Sharing bags take a bigger bite of bagged snacks market

Price inflation resulting from the disastrous potato crop of 2012 has flattered the fiercely competitive bagged snacks market. Total sales of crisps, nuts and snacks are up 4.9% volumes have remained flat (see below, [Nielsen 52 w/e 12 October]).

Cost inflation hikes, particularly for existing lines, are weighing down category volumes. For example, a 7.9% hike in the average price of Walkers standard contributed to an 8% volume decline in the past year.

Read The Grocer’s full Top Products Survey.

Being undercut by supposedly premium stablemates hasn’t helped either. That’s resulted from brands and retailers driving value into the category by pushing sharing bags at the expense of cheaper (in terms of unit price at least) single packs, says Nielsen analyst Rob Robinson.

Walkers marketing director Peter Charles puts the growth of sharing formats in the past 12 months down to the strong performance of brands such as Sensations and Extra Crunchy. Sensations was the best-performing brand in the top 10 - growing 13.5% by value and 13% by volume. “By investing in flavour innovation and upweighted marketing campaigns, we’ve increased distribution for both Sensations and Extra Crunchy and have helped customers unlock further sharing occasions,” Charles says.

So, while standard Walkers remains the number one brand by a huge margin, with value sales of some £475m, it’s unable to enjoy any growth associated with sharing. And the lower average volume price of brands sold predominantly in sharing packs is undoubtedly playing a role (Walkers standard sell for an average of £8.71 a kilo Sensations and Extra Crunchy fetch £8.69 and £7.77).

“Standard Walkers crisps remain an integral part of our portfolio but we’ve diversified our range in response to consumer demands and trends,” says Charles. And those trends will continue, he adds.

“2014 looks set to be a huge year for sharing. Summer is always a key sales period for sharing brands, and coupled with big sporting events, when the majority of games will be aired during the evening, summer 2014 presents a massive sales opportunity for retailers to maximise the big-night-in occasion.”

“Brands are missing a trick by not developing solutions to drive value into convenience retail”

Chris Gott, Snacksdirect

This focus on sharing formats is already paying off for Walkers. Even though six of the 14 Walkers products in the top 25 have seen value sales fall in the past year, Walkers Snack Foods’ portfolio has racked up an impressive £55.4m in growth overall, making the manufacturer one of the biggest growers in grocery of 2013.

Impressive stuff, and £35m of that growth came from just one product: Deep Ridged, which was launched in summer 2012. Walkers claims the launch was the biggest in fmcg in three years and the biggest category launch of the past decade. “Walkers did a great job launching Deep Ridged last year with a really strong marketing plan and compelling consumer offers to drive distribution and trial,” agrees Snacksdirect’s Gott. “Not only that it’s a great product, too.”

However, the success of Deep Ridged seems to have been at the expense of Crinkles, its other ridged crisp. In stark contrast to Deep Ridged, the biggest grower in bagged snacks, Crinkles has suffered the greatest loss, of £11.9m. But Charles denies Crinkles has been cannibalised.

“Crinkles and Deep Ridged are unique crinkle crisp propositions that complement each other well,” he insists. “Walkers Crinkles is enjoyed by classic older shoppers, whereas Deep Ridged appeals to younger men.” The £6.8m loss suffered by ridged rival Real McCoy perhaps backs this up.

Interestingly, the sharing trend isn’t limited to the take-home market. Nielsen’s Robinson notes a 6.7% increase in impulse sales of sharing bags against a 2% decline in singles. “With sharing bags becoming smaller and closer in terms of price to that of single bags, we are seeing more space being given to the sharing segment in impulse stores,” he says.

Convenience retailers agree. “There’s been an increase in discounted multipacks and £1 sharing bags at the expense of impulse bags,” notes Louise Zierold, general manager for buying at McColl’s Retail Group. Singles are down 7% in the multiple convenience channel, she adds.

The appeal of price-marked sharing bags is obvious, says Chris Gott, MD of Palmer & Harvey’s Snacksdirect business. “They represent great value for money for consumers in a market flooded with different choices of pack formats from suppliers,” he says. “You can buy a bag of cheese & onion crisps in at least five different formats: non-PMP, 50p PMP, grab bag, £1 sharing bag and multipack. The £1 PMP bag is currently the clearest offer for a shopper in a crowded and confusing fixture.”

Value has been derived in numerous ways: 24th-placed brand Golden Wonder also chalked up strong sales growth, no doubt buoyed to an extent by a 9.4% fall in average price that’s resulted in the brand undercutting Walkers standard by a whopping £1.64 a kilo.

Pom-Bear is also enjoying value and volume growth of more than 20%, thanks in part to the June launch of Pom-Bear Zoo Friends, says marketing manager Steve Harger. “It’s created sales growth incremental to the core Pom-Bear range in stores where both are stocked and, with further distribution still to be gained for Zoo, it is destined to play a significant part within the brand.”

NPD in bagged snacks is also delivering incremental growth for Kellogg’s following the launch of Special K Cracker Crisps in autumn 2012.

The product has jumped from 104th in last year’s Top Products Survey to 26th this time around, with sales worth £13.7m. Its success also shows that our appetite for healthier snacks persists.

Hence the continuing influence of the health agenda on NPD in 2013. In July Walkers unveiled Mighty Lights (in cheese & onion, lightly salted and roast chicken varieties), in September Tyrrells entered the fruit snacks market with a range of apple crisps, and in October Natural Balance Foods extended its Nakd brand into 130g bags of Cocoa Delight, Berry Delight and Cocoa Orange snacks.

Despite all this, many in the sector say genuine innovation has been decidedly lacking in the past year, particularly for the key convenience sector.

“Brands would really benefit from developing solutions specific to the independent channel where shopper behaviours and consumer demand are different,” says Goff. “This could be actual NPD or new pricing/packaging solutions of existing products. Far too often, brands are missing a trick by not developing innovative solutions to drive value into this channel.”

In such a crowded category, and with 54% sold on deal [Nielsen], Gott warns pressure is rising: “At the moment, with so many different ways of buying just one flavour, it’s confusing for retailers to know what to stock, how to price it and how to merchandise it. It’s key for manufacturers to have a strategy enabling growth.”

Otherwise, for some brands, crunch time could be just around the corner.

Read The Grocer’s full Top Products Survey.