Category Review: Salty Snacks - Crunch Time

May 20, 2008
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 You’d think that our current preoccupation with health and wellness would be wreaking havoc on the salty snacks sector, but that doesn’t appear to be the case.

You’d think that our current preoccupation with health and wellness would be wreaking havoc on the salty snacks sector, but that doesn’t appear to be the case. In fact, data from Chicago-based Information Resources Inc. (IRI) show a 2.8 percent dollar sales gain for the total salty snacks category during the 52 weeks ending Feb. 24, 2008 (excluding Wal-Mart), with sales reaching almost $8 billion. On the private label side, salty snack growth was even more impressive - with dollar sales rising 5.8 percent to reach $0.4 million.

A closer look, however, reveals a slightly less-rosier picture - unit sales for the total and private label salty snacks categories were down 2.7 percent and 0.1 percent, respectively, IRI’s data indicate. Although these small drops certainly are not panic-invoking, they do reflect price increases that have occurred within the category.

And still-higher prices are yet to come. The culprit? Rising ingredient costs.

“The vegetable oil market has just been going through the roof,” says Jim Wiegmann, senior vice president with Hermiston, Ore.-based Snack Alliance Inc. “So manufacturing costs are going up, and the trade’s trying to decide how to deal with that. … There will be a whole set of bag size changes or pricing changes.”

Still, most shoppers are unlikely to allow modest price increases and minor package downsizing to come between them and their chips and salsa. Snacking, after all, is a national pastime - and the number of salty snack options seems to expand on a daily basis.

Health-Minded Makeover

Speaking of salty snack options, a good portion of the category’s new products represent an attempt to address health and wellness concerns. On trend here, Wiegmann says, are better-for-you snacks that contain less of undesirable ingredients such as fat and sodium.

“We actually believe that lower sodium is the next big wave,” he says. “We see that as a big trend, a big opportunity - specifically for private label to get out in front of because the national brand is just starting on it.”

In fact, Snack Alliance currently is working with a variety of seasoning companies, Wiegmann adds, to create low-sodium bold flavors that might appeal to forward-thinking retail partners.

Paul Smith, director of marketing and product management for Brewster, Ohio-based Shearer’s Foods Inc., notes that his company launched its first unsalted kettle-cooked potato chips last fall. The product has sold well, he says, but some consumers are asking for a reduced-sodium alternative as well.

“To this effort, we’re researching and testing reduced-sodium salts and other seasonings on an ongoing basis,” Smith says.

Other healthful options from Shearer’s address fat and fiber concerns.

“In keeping with better-for-you snacking trends, our reduced-fat kettle-cooked potato chips have quickly emerged as a top-selling SKU,” he says.

Shearer’s recently complemented that product with its first all-natural seasoned product, Smith adds, and also expanded its tortilla chip lineup by adding fiber-rich multigrain and whole grain options.

“We’ve seen significant interest from private label brands in these new tortilla chip bases,” Smith says.

All-natural and organic salty snack items also are attracting interest, Smith notes. He says sales of his company’s organic tortilla offerings continue to grow, and Shearer’s entire plant now is certified organic.

Despite all the interest and activity in the better-for-you salty snack segment, many premium, indulgent-type items still are receiving a warm welcome from flavor-craving consumers.

“[Some consumers] are eating less at a sitting because they are very concerned about health, but they’re going toward more indulgent snacks,” Wiegmann says. “Because they are eating less at a sitting, they want more punch.”

Get a Piece of the Pretzel

With the exception of Frito-Lay - which Wiegmann likens to an 800-pound gorilla - the salty snacks sector has no dominant players on the national brand side. Despite this vendor’s dominance, private label - which currently boasts only a 5.5 percent share of the total salty snacks category - has a real opportunity to win consumers away from both the national brand and popular regional brands.

All that’s required is a bit of forward thinking, Wiegmann maintains. He points to Food Lion as an example of a progressive private label retailer that came up with a hugely successful store brand chip program.

“They convinced their store personnel by various means that they have a great product, and then the store personnel started talking to consumers about it,” Wiegmann says. “And it’s [led to] a huge turnaround in their business.”

Of course, the product quality must match the claims to find success.

“Retailers continue to raise the quality and innovation bar in private label offerings,” Smith says. “Retailers are pushing beyond excellent quality to challenge manufacturers to deliver more new products.”

Packaging counts, too, in the shopper buying decision. Wiegmann says retailer customers are beginning to scrutinize factors such as packaging thickness.

“In salty snacks, it’s a huge move in the right direction because a warehouse salty snack program gets handled a bunch, so if you use cheap packaging, it’s starts to show,” he says.

Sustainable flexible packaging currently in development could provide store brands with a salable edge, Smith says. Made from corn-based plastic, the bags reduce overall use of petroleum-based film structures.

Effective merchandising and promotion also will go a long way to augment private label’s category share.
“The customers that are shielding against the national brand … are being very aggressive in pricing strategies,” Wiegmann says. “Those are the guys who are getting the rewards because their penetration on a daily basis is growing, and so they’re reaping that margin benefit throughout the year.”

Retailers that commit to advertising their private label salty snacks - and who support that advertising with sampling and off-aisle displays - encourage shopper trial, Smith notes.

“If the value proposition of the private label snacks is compelling and the trial experience positive, shoppers will become repeat users,” he stresses. “In the snack food industry, tasting is believing.” PLB

Sidebar: A Meaty Proposition

Although it might not fit neatly into the salty snacks “box,” the meat snacks category definitely is generating its fair share of snacking excitement. The protein-packed segment continues to benefit from the long-dead low-carb fad, during which it welcomed scads of new consumers - many of whom opted to stay.
Jeffrey Fisher, vice president of Omaha, Neb.-based American Foods Group’s Brands Division, says the low-carb era essentially elevated the meat snacks category into mainstream snack food status.

“The [meat snack] is portable - it’s very easy to eat when you’re driving; it’s low-fat; it’s high protein; it’s low carb,” Fisher says. “It just fits the snacking lifestyle and he dietary profile that people are looking for.”

The convenience store section of the category’s business continues to grow, Fisher notes. What’s more, private label share of the meat snacks category is now close to 10 percent, he says, citing data from Information Resources Inc., Chicago.

Among the noteworthy trends impacting the category are those toward flavor variety and organic options, says Mark Stieglitz, senor vice president of business development - store brands for Taylor, Mich.-based Mirab USA.

“Consumers continue to search out flavor variations,” Stieglitz says, “and we continue to see growth in Honey Barbeque and Pepper, while Original and Teriyaki continue to anchor the selections.

“Consumers continue to search out a beef jerky that is both soft and tender for their consumption,” he adds. “Recently, retailers such as Meijer, Kroger and Topco members introduced organic beef jerky in answer to consumer demand for more organic foods. Consumer trial continues on an upward curve.”

But retailers can be their own worst enemies when it comes to growing private label here, Fisher warns. Why? Because many of them simply have opted not to offer a store brand alternative to the national brands - an unfortunate reality in a snack foods category that is NOT brand-driven.

“There’s an absolute place for the value brand alternative in the meat snacks category that many retailers are not taking advantage of,” Fisher stresses.

And private label buyers searching for innovative meat snack options will find plenty to choose from. Mirab USA now can provide organic beef jerky items, for example, while the American Food Group’s O’Brien’s division recently expanded outside its natural beef jerky roots to offer a complete line of beef sticks and cheese-type products.

“The beef jerky demographics have broadened,” Stieglitz stresses. “It now includes more females, young people of all ages - active and on-the-go adults who are searching for healthy, nutritious and convenient snack alternatives. Private label beef jerky meets the needs of these consumers, and the price-value relationship leads to repeat sales.”

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