With the snacking industry projected to reach $200 billion by 2020, there’s no doubt about the category’s bright future. Convenience-store retailers can catch that sweet and salty lightning in a bottle by attracting millennials and baby boomers—the consumers who are driving much of the growth.
The snacking narrative is a consistent one, with some nuances sprinkled in on an annual basis, said Sally Lyons Wyatt, client services director for Chicago-based IRI, during a March webinar sponsored by Arlington, Va.-based Snack Food Association (SFA). “Consumers are getting smarter as they shop retail channels, and value is the key,” she said.
From a retail perspective, c-stores are one of the channels best suited to capitalize on the growth in snacking. For instance, consumers ages 45 to 54 identify c-stores as the channel that has the best assortment of snacks and snack sizes. Dollar stores and the Internet score high with similar capabilities.
These consumers make quick trips to stores, which plays nicely for the convenience channel. Younger millennials and older boomers, on the other hand, are prone to make trips to stock up their pantry.
Lyons Wyatt advised retailers to “seize their channel strategies” by demonstrating value. C-stores’ total share of snack foods is 12%, trailing the supermarket channel, which holds a 51% share. However, c-stores boast a compounded annual growth rate (CAGR) of 4.3%, while supermarket CAGR is only 1.9%. In fact, c-store CAGR is also higher than mass merchandisers, club stores and drug chains, trailing only dollar stores, which are at 10% CAGR.
Snacks Morphing
Meanwhile, snacking lines are beginning to blur as consumers consider healthy and indulgent snacks, with indulgent treats taking on healthy attributes and the other way around.
In 2014, indulgent snacks exhibited a 3.1% dollar-sales increase, vs. 2.5% for healthy snacks.
“Indulgent snacks are answering the call as consumers view them as more permissible,” said Lyons Wyatt. They are now more likely to offer fiber or natural sweeteners, or vegan and gluten-free attributes. You see indulgent chips that are now healthier, made with sweet instead of russet potatoes, for example, or baked instead of fried.
With 59% of consumers indulging while snacking, the leading core indulgent snacks have garnered more appeal, with dried meat snacks, bakery snacks, refrigerated handheld entrees and wraps driving indulgent purchases.
Yet 41% of consumers view snacking as an important part of a healthy eating plan, and 50% seek snacks that offer benefits beyond basic nutrition.
This leads to the natural and organic conversation: Forty-eight percent of consumers prefer to eat more natural snacks, while 27% eat more organic or organic-labeled snacks. Natural and organic continue to realize double-digit growth. The most popular natural and organic snacks are ones featuring attributes such as ancient grains and non-GMO ingredients.
“Consumer knowledge is critical and their natural buying behaviors have varying attitudes,” said Lyons Wyatt.
Other headlines that Lyons Wyatt underscored:
- Niche snacks. They are becoming increasingly mainstream as small brands gain distribution and drive growth. From 2011 through 2014, the all-commodity volume (ACV) for niche snacks jumped from 58% to 85%, driven by better retail placement.
- Fresh clarification. The word “fresh” has positive attributes, but fresh doesn’t always mean healthy, said Lyons Wyatt. Snack fare such as hamburgers, hot dogs and pizza are examples. But sometimes fresh does mean healthy, as seen by the growth in products such as bagged carrots, apple slices, smoothies, eggs and wraps. Snack-size fruit increased dollar growth 9% from a year ago, according to IRI.
- New players to the snacking game. Food trucks and e-commerce are pushing the envelope as snack purveyors. “It’s at an arm’s length,” said Lyons Wyatt, but nonetheless worth paying attention to. The healthy vending trend is also something to watch as machines have evolved to address “consumer needs and demand moments.” Vending no longer dispenses only shelf-stable and cold snacks; some now offer heat-and-eat options.
- Core vs. extended snacks. Core varieties rebounded in 2014 and are now ahead of extended snacking categories. Core snacks include salty, chocolate and nonchocolate, while extended snacks are defined as products such as cottage cheese, lunchmeat and eggs. According to IRI data, core-snack dollar sales increased 3.3% and unit sales 1.3%, while extended snacks grew dollar sales 1.6% but saw unit sales fall 1.3%. This trend is an about-face from the year prior, when extended snacks had the upper hand over core. The speculation is that prices trended upward for extended snacks, led by the pipeline opening for premium extended offerings.
While the innovation behind core-snack stalwarts cookies, granola and chocolate candy was apparent, it surprisingly was sushi that topped core snack category growth, with dollar sales at 13.1% growth vs. a year ago. Meat snacks continued to ride a positive wave, with 12.6% dollar sales growth, while bakery snacks grew 11.6% and are now viewed as a snack for the entire day rather than relegated to just the morning.
CONTINUED: Private Label, Pack Size and More
- Private label. The rise of premium private label sparked dollar sales, but unit sales remained flat despite profit increases. “Private label and macro snacks see some retailers hitting it out of the park, while others need to take a better peek at their strategies,” said Lyons Wyatt. Private labels saw gains at Hy-Vee, SuperValu, Kroger, Target, CVS and Publix, while it lost out in chains such as Kmart, Walgreens, Roundy’s and Rite Aid. On the organic front, retailers such as Sam’s Club, Kroger and Walmart are making organics affordable and mainstream by “contemporizing their private labels,” Lyons Wyatt said. Target revamped its private-label groceries, shifting from packaged foods to granola, craft beer and coffee, and emphasizing simple ingredients. Kroger passed the $1 billion annual sales mark in the organic category only two years after launching its Simple Truth brand. “Look at your portfolio and embrace new ideas,” Lyons Wyatt said.
- Pack-size delineations. Large pack sizes are helping bakery snacks, cold cereal, granola bars, refrigerated dips, dried meat snacks and bottled juices, while small-size packs are showing traction with crackers, frozen soup, pizza, cottage cheese, crackers, dried fruit snacks, yogurt and nonchocolate candy.
- The millennial-boomer factor. Millennials place an emphasis on customization, convenience and brand trust, while boomers desire customization as well as wellness and convenience. “Customized coffee has really caught on with boomers,” said Lyons Wyatt. Millennials and boomers share certain snacking habits, as 32% reduced impulse snacking purchases in favor of a more planned purchasing ritual.
Positive Snacking Signs
In 2014, all top 10 snack-food categories enjoyed dollar-sales growth with varying ranges of success. Ice cream and sherbet, for instance, had a dollar share growth rate of 9%. Natural cheese and cookies both saw unit sales declines possibly due to price increases. Salty snacks saw dollar sales grow nearly 4% from a year ago, while snack nuts/seeds/corn nuts saw dollar sales up 4.3%.
- Consumers continue to reach for sweet and savory snacks. Dollar share in 2014 was up 27% for sweet snacks, 35% for savory, and 38% for “all other” snacks.
- Stocking up on certain snacks because they are on sale declined 6% since 2011, indicating that consumers are spending more freely and purchasing does not depend on discounts.
- Cutting back on snacks reduced 16% in 2014. Buying less variety of snacks for the household to save money declined 13%, while trying to make snacks last longer was down 6%.
- Paying more attention to price per serving dropped 10%; buying a sale item vs. a favorite brand declined 16%.
- Consumers snacking more frequently was up 11%.
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