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What’s on Tap for Snacks
C-stores are well positioned to take advantage of the lucrative snack food segment and what it has to offer in the years to come.
by Lisa White
If the c-store industry used a crystal ball to look ahead at the snack food segment, two words would undoubtedly be prominent—unlimited potential.
With a continued focus on the consumer and innovative product introductions and reformulations, many in the industry predict continued growth in snack foods for c-stores in the years ahead.
"We’ve identified that snacks are a real growth opportunity for c-store retailers and wholesalers," says Kit Dietz, owner of Dietz Consulting, based in Huron, OH. "In one study, WDS (warehouse delivered snacks) have increased profit dollars in overall snack category growth almost 20 percent. MVEs (multi-vendor endcaps), which put the best snack brands from a variety of manufacturers in front of the customer in a single display, showed profit increases of almost 50 percent."
Dietz says the warehouse snack committee, sponsored by AWMA and made up of interested manufacturers, wholesalers and retailers, is currently looking at the importance of more exposure for new snack items. "A lot of growth in this segment comes from manufacturers’ new item innovation. However, there is typically significant lag time between when manufacturers would like to have a product in front of U.S. consumers to the time it actually takes to get it on the shelves," he explains. "Speed to market is important."
Consequently, the committee is currently looking at developing merchandising pieces exclusively for new snack items to help increase the products’ visibility. "This will increase consumers’ exposure to the newest snacks," says Dietz. "From there, a process will be developed to determine which items will make it long term and the snack lines that will be deleted from the selection." He says speeding up new snack introductions will benefit both wholesalers and retailers.
Major snack manufacturers also are identifying c-stores as a prime outlet for future growth. "The snack category has continued to outpace other segments in c-stores," says Dave Onorato, vice president of c-store sales for Hershey Foods Corp., based in Hershey, PA. "In the last 12 weeks (Nov. 2004 through Jan. 2005), snack sales in c-stores experienced 7 to 8 percent growth, exceeding food, drug and mass merchandisers. Retailers look harder at the inside of their stores to make their space work harder. They are realizing that they can place confections and snacks in high traffic areas and capitalize on high profit and turns offered by this segment."
Further proof of the future potential of snack foods is Hershey’s entrance into four new snack categories within the last year, including cookies, snack bars, nutrition bars and nuts (with its acquisition of Mauna Loa).
Trends Affecting Snacks
Many concur that, although the low carb craze is leveling off for the most part, consumers are still seeking more healthful snacks. Greg Kaminski, director of category management for Core-Mark International, a San Francisco, CA-based distributor, says he is seeing a lot of trends in line with healthful snacks. "The low carb diet is passe at this point, but manufacturers are still looking at adding higher fiber levels and more protein in their snack lines. There is a lot of concern for the new nutritional pyramid and staying ahead of the curve," he says.
Also, continued focus on the problems associated with obesity, and Americans’ rising obesity rate, will impact the snack segment in the years ahead. Predicts Kaminski, "I think this is a long-term trend. The obesity problem across the country is getting more problematic every year." He says recent studies have shown increases over the last 15 years in states with obesity problems.
In addition, recent attention to the dangers of trans fats has many manufacturers scrambling to, not only get their packaging labeling in line before the FDA’s January 1, 2006 deadline (companies will be required to list trans fats in their nutritional labeling on all packaging by this date), but keep these fat amounts to reasonable levels in anticipation of consumer concerns.
Howard Stroud, director of merchandising and purchasing at the Grocery Supply Co., a distributor based in Sulfur Springs, TX, predicts that next year’s trans fat labeling reform will have a major impact on this category. "Manufacturers need to be gearing towards this, because we have to prepare retailers and begin promotions in the middle of this year," he says.
Stroud agrees that the low carb trend is fizzling out. "But the total category for ‘good for you’ foods is still very strong and growing," he says. "People are still looking for a good-tasting healthy alternative [when it comes to snacks]."
Part of the problem with this category, explains Stroud, is the lack of education on what makes a snack healthy. "What happened in c-stores was that we had a lot of healthy bars [coming on the market simultaneously]. Some energy bars can be high in fat and some are high in carbs, while others are low fat and low in carbs," he says. As a result, there wasn’t a good distinction with these products, and consumers were confused. "Also, there probably was not enough education provided to retailers on the distributors’ and wholesalers’ part, in addition to there being no product distinction at the retail level. That meant consumers were left to figure it out for themselves."
Although he foresees continued growth in healthful snacks in c-stores, Stroud says good taste is still key in this sector. "Consumers are looking for the perfect balance of low fat, low carbs, low calories and good taste. But the key factor in snacks is how they taste," he says, adding that many items coming into the market now are beginning to fulfill these requirements.
Manufacturers Take Heed
One such line is Hershey’s SmartZone bars, which offer about 40 percent of calories from carbs and 30 percent each from fat and protein. "This is a great-tasting line of nutrition bars that offers a balanced approach to a healthful lifestyle," says Onorato. The company recently signed on famed fitness expert Denise Austin to help promote the new line, which is available in Crunchy Key Lime, Crunchy Blueberry, Peanut Butter, Chocolate, Strawberry and Lemon flavors.
"A growing number of consumers are seeking better-for-you snacking options, yet are not willing to sacrifice taste or convenience," says Paul Cocco, director of sales for Hershey’s Snacks Division. "That’s why you’ve seen and will continue to see Hershey offer products such as Hershey’s Sugar Free, SmartZone and 1 gram Sugar Carb, while fortifying the Snack Barz line with vitamins and minerals. "They all taste great and are available in single-serve packs for on-the-go snacking."
It’s innovation, says Onorato, that is driving snack food sales in c-stores. "We’ve introduced limited edition items, which have taken the industry by storm. To do this, we take a well-branded product and give it a different twist for a short period of time to excite consumers into trying the product. For example, we developed white chocolate Reese’s Peanut Butter cups and Dark Chocolate Kit Kat bars," he explains.
Other manufacturers agree that snack products of the future will focus on flavor, in addition to being healthy. "We do see the interest in healthy snacks as a long-term trend with consumers," says Cathy Sturm, senior marketing manager at Jack Link’s Beef Jerky in Minong, WI. "Consumers want snacks that are lower in calories, fat and carbs, but they don’t want to sacrifice great taste. The focus will be on bringing innovative mealtime flavors to the snack food category." To capitalize on this trend, in March of this year, Jack Link’s introduced its X-Stick in both Chili and Bacon-Cheddar flavors.
Another snack food manufacturer that has introduced a new product with a focus on both health and taste is Kellogg’s, based in Battle Creek, MI. The company recently introduced baked Cheez-Its snack crackers in a BBQ Cheddar flavor.
"We have to be prepared to draw a new market segment into the c-store and have what they’re looking for," says Stroud. "As distributors, we need to be sure our customers have enough options, including the use of MVEs to support retailers as they grow, the best of the best type rack of bestsellers, and health-conscious items, because their sales have warranted their being on the shelves."
Dietz foresees big growth opportunities for snacks in the c-store channel in the coming years. "A lot is how you position it in front of the consumer, and that’s what [the warehouse snack committee] is focusing on. This includes getting good positioning and exposure for retailers."
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