Consumers cut back on many things when times are tough but not treats and nibbles.
The £1.9bn crisps, snacks and nuts market has enjoyed 6.7% value growth over the past year and volume sales are up a healthy 4% [Kantar Worldpanel 52w/e 20 Feb 2011].
Affordable treats are benefiting hugely from the challenging economic climate and with the emphasis very much on value for money, mass-market brands are outperforming their premium rivals.
Sharing bags are doing especially well partly because they're relatively cheap compared with single-serve bags and partly because they tap into the continued popularity of eating in rather than out.
Although Kantar reports a downturn in the consumption of crisps as a between-meals snack, this is more than balanced out by the increase in sales of larger sharing bags, claim the big brands. "The sharing category is up 12% and has been growing year after year," says Mark Sugden, customer marketing director at McCoy's and Hula Hoops owner United Biscuits.
The big mainstream brands are thriving. "The sharing occasion is in growth and our products in that category have grown massively," reports Walkers marketing director Miranda Sambles. "Doritos is growing at almost double the rate of the category."
It's no coincidence that Walkers, KP, Pringles and McCoy's have been both the most active promoters (see p88) and strongest performers. Promotional activity has been key across the category.
Sales of Pringles, currently the leading large sharing snack brand, have also been driven by consumers entertaining at home, says Paul Lettice, head of trade communications at Pringles-owner P&G, which announced last month it is selling the brand to Diamond Foods.
"Large sharing snacking occasions are driving trial and frequency of purchases across the entire snacks category, as consumers seek to maximise the quality of social time spent with friends and family," he says.
Competition for sharing bag sales is most intense at the premium end of the market, with brands such as Walkers Red Sky and Sensations and UB's Phileas Fogg range fighting for facings with brands such as Kettle Chips, Tyrrells, Burts Chips and Real Crisps. This creates some sales figures volatility as brands move on and off promotion. "Sharing has been much more promoted over the past year, and as a result premium brands are performing strongly, but not driving the market," says Kantar category analyst James Spicer.
These tactics led to a mixed bag of results for sharing brands. SymphonyIRI figures show that the best gains were made by Tyrrells, which grew value sales from £15m to just shy of £22m. Burts enjoyed a more modest jump from £2.3m to £3m and Red Sky also experienced growth of £12m to £14m, although SymphonyIRI reports a slight drop-off in sales in more recent weeks as it came off promotion. On the flipside, there was a significant fall in sales for Phileas Fogg in the year to 22 January, from £9m to £7.5m, with Kettle Chips managing a tiny increase, up 0.6%.
Owner UB says that "the brand decline can be attributed to our withdrawal from the tortillas segment as we focus on our crisps business." Despite the slump, however, Sugden maintains Phileas Fogg continues to do "very well" in the multiples and "phenomenally well" as one range of four £1 price-marked sharing packs launched by UB for the convenience and impulse sector (alongside McCoy's, Hula Hoops and Mini Cheddars).
Walkers, meanwhile, has tried to differentiate its sharing range to maximise and not cannibalise sales, says Sambles. "We were the first brand to establish the sharing market in crisps, snacks & nuts with Sensations, and that market has grown massively since."
Red Sky has a strong appeal to upmarket AB consumers, explains Sambles, the new Walkers Extra Crunchy variant is geared towards the C1/C2 demographic and Sensations is more of an "intimate sharing product, so more likely to be shared by couples, while Doritos is more likely to be shared by groups, and is skewed towards 18 to 25-year-olds".
Kettle Chips has clearly got its target demographic sussed. The company increased sales by 0.6% to £84.1m in the year to 22 January 2011.
"Kettle is a key brand in premium snacking with growth rates ahead of the rest of the market," claims Slamin. "We believe consumers are trading up to more premium CSN with added value."
Kettle extended its reach beyond the sharing format in 2005, adding smaller 40g bags to its core range and more recently expanding this offer with the launch of Kettle Ridged Crisps in the same format in February this year, in Flamed Steak only. Four Kettle Chips varieties were made available in 5x30g multipacks in 2010.
"Crisps and snacks are an affordable treat even in tougher economic conditions," says Slamin. The launch of the smaller bag has encouraged consumers to buy at lunchtime and to try out a variety of the brand's flavours, he adds.
Seabrook is adopting a slightly different tactic to persuade people to try more flavours. Rather than its standard 48-pack box, it's making a 24-pack box of its core range available to retailers, allowing them to test sales of new flavours at less risk. "This provides the retailer with a greater confidence in their ability to sell through the products," says trade sector controller Jon Wood. "Therefore they will be more willing to trial numerous flavours."
The company has also agreed new cash & carry listings with Bestway and Dhamecha Group as part of a drive to improve its distribution in the South and, last year, it tried to gain a foothold in the healthy snacks market through the launch of its 'Goodbye salt Hello flavour' range, with 90% less salt than the standard range.
It's not the only brand to go down this route. Driven both by consumer demand for healthier products and official targets set by the FSA for fat and salt reduction, a number of major brand owners have reformulated their products over recent years. However, this trend seems to have been less of a priority for brand owners over the past year perhaps because they feel they have taken reformulation as far as it can go without compromising on flavour.
Some question how much scope there is to make further cuts. Natalia Douek, regulatory affairs director for Walkers parent PepsiCo Europe, warned the Grocer Food and Health conference in February that achieving further major reductions in salt content products would be challenging.
Consumers now take it as read that products are as healthy as they can be, adds Sugden. UB's reduction or removal of saturated fat in McCoy's, Twiglets, Wheat Crunchies and Nik Naks is now simply the price of entry into the snacks market rather than a differentiator, he argues.
"The overt healthier bit of the CSN market is worth £91m it's the smallest part of the sector and declining 7% year-on-year," he says, quoting Nielsen figures. "Consumers are reassured that suppliers are investing hard to improve the nutritionals of their products." It's no surprise given the decline in healthy snacks sales that Walkers has shifted the marketing focus for its SunBites multigrain snack from health to flavour. "Once people try it they love it," says Sambles. "It's about getting more people to try it."
Smaller brands, however, see an opportunity to fill a niche not being met by the majors. "The emphasis of healthier eating has been well and truly placed on salt intake levels," says Seabrook's Woods. "We wanted to ensure that we are giving our consumers choice, so for those wanting to reduce salt they can do so while still enjoying their favourite crisp brand."
Other brands are confident that healthy snack sales will bounce back if they haven't already. Although healthier options have suffered in the downturn, "at the end of December 2010, diet and low-calorie savoury snacks returned to growth", with SymphonyIRI data showing an 11% increase, says Fran Campbell, MD of The Dormen Food Company.
Its WeightWatchers crisps and savoury snacks range saw an increase of 32% in the 12 weeks to 23 January 2011, and "this strong growth is predicted to continue," claims Campbell.
Warburtons is also sticking to its guns and emphasising the healthier credentials of its relaunched Baked Pitta Chips, which originally hit the shelves last March but were withdrawn four months later after a bakery fire hit production. Twice-baked to give added crunch, the chips contain a third less fat than standard potato crisps.
Health claims will only work for certain brands, however, believes Barney Mauleverer, partner at Fresh Marketing. He is adamant there is a growing demand for healthier low-fat snacks to replace crisps as a between-meals snack and that the opportunity is ripe for challenger brands to enter this space. But, he says: "Walkers is not a credible brand to carry a healthier licence consumers don't buy into this."
Fresh Marketing has extended its Diva brand, which already includes four flavoured popcorns, to also include three healthy eating popped cassava snacks.
It's tapping into a market buzzing with NPD, but the jury is still out on how well popcorn is doing. The past year has seen a flurry of new flavours, many of which come at the more adventurous end of the spectrum, such as Corn Again's Chilli and Fennel (see below), but despite heavy innovation, volume sales are down by 3.0% and value is up just 0.1% [Kantar 52w/e 17 April 2011].
Some brands are doing well, however. Butterkist boasts sales of £26.8m, up 7%, and a 63% share of the market [SymphonyIRI 52w/e 16 April 2011] and it is expanding distribution through new listings. "Popcorn has very much become part of the regular grocery shop," claims Sarah Brown, Butterkist brand manager at Tangerine Confectionery. With more people now forgoing the cinema for a DVD at home, consumers are adding Butterkist to their shopping baskets as a stay-at-home treat, she says.
"Our ready-to-eat range continues to perform well, from the original Toffee variety through to the most recent addition, Chocolate Coated Toffee, and sharing packs in particular have seen growth," she says.
When it comes to new flavours, it is not just crisp brands that are spicing things up. Kohlco Brands has extended its long-established Eazypop popcorn brand with a chilli variant alongside butter, sweet and salted. Tyrrells also offers a Jalapeno Chilli flavour in its Proper Popcorn range which, says marketing director Oliver Rudgard, "has a very adult focus and aims to drive value into the popcorn category in the way we've done in potato and vegetable crisps".
County Durham brand Corn Again, founded in 2009 by husband and wife Richard and Catherine Furze, offers both sweet and savoury variants, although they had a struggle to convince shoppers of the merits of the latter. "Initially, people were saying that savoury popcorn is 'all wrong', but we found that if we had a sweet variety too they would try both." Corn Again has four flavours in Asda, including Salty Sweet and Chilli and Fennel.
Reluctant to let the brands have it all their own way, Waitrose is planning to introduce flavoured popcorn products into its snack range, with popcorn "destined to be a huge trend in the next few years", according to snack buyer Victoria Green.
Although there has been plenty of focus on new brands and flavours, crisp brands in particular have capitalised on nostalgia chiefly by reviving familiar brands.
In February Golden Wonder relaunched Ringos, one of the lines acquired by parent company Tayto when it bought Golden Wonder from Walkers in 2006 and described by its new owner as 'neglected'. Walkers itself successfully relaunched the veteran Monster Munch range as Mega Monster Munch in 2008, targeting adult consumers with fond memories of the brand from childhood.
UB, meanwhile, revamped Phileas Fogg in 2008, repackaged and repriced Space Raiders in October 2010 and relaunched Discos in 2007, updating the packaging and reformulating the product to contain less saturated fat. "Certain retro brands work really well at Waitrose, with Discos a particular highlight for us," says Waitrose snack buyer Victoria Green.
Discos is doing well, while the repackaged Space Raiders is up 59% year-on-year, claims Sugden. But it isn't just nostalgia driving the renaissance of such brands, says Sugden. It's also marketing support. "These are all brands from the 1970s and 1980s, which is when loads of innovation came into snacks," he says. "You may take your foot off the gas in marketing terms for a time, but the strength of the connection with consumers remains, and a brand like Discos can come back very quickly."
While crisps may have endured their fair share of the inflationary impact, with ONS figures showing a 9.5% increase in the price of potato products in the year to March 2011, nuts have fared even worse.
Dormen's Campbell says that the price of nuts has undergone an unprecedented increase over the past year. "Cashew prices, for example, have risen by up to 60%, with whole Brazils hit worst with nearly an 80% increase," she says.
SymphonyIRI figures show that the total nuts market grew from just under £250m to just over £260m in the year to 22 January 2011. Own label, worth £180m, is far bigger than any brand, with biggest player KP, owned by UB, worth just £42m, followed by Dormen at just shy of £6m.
It's a fragmented market and variety is more important to consumers than brand, say experts. Price is a factor, too, says Waitrose's Green. "Customers know nuts will be more expensive than crisps, so we are involving nuts in lots of promotional activity. Ninety per cent of our nut assortment is own label, and sales are strong, a clear indication of how nut sales work, comparing own label with brands. Own-label crisps are also blossoming as the misconception that they aren't as good as branded slowly fades."
With own label thriving, promotions are very important for a premium brand such as Dormen, adds Campbell, as they encourage consumers to try something new. "Within the category, peanuts are the bestsellers, but more than two thirds of the category is made up of speciality nuts, so it is essential to offer consumers a variety," she says. "There has been an increase in consumers who want to experiment with new flavours and tastes. We have also seen a rise in the demand for more varieties and exciting flavours to enjoy at home."
Recent additions to the Dormen range include smoked almonds, caramelised cashews, spicy nut satay, wasabi peanuts, and chocolate covered peanuts. Also innovating is Northern Irish brand Forest Feast, which launched its Snack International range of nine varieties at IFE this year.
The sub-category has also been boosted by brands from other sectors, with Kantar's figures showing both Marmite and Reggae Reggae nuts among the top 10 brands. The company behind both, Humdinger Foods, has also launched nut ranges under the Branston and Sharwood's brands.
Innovation will play a key role in the category's future growth. "It's critical that we continue to make those ideas fresh," says Walkers' Sambles. "We still see NPD driving growth of the brands and the category."
Walkers plans new executions of its successful flavour-based promotions, predicting high-profile activity later this year.
Waitrose's Green welcomes the promise of NPD activity, saying that it adds "excitement and theatre" to the category. Excitement that is clearly needed if shoppers are to help munch CSN out of the credit crunch.
Focus On Crisps, Nuts & Snacks