Strong margins, loyal customers go hand in hand with healthful snacks.
On the Whole
Wholesaler Core-Mark, South San Francisco, Calif., is seeing increased demand for healthy snacks across the country, in all markets.
“Healthy snacks are definitely on the rise,” says Carla Boyington, director of category management. “We put the healthysnack category in over four years ago and have had double-digit growth every year. What’s driving our snacking business is healthy snacks. Our growth on these brands is phenomenal and is continuing year over year. If anything, we’re looking to balance our sets with even more healthy snacking products.”
Best-selling snacks include fresh fruit (the No. 1 snack, according to Boyington), chips such as Food Should Taste Good, Special K Cracker Chips, Stacy’s Pita Chips, yogurt and bars from companies such as Clif Bar, Kashi and KIND. Even all-natural jerky is on the upswing.
Core-Mark has been slowly buildingthe number and the variety of snacks it carries, and in 2010 it launched a Good Health To Go Snack Rack. Now, 15% of the bars and 10% of the salty snacks the wholesaler carries are healthy, says Boyington. But it’s also important that these products are big name brands so the consumer can recognize them and associate with them, she says.
Core-Mark also makes sure it rotates products with regular new offerings to continue to grow the category. “To keep product fresh—in people’s minds—and to keep on top of trends, we want to have the right new items and the right brands,” Boyington says.
One of these brands is KIND, which saw sales of its bars in convenience stores double from June 2012 to June 2013; sales in this shopping channel are slightly ahead of others, says Cliff Wheeler, senior vice president of strategic channels.
In fact, he says, “This year, we will put a strong emphasis on marketing toward business travelers and students—two demographics who frequent convenience stores. Whether it’s near the airport, the gas stations or close to campus, these are people on the go, and they do not want to sacrifice health for convenience.”
People on the go are also highlighted in Technomic’s snacking report, which states that impulse purchases of snacks are up from two years ago. Sixty-two percent of the respondents to the survey stated that most of the snacks they purchase for away-from-home consumption were impulse purchases.
Healthy options were also a focus, and more than a third of consumers told Technomic that they expect to eat more healthful snacks in the coming year.
Carrying on-the-go meal replacements also can make c-stores a destination for better-for-you items. “The premium beverage category is growing at a pace of over 20% per year with great store margins, so they’re a perfect fit for retailer needs,” says Jim Whitaker, vice president of beverage sales for Bakersfield, Calif.-based Bolthouse Farms, which offers better-for-you beverages such as Strawberry Parfait Breakfast Smoothie and Protein Plus Chocolate.
All of this is good news for retailers, because the profit margins on healthy foods tend to be a little higher than for mainstream products.
“Some [healthy] snacks might be a slightly higher cost so the retailer might be making a little more,” Boyington says. “We definitely haven’t had to sacrifice any profit margins—probably the opposite, if anything.”
“Our profit margins on these products are between 35% and 40%,” says Sanderman. “They are more expensive, so we can’t charge as much, but we make money on the healthy items because it’s a bigger ring-up, and I’d rather go for the bigger ring-ups.”
But with more expensive products, you have to entice customers to buy them, and to do that, it’s crucial to go beyond having the right products.
“It’s important to position items correctly in the store,” says Boyington. “For the early morning, put sweet snacks near the coffee; then put savory snacks near fountain and cooler beverages, because the consumers’ pathway changes throughout the day.”
Retailers should be aware, Boyington says, that the products that sell change through the day, with yogurts and bars the winners in the morning, and savory dominating through the afternoon and evening. However, salty snacks are the clear mainstay all day long, she says.
The NPD Group sees several snack times through the day. The morning has two peaks, says Seifer; one precedes breakfast, and one is between breakfast and lunch. After noon there’s a peak around 3 p.m., and there’s another between dinner and bed, or between 8 and 9 p.m.
“And what should be noted,” he adds, “is that the emphasis on health declines as the day progresses. We start off with good intentions and things deteriorate as the reality of our lives impedes on our day.”
But constantly putting healthy foods in front of consumers can help change their perception of convenience stores, says Boyington.
“It will be a slow change before people realize convenience stores are a destination for healthy foods. And to get to that point, it will come down to the store’s ability to present a good variety of quality fresh foods to change perceptions. It will take a full commitment to a full fresh-foods program to create the category into a destination.”
Sanderman believes the same thing: “These items aren’t going to fly off the shelves right away. But once consumers know we have it, they’ll come back rather than stand in line for 40 minutes at Safeway.”