|Title:||United Kingdom top 10 snack chips or nuts by retail sales and sales growth in pounds sterling and percentages for the year ended February 18, 2012|
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TOP XX BESTSELLERS
Crisps, nuts & snacks: XX w/e XX February 2012
SALES CHANGE [pounds sterling] m y-o-y %
Walkers Crisps XXX.X X.X
Pringles XXX.X X.X
Doritos XXX.X X.X
McCoy's XXX.X X.X
Hula Hoops XX.X XX.X
Kettle Chips XX.X X.X
Quavers XX.X X.X
Mini Cheddars XX.X -X.X
WaLkers Sensations XX.X XX.X
Monster Munch XX.X -X.X
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Bagged snacks haven't, historically, been in the vanguard of healthy eating. But the obesity crisis in the UK and overseas has compelled many manufacturers to make their offerings - if not healthy - healthier.
Catering to the nutrition lobby can certainly benefit the bottom line, and for manufacturers it also helps on the corporate responsibility side. It's also important for the overall category's development, driving innovation from both established companies and new ones. But it's not without risk. Suppliers face the threat of their new products failing to live up to consumer expectations - either because they tinker with an old favourite, or because they no longer meet the very demands driving consumers to bagged snacks in the first place.
It's a paradoxical situation - and one that has prompted a schizophrenic response from the industry. Some have tried to preserve the essence of their products by tinkering with formulations to improve nutritional content. Others have looked to wipe-the-slate-clean NPD to provide all-new healthy alternatives. Some have done both - and a few, obstinately, have done neither. But which approach is best? And is there a future in 'healthy' bagged snacks?
Despite developments here in the UK, the healthy snack market is actually more developed overseas (see box, pXX). At present, there's little evidence to suggest Brits are willing to sacrifice the indulgent side of snacks for a healthier nibble.
Sales of bagged rice cakes have stalled at around the XXm mark. Volume sales of nuts have fallen X.X%, despite XX% of consumption being prompted by health considerations [Kantar Worldpanel]. And while crisps and savoury snacks are both in volume growth -- although inflation has pushed up value sales far ahead of volumes -- sales of Walkers Baked (one of PepsiCo's flagship 'healthier' crisp brands) fell in the past year [SymphonyIRI]. And sales of Walkers' core brand, together with Sensations -- neither of which makes any claim to healthiness -- grew.
* The UK bagged snack market is worth over [pounds sterling] Xbn a year, with value sales growth of X.X% year-on-year.
* However, this growth is largely inflationary, with shoppers paying an extra Xp, on average, compared with last year.
* Shoppers are also buying bagged snacks more often - frequency of purchase has risen by X.X% year-on-year - but these purchases tend to be smaller.
* Large multipacks are in decline, with values falling PA as smaller multipacks and sharing bags stole market share.
* In an industry dominated by brands (which account for XX% of value), own label was the success story in growth terms, with sales up X.X% against brands' X.X%.
Adam Gilham, consumer research analyst
"Healthier snacks is growing at the slowest rate of all the segments in bagged snacks, at X%," says Mark Sugden, UBUK director of market strategy & planning. "This suggests that demand for products marketed heavily as 'healthier snacks' is not as strong as in other segments or in other categories, such as biscuits."
In recent years two distinct schools of thought have emerged on how to marry healthiness with consumer demands. On one side of the fence, brands are focusing on gradual reformulation of existing products to reduce salt and saturated fat content. On the other side are the brands pursuing 'healthier' products through innovation, rolling out baked crisps, higher fibre crisps, rice cakes and, most recently, 'popped' crisps that are typically lower in fat and calories than mainstream alternatives.
The big boys obviously think there's something in healthy NPD. Over XX% of PepsiCo's R&D budget is channelled into producing new, healthier snacks. It has staked much of its future growth on the expectation that consumers will buy into products that deliver positive nutrition, promising that accolade will apply to XX% of its products by 2015. "Delivering choice is fundamental to sustained growth as consumers demand a range of options and refuse to compromise on taste and quality," says Sebastian Micozzi, head of marketing at PepsiCo brand Walkers.
And while Walkers Baked and, most recently, Walkers Baked Stars, have not been particularly successful in terms of sales, Walkers SunBites have enjoyed "phenomenal growth" of XX% in the past year [Nielsen XX w/e XX February 2012], says Micozzi, and PepsiCo is also hoping its Sakata brand of rice crackers will go down as well in the UK as it has in Australia, where it is already worth [pounds sterling]XXm.
As well as Australia, the United States has always been a good pointer for future trends in UK snacks (see pXX). The hottest product right now is surely Popchips -- one of the fastest-growing snacks brands in the US, 'popped' with heat and pressure rather than fried -- part of a wave of healthier snacks crossing the Atlantic, including kale, vegetable and fruit crisps. "We're seeing a number of these trends emerging in the UK and Europe and expect that to continue, including an increased focus on portion size, lower fat and calorie alternatives, and gluten-free offerings," says Keith Belling, Popchips co-founder and CEO.
Belling adds that consumer resistance only exists to snacks that sacrifice taste for health. "When you find a way to offer a great-tasting, healthier indulgence, you'll find an increasing number of consumers willing to make the change."
Avoiding compromising on taste has been arguably the most significant obstacle facing those looking to address health concerns. When Kettle Foods set about creating new Kettle Baked Crisps, launched last month, its aim was to develop a lower-calorie product "that still tasted like a decent potato crisp". "It took time to get the product to the level we got it to," says Kettle Foods marketing director Andrew Slamin. "You've got to play around with fat levels and use the right potatoes and thinness, so it's a combination of three or four different variables that you've got to balance and get as good as you can."
Although Kettle Baked is not positioned as an exclusively female snack, Slamin believes the majority of baked crisp consumers will be women. But he rejects the notion that male consumers are sceptical about healthier snacks. "I don't think they are," he says, "but most people will say when they're having a crisp, they're not looking to compromise. They're looking for something that tastes great and fulfils their need at a particular time."
That's why Tyrrells, arguably Kettle's closest competitor, has so far resisted the urge to go down the health route. "The crisps and snacks sector is really about a moment of indulgence," says Tyrrells marketing director Oliver Rudgard. "It's not about active health and I think at times brands may shy away from that fact."
Intersnack head of marketing Dave Wilson goes one step further, maintaining that not only are consumers wary of compromising for health, many of those buying into bagged snacks are not interested in health at all. "I believe there is a significant disconnect between snack producers' considerable engagement in the health agenda and the reality of consumer demand," he says. "The average shopper has a relatively poor understanding of what constitutes 'healthy' and is fairly unlikely to be looking for this in snacks, anyway."
Intersnack, which produces the Porn-Bear and Penn State brands along with own-label offerings, has focused on gradual reformulation rather than NPD revolution. It's not alone. United Biscuits, owner of three of the top XX bagged snacks brands [SymphonyIRI], has focused on making nutritional improvements to its existing portfolio, particularly through saturated fat reduction, rather than rolling out radical 'healthier' innovation.
Reformulation is a safer approach - and it's easy to see why manufacturers may prefer to play it safe. The category as a whole is contending with commodity cost inflation -- spikes in the price of wheat, maize, sunflower oil and potatoes over the past year have pushed value sales up far in excess of volumes, which have grown just X.X%. And as prices soar, the brands are under constant pressure to keep them down. Nick Hurst, founder and director of Burts Chips, describes the bagged snacks market as "very competitive and dealled". "Consumers are not terribly loyal," he adds. "They are flitting from one deal to the next, so you have to come up with innovative flavours and products to get their interest."
The pressure to differentiate is reflected in the relentless pace of innovation and marketing activity across the crisps category. Last year, for instance, Burts launched Levi Roots' Reggae Reggae crisps in iXog sharing bags under licence. Tyrrells, meanwhile, has pinned its hopes on clearer positioning. "We overhauled the entire packaging portfolio to get much better cut-through, focusing on quirky, quintessentially English photos rather than a pile of cheese and onions on the pack," says Rudgard.
Nor are crisps brands only facing competition from each other. The savoury snacks category is growing faster in volume terms than crisps, in value sales (up X.X%). The sector has, historically, been perceived as child-oriented -- but its recent growth is being driven by premium, value-added offerings targeted at adults.
Popcorn and pretzels, in particular, are delivering stellar growth. Value sales of pretzels soared by XX.X% in the past year, and sales of popcorn grew by XX.X%, of which XX% was driven by savoury. "Savoury popcorn is where the big opportunity is," says Rudgard, whose Tyrrells Proper Popcorn, launched in late 2010, is now worth Xm. "Adults are looking for a bit more of a foodie experience."
Popcorn and pretzels aren't just trendy. They also deliver on the need for healthier snacks, which simultaneously helps explain their growth and suggests (especially given the forecast from the US) that we should expect more success from them as the 'healthy' trend picks up speed.
Ironically, the bagged snacks category with perhaps the greatest claim to the 'healthy' high ground is failing to capitalise on it. PepsiCo defines 'positive nutrition' in snacks as "containing nutritionally significant amounts of fibre, wholegrain, fruits, vegetables or micronutrients" -- but their high fibre and low GI index hasn't helped sales of nuts. Volume sales of nuts fell by X.X%, while price increases inflated value sales by X.X% year-on-year [Kantar Worldpanel]. With own label, which already has the lion's share of the category, growing volumes by X.X%, household names such as KP, Bobby's and Dormen took the hit. All recorded volume declines -- in the case of the latter two, substantial ones.