Americans love snacks.
And they like to purchase these grab-and-go treats from c-stores, evident in the $18.7 million in snacks and sweets sales in the convenience channel for the year ending late May 2017, according to data from SPINS.
Take a closer look at the numbers, however, and some particular patterns emerge. SPINS, a Chicago- based provider of retail consumer insights, reports that overall year-over-year growth in this category was soft at 2.1%. But natural and specialty/wellness snack products enjoyed 12.7% and 5% sales growth, respectively, and represented more than $1.7 million of the $18.7 million in c-store sales.
Also, 29% of consumers report purchasing more healthy snacks this year, and 43% of millennials have indicated they buy more of these items, according to a May 2017 consumer survey conducted by NACS, Alexandria, Va.
Experts say they smell profitable prospects in those figures.
“On a macro level, consumers want healthier options,” says Kelly LaBounty, category development manager for General Mills Convenience & Foodservice, Minneapolis. LaBounty sees retailers using natural, organic and overall better-for-you products as a tool to offset the headwinds of channel blurring on the part of e-commerce and increased competition from dollar and drug stores.
“Retailers are looking for any and every opportunity to increase margins, build consumer baskets and provide incremental opportunities and offerings,” she says.
Those opportunities are percolating across the snack category, from classic categories such as chips, trail mix and baked goods to niches that were borne out of the trend itself, such as yogurt, smoothies, pressed juices and protein-packed products.
The challenge—and opportunity—for c-store retailers is to identify how the category fits into their sets and inside their customers’ baskets.
Tales From The Trenches
Goodnessknows Snack Squares, Wonderful Pistachios, Lenny & Larry’s Complete Cookie, Mr. Cheese O’s Crunchy Real Cheese Snacks, Quinn Classic Sea Salt Pretzels, Figgy Pops Supersnacks: There’s no denying that an increasingly diverse array of brands is garnering serious attention in the better-for-you (BFY) space in 2017.
Customers are clamoring for products that promise natural, organic and nutritious ingredients, such as Forager’s Drinkable Cashewgurt, Beanitos White Bean Chips and P3 Portable Protein Packs. Chicago-based IRI even identified three BFY products—DairyPure Whole Milk, Quest Bar protein bars and Frito Lay’s Nut Harvest nut snacks—among its annual list of new product releases with the greatest sales.
Randall Aycock, director of marketing for Fremont, Calif.-based AU Energy, which operates Shell-branded gas stations and c-stores in the San Francisco Bay Area, says many BFY snacks like these are growing at a faster rate than core snacks at his stores, including fresh and packaged fruit (14% growth vs. 7% for core brands), meat snacks (14% growth) and nuts and seeds (10%).
“It’s not like everyone is looking for a healthier option, but the number of consumers looking for healthier options is increasing,” Aycock says. “The goal is to satisfy both types of consumers in order to maintain growth.”
Jonathan Ketchum, senior vice president of retail for Odessa, Texas-based Alon Brands, the largest U.S. licensee of 7-Eleven stores (operating 309), says his stores have recently added healthy, organic and gluten-free products into their snack sets in response to increasing consumer demand.
“To make room for the healthier items, we have cut back on multiple facings and reduced duplicative offerings,” says Ketchum, who notes that his BFY snack SKUs command about 20% of his product mix. “We’ve found that the optimum placement is within the category section and not in a separate ‘healthy’ area. Consumers want to see the entire spectrum of what we offer in one place and then make their decision.”
Melissa Rosen, on the other hand, has gone whole hog on healthy. She opened Locali Healthy Convenience stores in the Los Angeles area—two locations, with plans for more to come—that, in addition to deli-made fresh edibles, sell only natural, organic and BFY packaged foods and beverages such as Zevia (stevia-sweetened colas), Jackson’s Honest coconut-oil-cooked potato chips and Barnana organic banana snacks.
“We’ve proved that if you can keep your footprint small and offer delicious healthy food products in a curated space that allows customers to grab and go quickly, you can be successful,” Rosen says. “It’s hard to get people to change the way they eat, but if you offer bridges to healthier eating that are nonjudgmental, they’ll gravitate toward it.”
Behind the Healthier Push
Consumers today are taking a more proactive approach to living well, which is driving natural, specialty and BFY snacking sales, says Susan Viamari, vice president of thought leadership for IRI.
“They’re adopting self-care mindsets and lifestyles in order to live longer. And food is playing an increasing role in that journey. They want to know what’s in the ingredients and where the product comes from,” Viamari says. “This is not a fad—it’s here to stay.”
Consumers’ definition of what “healthier” means is also evolving, says LaBounty of General Mills.
“In the past, healthier often meant low-calorie or low in carbs. Today, it’s more likely to be defined as fresh or less processed,” LaBounty says. “In convenience stores, we believe health and wellness means ‘keeps me full and satisfied,’ as well as fresh and recognizable ingredients.”
It’s no secret in the industry as to who’s driving the BFY snacks trend: It’s females and Generation Y, also known as millennials.
Ketchum can attest to this; he says millennials and mothers with young children are the primary buyers of healthier snacks at his locations. There are a few surprising others, too.
“Actually, I see mothers, blue-collar workers and tech workers purchasing these items more frequently in our stores, not just millennials,” says Aycock of AU Energy. “This movement was led nationally by the emergence of supermarkets that made healthier-for-you a main focus. As their success grew, more healthy alternatives became available at most supermarkets. Now, the convenience channel is benefiting from the halo effect by offering more healthy options.”
Jeff Lenard, vice president of strategic industry initiatives for NACS, agrees: “The key for convenience stores is choice. Some days someone wants a piece of fruit, and the next time he or she may want a candy bar. So, above all, it’s vital to focus on offering choice.”
Three snack trends will be growth contributors to the natural, organic and BFY segment in 2017 and beyond, Viamari says. These trends are portable snacks such as packaged fresh juices and nut-based smoothies with probiotics; protein, including meat snacks; and holistic health practices, such as choosing ingredients with sustainability and healthier farming features.
“Handheld and on-the-go snacking have been huge drivers, and this continues to be a sweet spot for convenience retailers because they’re in the immediate-consumption channel,” Viamari says.
Portability of products, such as snack-sized fresh produce, dried meat snacks and trail mixes, and demand for protein and plant-based products have emerged as major themes among healthier snacks, she says. Likewise, claims around USDA (U.S. Department of Agriculture) organic certification, transparency, dairy or no dairy, vegan, grains, hormones, and locally sourced and authentic ingredients are boosting sales of BFY snacks.
Consider how communicating such benefits might win over consumers. For example, per 2016 data from IRI: Plentils, a crunchy lentil chip product that’s certified kosher, halal and gluten-free, as well as Non-GMO Project verified, became a $2 million brand that grew 103%; Annie Chun’s organic seaweed snacks, which are USDA-certified organic, vegan and dairy- and gluten-free, reaped $6.8 million in sales and 7.6% growth; and Crunchmaster Rice Crackers, boasting certified gluten-free and Non-GMO Project verified attributes, raked in $52.2 million in sales and 7.7% growth.
Favorable flavors also make registers ring: Almost 91% of consumers select snacks based on enjoyable taste, according to IRI.
“The trick is to get something good tasting and not just have a label that touts the product’s benefits,” says Charles Olenik, owner of Camp Custer Service, an independent c-store in Hardin, Mont. “Too many healthy snack products have insult pricing built into them and, on top of that, taste awful. There’s always room in the store to try new snacks and experiment in small quantities, but you have to listen to your customers and their tastes.”
Don’t Ignore Your Core
Perhaps the most important tip of all: Placement of BFY snacks should never crowd out core SKUs.
“The fact remains that most consumers don’t enter a c-store looking for something healthy, and core items still drive the overwhelming majority of the volume,” LaBounty says. Remember that “the top two consumer needs when it comes to c-stores are to satisfy hunger and to satisfy a craving.”
Consequently, offering a broad range of both indulgent and good-for-you options is smart, Ketchum says. “Providing alternatives allows our guests to make informed decisions on what they want to eat and why.”
Keep in mind that, although demand for BFY consumables has increased in recent years, indulgent snacks and healthy snacks consistently command, respectively, about 60% and 40% of the market across all consumer-packaged-goods sales channels, Viamari says.
“There’s always a place for indulgent. But you have to think about the consumers you serve in your particular market and hone your assortment based on their preferences,” Viamari says. “Shoppers on Main Street might want 90% junk food and 10% healthier-for-you, while shoppers on Elm Street might want more earthy, crunchy, organic and natural snacks. You have to allow for flexibility in your plan-o-gram and assortment planning and use data from a range of sources, including qualitative research and your own frequent shopper program, to better understand what to stock.”
Healthy on the Horizon
Experts say healthy snacking is here to stay.
“Long term, healthier snacking is the way of the future, even if it hasn’t quite yet arrived,” LaBounty says. “The millennials and women who prefer BFY snacks will gradually become more important among convenience-store demographics.”
While he wouldn’t quite call it a “movement,” Ketchum is encouraged by increased offerings and sales of low-guilt treats.
“Consumers in the past would usually overstate their BFY eating habits, but finally today’s shoppers are eating and buying these items,” he says.
Aycock forecasts peaks and valleys ahead. “This will require retailers to stay on top of trends and adjust product mix along the way,” he says. “But for the foreseeable future, the trend looks positive.”
For her part, Viamari doesn’t believe BFY snacks will upend her aforementioned 60-40 indulgent-to-healthy ratio anytime soon.
“But I believe we’ll see more blurring of healthier and indulgent in snack products,” she says. “More indulgent chocolate mixed with healthier granola, for example.”
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