Future Looks Bright for Packaged Sweet Snacks
By: Dara Chadwick January/February 2011
Sales of packaged sweet snacks like cookies, muffins, brownies and pastries seem to be enjoying an uptick as of late and they may just have gourmet coffee to thank for it. As more and more c-stores have improved and upgraded their coffee programs, consumers are taking notice and many, it seems, are looking for a little something sweet to pair with their morning or afternoon cup o joe. But they’re not just looking for any old snack, according to Bill Skeens, president of the Vernon Hills, IL-based Prairie City Bakery. Consumers don’t want a Ding Dong with a gourmet cup of coffee, he says. They’ve told us that there’s a disconnect. They say, “You’ve upgraded me on the coffee.” People don’t realize that there are great packaged items out there. But the category continues to grow. Smart retailers are looking for something to serve with their gourmet coffee. Prairie City Bakery offers a number of packaged items in its breakfast line, including its Big Cinnamon Roll, four varieties of Coffee House Danish, four varieties of Sugar Topped Muffins and two varieties of its Bear Claw. We offer a full-blown pastry program with a consistent look and the same footprint, he says, adding that the company offers a stackable wire rack for its pastry products. Some retailers do take the path of least resistance and let somebody else deliver, but our program puts them in control.
Indeed, competition with direct-store delivery (DSD) in the packaged sweet snack category remains a significant issue for distributors. For us, selling sweet snacks, like pastry, to c-stores is still a challenge, says Kim Duet, purchasing/marketing director for Lyons Specialty Co. LLC in Port Allen, LA. We continually compete against DSD for the space. Still, she adds, “Our delivered brands offer more variety and quality.” Jeff Blalock, vice president of sales, Flowers Bakeries in Thomasville, GA, says that he knows some c-stores may “find it difficult to obtain sweet snacks through their preferred distribution methods,” whether that’s warehouse or DSD. That’s why Flowers Bakeries is fortunate to offer our customers both options. Mrs. Freshley’s (warehouse) and Blue Bird (DSD), he says. Giving customers those options, he adds, has contributed to Flowers Bakeries’s growth in the category. The company’s total snack cake business continues to grow, in part, because we have the flexibility to offer not just fresh snacks through our DSD network, but also frozen snacks through the warehouse delivery channel, Blalock says, adding that average sales dollars per store rose just under two percent for the packaged sweet snacks category, according to NACS industry sales data for 2009.
To keep up with increased demand, Blalock adds, Flowers Bakeries has added new production lines for snack cakes and wafers, and re-tooled its brownie line to increase capacity. The Flowers Bakeries line includes Mrs. Freshley’s donuts, cupcakes, honey buns, crA?me-filled snacks, Danish and pies in both single-serving and multi-packs.
A Little Something Sweet
When it comes to consumer tastes, it’s not always easy to predict what will be a hit and what won’t. Blalock says his company’s best seller in c-stores is Mrs. Freshley’s six-count Chocolate Mini Donuts. Other strong sellers include sugar mini donuts, chocolate cupcakes and honey buns, items that do well, he says, because they are traditional favorites that taste great and are easy to eat on the go. Duet says that Lyons has seen consistent sales of its best-selling packaged sweet snacks the Cloverhill Honey Bun and Kellogg’s Strawberry Pop Tart. Both have been staple items in the c-store for many years, she says. Tradition goes a long way in selling packaged sweet snacks to consumers, especially when that tradition includes a taste, look, smell and feel that reminds them of something they might eat at home. That’s something Prairie City Bakery’s Skeens counts on. “Our hand-wrapped Down Home Cookies are our best sellers,” he says. “It’s got a moon crater look that looks homemade and tastes homemade. You’ve heard of free-range chickens? These are free-baked cookies. The look and feel of packaged sweet snacks are the keys to selling them successfully in the c-store,” Skeens adds. “People eat with their eyes first,” he says. “And then a product has to pass the squeeze test. If it’s soft and moist, they’re going to buy it. Ours are.” Packaging also plays a key role, and Skeens says Prairie City Bakery purposely puts its label on the back of the package to let consumers see the product inside. “Some of our competitors hide the product under a lot of four-color graphics,” he says. “We don’t. We call it what you see is what you get packaging. If people can see what they’re getting, we think they’re going to buy it.” Branding and a healthy fan base can also boost sales of packaged sweet snacks in the c-store. Andy Axelrod, president of the Fairport, NY-based Love and Quiches Desserts, which manufactures a line of Gourmet Grab & Go packaged sweets, says the line’s best seller is the Love & Quiches Brownie made with Oreo. “It shows you the power of branding,” he says. Axelrod says the line’s Oatmeal Chewie also does very well in the c-store. “We get more fan mail about that than anything else,” he says. Duet has also seen the power of branding at work.
“Depending on the item, line extensions continue to do well without taking away from the other items in the same category,” she says. For instance, General Mills came out with another cereal bar this year, Lucky Charms, and it moves just as well as the items that have been around for a while.
Room for Growth
“Love and Quiches started doing more business with major c-stores when the stores started to grab more of the restaurant dollar,” Axelrod says. “C-stores are doing a phenomenal job and our products fit in very well. The suggested retail on our products is $1.29 up to $1.69, and we haven’t seen a lot of price resistance. Customers are willing to pay more for quality, and retailers are able to get a much better mark-up on our products.” That quality of which Axelrod speaks is restaurant quality, a description he applies to the company’s New York Cheesecake line. In fact, the Gourmet Grab & Go line includes a 2.5-oz. refrigerated Real New York Cheesecake; that product has a 30-day shelf life while the rest of the products have a 60 to 90-day shelf life. Product rotation is one of the challenges Axelrod sees in selling packaged sweet snacks at the c-store level. Barrier films and different product formulations can boost shelf life; the company’s Lil Lovers 100-calorie Brownie has a 90-day shelf life after thaw. “We don’t compete with indestructible brownies or cookies,” he says. Love and Quiches recently introduced its new refrigerated Fudge Meltdown, an individual microwaveable chocolate dessert that can be heated or eaten cold. “It’s akin to a lava cake,” Axelrod says. “There’s nothing else like it out there.” Skeens says his company offers a better quality product at a better price. But successfully selling packaged sweet snacks relies heavily on the retailer. Many times, they sell through so fast that people forget to re-order the product, he says.
Stores can make more money, but they have to take some ownership. Most agreed that packaged sweet snacks is a category poised for growth, it’s about finding the right mix of product, delivery and merchandising. “I believe the category is growing,” Duet says. “Customers are still looking for something new and different. We started carrying a BC Bundt 7UP Pound Cake Slice this year and it has turned out to be a great seller. I think its uniqueness has appealed to a lot of customers.” Blalock says he believes that sweet snacks can be one of the most profitable categories in a c-store. “If you focus on obtaining the right program and right products for your store, customers will respond,” he says. Taking advantage of opportunities to crossmerchandise and piggyback on another category’s growth is a smart approach. According to Skeens, just about every c-store has upgraded its coffee program in the last few years. “Starbucks reeducated the whole marketplace,” he says. “And c-store consumers have responded.” With his products, he says, “retailers can make 40 percent more versus a DSD product and have a better quality product. We call it gourmet coffee’s best friend.” Packaged pastry products in general, he adds, put retailers in control. “Managers are in charge of what they’re selling,” he says. “There’s nothing more frustrating than waiting for delivery.” Axelrod sees great potential for growth in the packaged sweet snacks category. “Even when times are tough,” he says. “People still eat sweets and dessert.”
Dara Chadwick, a regular contributor to Convenience Distribution, is based in Jamestown, RI.
Category Close-Up: Packaged Sweet Snacks – The Sweet Sell of Success
By Sarah Hamaker
While packaged sweet snacks have not registered a big jump in sales in recent months, the category has seen a slow but steady increase in sales since November 2009, according to NACS State of the Industry data. Back then, the average sales of packaged sweet snacks per store per month hit $1,585. That figure dipped to $1,429 in February 2010 before climbing to $1,728 in May 2010.
Henry Colley, vice president of retail operations for Sprint Food Stores Inc., in Augusta, Georgia, supports NACS data with his comments; “Packaged sweet snacks have risen about 1.5 percent in terms of dollars at our 12 locations,” he said, adding that some of the increase is probably attributable to price hikes.
Overall, the packaged sweet snacks category grew 5.22 percent from 2008 to 2009 in terms of gross margin percentage, according to the NACS State of the Industry Report of 2009 Data.
Manufacturers also paint a positive picture of packaged sweet snacks sales. “We have seen strong growth in the category lately,” said Andy Axelrod, president of Love and Quiches Desserts.
“Sales are going really well right now for bakery,” agreed Catherine Porter, senior customer marketing manager for convenience stores for Sara Lee. “The latest numbers through August are showing really strong category growth, especially for cinnamon rolls, muffins and cakes.”
In terms of dollar sales, total sweet snacks advanced 2 percent for the 52-week period ending October 3, according to SymphonyIRI data. That growth was driven in part by an acceleration in sales “a 2.9 percent jump” during the 26 weeks before. “This trend shows continued momentum toward consumers eating more indulgent items, fulfilling their savoring occasions,” said Kathy Kemmet, director of new product development, immediate consumption channel for Kraft Foods.
However, not everyone paints a rosy view of the category’s sales. “Sales have been about the same for us in the packaged sweet snack category,” said Carl Hitt Jr., director of retail for Wi-Not Stop, which has 11 convenience stores in Virginia.
Wi-Not Stop makes its own packaged sweet snacks items and has seen a small bump in sales of those products. Hitt attributes the increase to people looking for value and their private-label brand offers “basically the same product” but at a lower price-point.
“In convenience stores, over the last quarter, the packaged sweet baked goods category was flat on retail dollar sales,” said Chuck Engle, vice president of national accounts for Hostess Brands Inc.
Packaged sweet snacks appeal to consumers partly because of the promise of an affordable luxury. “Recently, we’ve been seeing a renewed focus on more indulgent snacks that deliver on quality and taste,” said Jeff Blalock, vice president of sales at Flowers Bakeries.
“This may be due to the tough economy. When times are tough, people seek out affordable indulgences. That’s a bit different from what we’ve seen in the recent past, when there was a surge in demand for better-for-you sweet snacks. While there is still demand for healthier snacks, health-conscious consumers are now also looking for the occasional indulgence,” said Blalock. Flowers will be focusing attention on developing more indulgent snacks in 2011 to meet this need.
“Sales of the heavy sugar products have not slowed down any,” said Colley. One reason could be that consumers are willing to pay a premium price for quality baked goods as a way to pamper themselves.
“I think we will continue to see more premium packaged baked goods on the shelf,” said Axelrod. “People are willing to pay a premium for a quality treat that offers a home-baked goodness.'”
Several packaged sweet snack trends can be traced to the growing influence of Hispanic consumers.
“We’ve had to bring in more Hispanic-type sweet snacks to accommodate our changing client base,” said Hitt of Wi-Not Stop’s packaged sweet snack category. “For example, we’ve added conchas, which is like a big sweet roll, and different types of sweet breads.”
Latinos also have brought different flavor combinations to the packaged sweet snack category. “Because of the Hispanic influx nationwide, we’ve seen more requests for more tropical flavors,” said Al Cason, vice president and COO for Bud’s Best Cookies Inc. Latin-based fruit flavors include orange-mango, pineapple and guava.
Packing More Punch
Cookies and cakes have added more ingredients to their recipes, with nuts or candies within baked goods. “Within cookies, there has been a shift to indulgent, candy-like attributes,” said Kemmet. The shift is partly due to consumer interest in combinations of flavors within one baked-good product.
“We’re seeing more inclusions, such as adding marshmallow bits, caramel and chocolate to bars, cookies and cakes in order to differentiate the products,” said Joe Crane, operations manager for Choice Foods.
A Little Taste
Just as restaurants have exploited the small plate trend, packaged sweet snack suppliers have also begun shrinking their products to give customers a single tiny bit of sweetness at a time. “We’re noticing individual portions are becoming a big trend in the category,” said Axelrod. “Packaged desserts will start to see delectable desserts in a mini, on-the-go form.”
Wi-Not has started selling little pound and marble cakes, which have proven quite popular. “These are more individual, a more immediate-consumption size,” said Hitt.
Because the packaged sweet snack category relies heavily on impulse buys, manufacturers have begun to pay more attention to packaging in an effort to boost sales. “Today, we’re also seeing more exciting packaging with bolder graphics. Again, because snacks are impulse items, it’s important to have eye-catching packaging and point-of-purchase displays,” said Blalock.
Sara Lee recently updated its packaging to grab more consumer attention. Packaging now promotes “made with real fruit” on products. “We’ve featured claims that resonate with consumers to bring attention to the category and products,” said Porter.
Early 2010 saw an interesting bump in the morning daypart for sweet snacks, although more recent data shifted growth back to its traditional evening snack time. Porter attributed the sales jump in the breakfast hours to an increase in consumer interest in comfort foods during winter months.
Overall, Sara Lee views the morning daypart as a golden opportunity for convenience stores to push their packaged sweet snacks. And at Sprint Food Stores, honey buns and mini donuts dominate sales in the morning hours.
“We see consumption of breakfast occasion products like muffins and coffee cakes on the rise as adults look for convenient breakfast favorites that are portable, satisfy a craving and get the day off to a fast start,” said Engle of Hostess. In July, Hostess debuted its line of Hostess Breakfast Classics, which includes Danishes, muffins, cinnamon rolls and honey buns, to help spark morning sales.
“Convenience and portability continue to be key drivers in the sweet baked goods category, especially in the morning daypart, when consumers are time crunched and are turning more frequently to convenience stores for their breakfast solution,” said Engle.
Finding a Sweet Mate
Bundling packaged sweet snacks with other products, such as drinks and meal packages, can positively affect category sales. “The ability to pair sweet baked goods with hot and cold beverages will also be key to driving incremental sales and consumer satisfaction,” said Engle.
Wi-Not has a bundling program that joins packaged sweet snacks with beverages. “People are looking for value,” said Hitt. “We try to do combos with coffee and a drink, which seems to do well in our stores.”
Sara Lee sees a lot of potential in bundling packaged sweet snacks with foodservice items. “One of the things that we’ve been doing with our customers to help them capitalize on this opportunity is to offer them turnkey promotional tools against the product line,” said Porter. “For example, we’re offering a merchandising and promotional opportunity for a four-ounce muffin with small coffee bundle. We also have a cinnamon roll and cappuccino snack bundle.”
A Sweet Future
With sales trending up and innovative promotional opportunities expanding, the packaged sweet snack category’s best days may still be ahead. “We believe that great taste, variety, convenience and portability to satisfy immediate consumption needs will continue to be key drivers in the convenience category,” said Engle.
“Consumers crave indulgent, decadent snacks that satisfy their sweet tooth and can be eaten on the go, and convenience stores make it so easy for consumers to stop and grab that on-the-go snack cake for breakfast or anytime,” said Blalock.
Retailers who view the category as a point of differentiation could find sweet success. “Convenience stores can build their sweet snacks sales by combining them with other foodservice solutions, such as muffins with coffee, or cake slices and loafs for that perfect dessert with the hot dog, chips and soda bundle,” said Porter. “Convenience stores can create that whole daypart solution to bring consumer attention to that category throughout the day.”
With plenty of variety and the convenience factor, packaged sweet snacks occupy a “very good place,” in convenience stores, said Colley. “Convenience stores have an edge over fast-food restaurants and grocery stores in this category because we have the variety and the ability to give instant satisfaction with our quick and fast format.”
Sarah Hamaker is a freelance writer based in Fairfax, Virginia. She’s also a NACS Magazine and NACS Daily contributing writer