Bagged snacks 2022: Crisps hit by rising costs before HFSS

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Bagged snacks GettyImages-1258687192

For bagged snack brands, this year was supposed to hold one big challenge: the ban on HFSS goods in prominent store locations.

By the time the rules came into effect in October, though, the market was already struggling against other factors. While value grew £229.1m over the full-year period to September, this was entirely down to price rises masking volume declines.

Branded volumes fell 6.5% – equating to roughly to 415 million fewer grab bags going through the grocery tills.

Few players have emerged unscathed. Only eight of the top 25 are in volume growth, while the likes of Doritos, Hula Hoops and Sensations are in double-digit decline.

Part of this can be explained by the end of lockdown-driven stockpiling and more snacks being eaten in pubs and cafés. Given the boom in crisp sales during Covid, it was always going to be tough to maintain year-on-year growth.

But the sheer scale of price rises can’t have helped volumes, either. The average price per kilo of branded crisps, nuts and popcorn is up 14.4%. Some household names have got even pricier. Doritos, for instance, is up 22.8%. Sensations are 18.4% more expensive.

While some of this will be down to changes in format– single bags, which are more expensive per kilo, have grown with the return of impulse occasions – much of it comes down to rising input costs.

In the wake of Russia’s invasion of Ukraine, cooking oil prices rose dramatically and sunflower oil became nigh on impossible to source. Then came soaring energy prices. Now it’s the turn of potatoes to get costlier. Prices surged 21% in September, according to ONS figures.

“The exceptionally warm, dry summer has affected crop growth, driving up the cost of raw materials,” explains Adele Ward, marketing director at Kallo.

“With the rising fuel and heating costs, this once again impacts the cost of production and fuels further price rises.”

Further costs were incurred by HFSS rules, which prompted many suppliers to create healthier versions of their typically high-salt products. A constant stream of such NPD has hit shelves over the past year, from the Walkers 45% Less Salt lineup and Proper’s debut in potato crisps with a non-HFSS trio, to launches by Insane Grain and Henderson’s.

Reformulation of some products has clearly been tougher than others. Snack a Jacks, for example, were already close to being HFSS-compliant and needed only small tweaks to bring them inside the rules.

Doritos, on the other hand, required a major rethink. It’s now a thicker chip made with more corn, allowing it to use less flavour for the same effect.

The intention of the rules that inspired these changes is to improve public health, but there’s still a question mark over how shoppers will respond. Traditionally, health has not been a big driver of bagged snack sales. As PepsiCo MD Jason Richards told The Grocer earlier this year: “Why do you eat Doritos? Because they taste great and you enjoy them.”

Yet Brits appear to have welcomed those reduced salt snacks from Doritos stablemate Walkers. PepsiCo says they made £14.7m in their first six months – enough to be 33rd in our ranking if counted as a standalone brand.

Walkers 45% Less Salt will likely have seen sales further accelerate with the start of the HFSS clampdown in October (a month after the end of our data period), when it replaced saltier crisps in prominent store locations.

For now, however, it is still too soon to assess the full extent of the impact of the HFSS regime, says Fiona Tomlin, PepsiCo’s chief marketing officer. “This is something we are monitoring closely, and we will be able to share insights on in early 2023.”

For Andy Riddle, group sales director at KP Snacks, the new legislation “has been one of the most significant changes to impact retailers and manufacturers of recent years” and has pushed the supplier to invest heavily. It now has more than 110 non-HFSS SKUs, making up a quarter of its entire portfolio.

That includes its nuts, which are exempt from the legislation and “represent an opportunity to drive sales” Riddle adds. KP Nuts could certainly do with that boost, after failing to add any value over the past year as volumes fell 5.5%.

KP’s concerns

It’s a performance typical of KP’s wider portfolio. Hula Hoops, McCoy’s and Tyrrells also shed significant volumes, shifting 3.2 million fewer kilos between them.

In large part, this was due to a cyber-attack forcing a pause in supply from January until March, Riddle says – an incident that came shortly after the crisp shortage caused by IT issues at PepsiCo.

It was a major concern for KP, not just due to lost sales but also the safety of its employees. Soon after the attack, cyber-criminals published personal documents from members of staff, warning more would be published unless a ransom was paid. (KP has since declined to say whether it paid up.)

KP is also facing problems indicative of the wider category. Bagged snack brands in decline will be in the crosshairs of supermarkets looking to drive efficiencies by cutting back their ranges.

“As retailers look to maximise sales and reduce costs, we’re seeing range rationalisation across the board,” warns Kallo’s Ward. “And this means branded products, in particular NPD, must work harder to deliver.”

This means being innovative with flavour, especially – because there is clear demand from gen Z shoppers for new and exciting flavours, says PepsiCo’s Tomlin. Which explains the October launch of Doritos’ Loaded Pepperoni Pizza and Triple Cheese Pizza variants (both non-HFSS).

That being said, classic crisp flavours are still sought by shoppers of all generations. Salted, cheese and hot & spicy remain the three most popular among Brits, according to PepsiCo research.

Which suggests that while innovation is crucial to growth, there remains appetite for the traditional crisp.

Top Launch 2022

Walkers 45% Less Salt | PepsiCo

Walkers Top Launch

The UK’s biggest crisps brand unveiled its first fully non-HFSS range in March. It comprises low-salt versions of its top three flavours: Lightly Salted, A Dash of Salt & Vinegar and Mild Cheese & Onion. Containing “nearly half the salt” of their core counterparts, the new snacks maintain “the great flavour that Walkers is known for”, the brand promises. All three come in a 6x25g multipack (rsp: £1.75), with Mild Cheese & Onion and Lightly Salted also available in 45g grab bags (rsp: 85p).