently fuelling the growth while the on-the-go occasion has, unsurprisingly, declined.”
Luckily, this shift towards larger formats is something brands have been dealing with - albeit to a lesser extent - for some time. Golden Wonder reports that Ringos, its best-selling snack brand, now sells three times as many sharing packs as it does singles through impulse. “Four years ago we sold the same of each format,” says marketing director Matt Smith. “I see the shift towards sharing continuing and helping to drive basket spend.”
PepsiCo has witnessed a similar shift. “Total sharing sales have grown by 124% over the past 10 years and now account for 31% of total crisps, nuts and snacks sales, up from 10% in 2010,” says commercial director for snacks Alex Brittain, quoting Nielsen numbers for the year ending 29 December 2019. He points to the launch of Doritos Stax as proof of how the manufacturer is looking to cash in on sharing.
Still, it’s not quite as simple as switching focus to larger packs and forgetting the smaller ones. As KP Snacks’ Riddle points out, single packs tend to form part of meal deals, so are not as promotionally driven. It used to be “an ongoing business that you can rely on for 52 weeks a year”. As the lockdown puts a dampener on many of those 52 weeks, brands are having to compete in the more promotion-sensitive area of larger packs.
Brands are also losing out on the higher-margin area of foodservice, as non-essential travel is banned for the foreseeable. “A lot of [foodservice] companies have closed since lockdown and we’ve lost money,” says Colette Russell Smith, co-founder of premium hand-cooked crisp brand Savoursmiths.
“If you’re suddenly staying at home all the time, your eating habits are going to change”
That makes it crucial to get the right retail strategy. Luckily for Savoursmiths, the lockdown has brought about an increased appetite for their posher crisps at home. Russell Smith reports an “incredibly big increase from Waitrose” and distributors such as Cotswold Fayre, which she puts down to consumers wanting to treat themselves.
“If you are suddenly working from home or staying at home all the time, your eating habits are going to change,” she says. “People aren’t going out so we think they will be buying more premium crisps for consumption at home, while they’re watching Netflix.”
Eating habits are also being influenced by retail space. Indian snack manufacturer Cofresh, for one, is suddenly seeing an increased presence in the aisles. “To avoid empty shelves, some retailers have given us double facings of our products in the world food aisles,” says Debbie King, commercial sales & marketing director at Cofresh.
“People who shop the world food retailers and the world food aisles in Tesco, Asda, Morrisons and so on, bulk-bought items such as rice, oil and chapati flour and the retailers weren’t able to restock. Retailers were saying they were down to their last 500kg of rice and they couldn’t replenish it, so they filled that space with our products.”
Supply and demand
This combination of higher consumer demand and larger shelf space has made supply a key priority for many snacking manufacturers. Pladis, which makes Jacob’s savoury snacks, is closely monitoring the situation. “Due to the particularly high levels of demand we’re currently experiencing, our number one priority is maintaining our solid supply chain, particularly on our core range and bestsellers, and working with our retail partners to get our products from our bakeries to supermarket shelves as quickly and efficiently as possible,” says Pladis customer marketing director Stuart Graham.
For PepsiCo’s Brittain, this issue of supply goes beyond just business sense. He believes maintaining an adequate stock of snacks could have consequences for the nation’s morale. So the company is putting supply of its key brands - including Walkers and Doritos - at the forefront of its efforts.
“Times are tough, so the last thing people want is a limited range of food available. Walkers’ purpose is to put a smile on people’s faces and that’s more important now than ever,” says Brittain. “Behind the scenes, our manufacturing team is demonstrating remarkable resilience and agility to maintain supply to our customers, prioritising the products the nation loves most at this difficult time. Our potato supply remains resilient, thanks to our strong relationships with more than 300 UK farmers across the UK.”
His last point is particularly pertinent. Because not everyone is in the privileged position of having bountiful potato supplies. “We were already operating in a potato season where only 85% to 90% of our contracted volume was available due to poor weather conditions,” says Calbee UK commercial director Jon Wood. “As such, we incurred significant costs by sourcing potatoes from Europe to meet demand. Unfortunately Covid-19 has cut off this supply, so we are now working from a finite amount of potatoes.”
“Times are tough, so the last thing people want is a limited range of food available”
Mackie’s Crisps says the “huge surge in sales” in March even put pressure on supplies of seasonings and packaging. Thankfully, that’s starting to calm down. “As of early April, things have settled and the supermarkets are even reporting a lull,” says commercial director James Taylor.
Plus, Taylor points out the potato supply situation isn’t as dire as it may first seem. “Because many potatoes graded for chip-making can also work for crisping, the closure of the majority of fast food outlets is likely to save our diminished potato stocks.”
Of course, diverting thousands of tonnes of potatoes originally destined for the deep fat fryers of McDonald’s and Burger King to smaller crisp manufacturers up and down the country presents its own challenges. But there may be another answer for brands looking to safeguard their margins: diversification into different raw materials.
Kantar says many alternative takes on the potato crisp are performing well. “Pringles Rice Fusions launched strongly, earning a place on Kantar’s ranking of the most successful new fmcg launches of 2019 and most probably delivering higher margins to manufacturer Kellogg’s, given they are made of rice instead of potatoes,” says analyst Tomas Caetano. “Another example is McCoy’s Muchos (made from a mix of wheat and corn flour and potato starch) with its strong sharing proposition.”
Plus, these raw materials can be more predictable than the spud. “The trouble with potatoes is that it is an annual crop and you don’t know what you are going to get until the harvest,” says Michele Conway, sales director at Pasta Foods, which supplies pellets made from raw materials including potatoes, chickpeas and lentils to snacking manufacturers.
“Crisps manufacturers in the UK and Europe have been really challenged by the poor harvests, which have affected both quality and availability and meant that prices have remained firm. It’s less of a challenge for us because generally the potatoes we use for pellets are grown for their starch and are not specifically for crisping.”
“Crisps manufacturers in the UK and Europe have been really challenged by the poor harvests”
It’s telling that Hula Hoops - made from pellets similar to the ones Conway describes and therefore insulated from the worst of the cost inflation incurred by crisping potatoes - was the strongest grower in the bagged snacks market for the year to 23 February [Nielsen]. Sales are up 15.4%, or £19.1m, on volumes up 6.8%.
Value for money is a key draw here. The cheaper cost of Hula Hoops means it can afford to offer 50g grab bags in Tesco’s meal deals, which compares favourably with a 40g bag of Walkers. That has helped make BBQ Beef Flavour Big Hoops the retailer’s bestselling meal deal snack. “It’s a better deal but it also has to deliver a better taste,” says Riddle of brand owner KP Snacks.
That proposition is also going down well in the convenience channel. “Forty-four per cent of Hula Hoops go through the convenience format and they’re growing at 23% year on year in c-stores,” explains Riddle.
Finally, there is one further benefit that potato alternatives can offer: health perceptions. Of course, taking spuds out of the equation doesn’t necessarily mean you have a more virtuous snack. But brands that have used different raw materials to develop a healthier proposition - and have communicated that concept - are reaping rewards.
Take Graze, for one. Its Crunch range, which includes smoky barbecue flavoured peas that contain 118 kcals per portion, seems to be hitting the mark. “The Graze sharing bags portfolio is in double-digit growth year on year, driven by the Crunch range innovation that we have brought to market, which is currently growing at 56.7% year on year,” says chief brand officer Pia Villa.
Organic chickpea puff brand Hippeas is also finding success with a low-calorie proposition. “This year in the UK, we’ve seen incredible growth at 37% year on year, and this is all coming from our core range, with no NPD yet launched,” says CEO Joe Serventi.
In this climate, his stance on NPD may become a more common one. Because innovation is one thing that has taken a back seat. Marketing is also taking a hit due to the cancellation of major sporting events such as the Olympics and Euro 2020. “Clearly, activations with sport or films are postponed,” says Brittain at PepsiCo.
However, even here there is an upside. “We’ll continue to build partnerships around more appropriate activities, such as our plans to become the headline sponsor of Film4’s 9pm movies from 14 April with Sensations, our premium sharing brand,” he says.
Too bad PepsiCo no longer makes Tiger Nuts. Because that would have given it the perfect opportunity to partner with Netflix’s hit of the moment: Tiger King. And that is one surefire way to win during lockdown.
Innovations in crisps, nuts & snacks 2020
- PDF, Size 3.98 mb