Australian Convenience Store News | S a l t y S n a c k s

The 1990ís saw sustained growth in the salty snack market. Frito Lay and Smiths dominated the local scene until 1998 when Frito Lay bought Smiths out. The ACCC approved the takeover subject to Frito Lay hiving off some major brands to a new independent player.

The result was a new Australian owned major operator in the salty snack market Snack Brands Australia. Snack Brands Australia was acquired by Snack Foods Limited - formerly Dollar Sweets Holdings.

The dust has now settled on the Smithís SBA matter and a healthy amount of market activity has returned to the salty snack industry. The snack market has again become vigorous and dynamic, with a new product or promotion launched every month over the last twelve months. This has grown the value of the salty snack market by 8.5% during this period. *

Smiths remains the market leader in all segments with its major brands Doritos, Lays, Smiths & Twisties. Snack Brands Australia is Number Two in the salty snacks business with such brands as CCís, Thins, Samboy, Cheezels and Planters. Arnotts, with its Kettle brand, and Proctor & Gamble, with Pringles, are the other major players, who are active only on the potato segment.

It is interesting to look at the differences in sales patterns between grocery outlets and convenience stores. There are no private brands in convenience stores and multipacks play a very small part in overall sales.

Hereís how the current salty snack market is split at grocery outlets:

Here are the corresponding figures for convenience stores:

*Source: Aztec Grocery Scan Data excludes nuts and salsa - June 2000

** Source: AC Nielsen Scandata 12 month MAT to June 2000--excludes nuts, salsas and sovoury shapes

*** AC Nielsen C*Track Data - excludes nuts and salsa ñ March 2000

With the major manufacturers involved in heavy promotional activity, market share figures between Smiths and SBA are quite volatile. The graphs on this page show the market shares for Smiths, SBA and private

brands in the potato, corn, extruded and mixed multi-pack segments for the twelve months to June this year. The black and red lines are Smiths and SBA respectively, while the green is for private brands.

These graphs show clearly that, when one manufacturer has a jump in sales, it is often at the expense of the other, which will then respond with a promotion to reverse the trend. There are two conclusions to be drawn from this:

SBA says it has Seen sales growth of more than 20 per cent over the last twelve months and Smiths says it is anticipating fifteen per cent growth in the next twelve months. Kettle says it has experienced 22% growth in sales over the last twelve months.

"Kettle is actually the market leader in impulse self consumption packs," said Kettle Marketing Manager, Nicki Anderson. "Our one hundred gram packs outsell the others in every State. Our plan for the coming year is threefold.

"Firstly, we want to add value for the consumer and we have lots of ideas about doing that. Secondly, we want to give consumers more occasions to enjoy Kettle chips and weíve just launched multipacks for this purpose," said Ms Anderson.

"Thirdly, we will be emphasising the entertainment segment and bringing out 200 gram pack to better address this market. Kettle Chips are hand cooked, have a unique taste and a bigger crunch. Itís a product youíre always proud to bring out when friends visit. We see the entertainment market providing substantial growth for Kettle chips over the coming year."

Smiths is drawing on the convenience store experience of its overseas parent and is bundling snack offers with beverage offers.

Smiths and Pepsi are both owned by American giant Pepsico, so neither had to look far for a marketing partner. SBA has teamed up with Coca Cola, a company which is no stranger to salty snacks. Coca Cola Amatil was the owner of the old Smiths company until about seven years ago and, more recently, has undertaken joint promotions with Kettle.

Lyndell Macfarlane is Impulse Business Manager for Smiths. Ms Macfarlane said that overseas experience has been that off-location displays in the drinks and foodservice areas actually build total sales in salty snacks.

"Itís question of aligning with the landmarks in the store," Ms McFarlane said. "Landmarks are those particular locations that really define the store and make it what it is. For most stores, the landmarks are the beverage section, the foodservice section and the register.

"The American experience has been that placing salty snacks in these locations increases sales without canibalising sales from the home display."

Smiths is encouraging convenience store operators to bundle a salty snack with a meal deal and a beverage deal by using tailored point of sale equipment. This equipment includes new gondola ends to place opposite the drinks fridge, display fixtures for stand alone coolers, vertical feed units, under counter racks and special racks for beverage dispensers.

Cathy Zeppieri is General Manager, Category development at Snack Brands Australia. Mrs Zeppieri said that SBAís recent growth has been driven by "the basics - effective promotional programs, product innovation, excellent compliance from petrol companies and a true focus on the consumer".

"The market growth is particularly pleasing given the pressures on the convenience market by major grocery outlets with extended trading hours and so on," Mrs Zeppieri said. "Consumers are snacking on the run and chips are filling a hunger need. It seems that consumers are simply eating more chips!"

SBA has been working with Coke throughout the Convenience Market. "This makes a lot of sense", said Mrs Zeppieri, "our products are complimentary and we actively target the same consumers. Alliance marketing is not new to the marketplace, we have been doing Combo deals for many years.

"It is now moving into a slightly new dimension which brings about even more benefits to the market. It is also great to work with the major player in the carbonated soft drink market.

Smithsí Lyndell Macfarlane said that studies carried out at American C-Stores supported the concept of bundled offers at landmark positions in the store.

"Two out of every three customers visit just one landmark position in the store, even though fifty per cent of American C-Store shoppers visit the store on a daily basis. Beverage is a store landmark that is strongly associated with snacks by customers. We need to capitalise on this relationship to drive incremental sales.

"Seventeen per cent of carbonated beverage drinkers normally consume a salty snack with their drink. But only eight per cent of beverage drinkers buy a snack when they buy a drink at a convenience store. This represents an enormous opportunity for retailers to increase sales and helps to explain why American convenience stores are selling twice as many salty snacks as we do," Ms Macfarlane said.

The 8.5 per cent increase in the grocery salty snack market value over the past twelve months has come from volume growth of 8.1 per cent. This shows that, whilst C-Stores generally do discount heavily to promote growth, grocery stores are able to drive growth without substantial price cuts.

"Weíve had a full promotional program," said Cathy Zeppieri. "The last twelve months have seen the relaunch of CCís, major promotional activity with Thins and Samboy, the launch of a new adult offering - Planters Classic, new flavours for Cheezels, Samboy, CCís and French Fries, tailor made retail marketing programs and the development of combo offers. Snack Brands Australia has certainly gained share in the petrol and convenience market."

"At Smiths, we like to promote on a large scale across the range and thatís something that only a market leader can do," said Lyndell Macfarlane. "Our recent Pokemon promotion actually pushed sales in mid March to the levels youíd normally expect over the Christmas Period.

"Pokemons actually grew the entire category and so did our Star Wars promotion in the first half of last year. Now our Lays and Smiths brands are Number One and Number Two in the potato chip market."

"Combo offers in conjunction with Coca Cola have been very successful for us," said Nicki Anderson. "A three hundred per cent boost in sales volume during these combo promotions is not uncommon.

"Kettle chips are the perfect product for convenience stores. They fit the age demographics of the C-Store customer. They are the Number One impulse self consumption snack and weíre trying hard to continue to drive this level of growth in C-Stores."

According to the Australasian Association of Convenience Stores, sales of salty snacks, chips and nuts through convenience stores amount to about $35 million per year, or just under three per cent of shop sales. Average profit margins are 42.2 per cent.

ASS&CSN thanks The Smith Snackfood Company and Snack Brands Australia for allowing reproduction of their merchandising material.