Untapped Potential
Retailers have an opportunity to better position their store brand cookies and crackers, as consumers continue to seek out affordable indulgences.
In a stagnant economy, why are store brand cookies and crackers not performing better? The cookie and cracker market continues to be dominated by the national brands, with traditional products still the heavy breadwinners of the category.
In the $5.2 billion cookie market, for example, store brand dollar sales accounted for only 16.9 percent of the total category (and unit sales, 19.2 percent) during the 52 weeks ending Dec. 25, 2010 (food, drug and mass merchandiser outlets, including Walmart), according to The Nielsen Co., New York. However, both dollar and unit sales increased from the previous 52-week period — by 4.9 percent and 3.3 percent, respectively. (See the table, p. 28.)
Store brand crackers, which posted $404.4 million in dollar sales and $248.5 million in unit sales last year, according to The Nielsen Co., also have room to grow.
And retailers have reasons to be optimistic about future sales growth. Two forces — consumers' reluctance to give up affordable indulgences such as cookies and crackers and rising food prices — are converging right now, giving retailers an opportunity to better align their store brand cookies and crackers with consumers' needs, particularly in the premium/gourmet space.
In fact, one-third of U.S. shoppers surveyed for "Cookies and Cookie Bars — US," a November 2010 report from global market research firm Mintel International, said they buy cookie brands based on price. Since the price gap between national and store brands isn't too wide in this category, store brands can compete on quality, as Target's Archer Farms' line does, as well as price.
Think premium
According to Mintel's "Crackers — US" November 2009 report, store brand crackers are escaping from the shadows of their national counterparts by offering sophistication, distinguished packaging and unique attributes.
"There is always a place for specialty products, even though this area took a hit the past few years," says Kara Nielsen, trendologist, Center for Culinary Development, San Francisco. "It's a good strategy for retailers to go after premium shoppers by featuring alternative grains, textures and flavors with their crackers."
In general, the cracker category has hosted new entries boasting of ancient or heritage grains and flours such as millet, amaranth and quinoa; more interesting flavors such as Asian and sweet flavors; and longer sizes, Nielsen says.
"Specialty products are expensive, and consumers aren't getting much for their money," she adds. "So if retailers can offer gourmet products at a reasonable price with pretty packaging, they are giving consumers a new option."
Hingham, Mass.-based Venus Wafers is one supplier that is targeting the premium segment. The company's offerings are packed with unique flavors, says Michael Thompson, president of the company.
"The newest flavor trend seems to be combining ingredients that appeal to different taste sensations and create an interesting texture," he says.
He notes that his company's flatbreads are receiving renewed interest from retailers and entrepreneurs because they are perceived to be healthful alternatives to traditional entertainment crackers. For example, in Hingham, where Venus Wafers also operates its plant, The Fresh Market (newly opened there) uses the flatbread as a private label option for shoppers to sample the retailer's cheeses and other toppings from the full service deli.
"Crackers are carriers of snacks," Thompson notes. "Cross-merchandising them against complementary toppings will increase the total shopping basket size. If the retailer is considering private label crackers or flatbreads, they should also consider carrying cheese or hummus under its label."
Cracker packaging is getting the upscale treatment as well, as more companies opt for transparent cellophane trays with smaller or larger (but thinner) portion sizes, and beautiful images and writing — all of which evoke fine entertaining, Nielsen says.
Other manufacturers are keeping costs down with simple packs made with recyclable materials, Thompson adds.
Experiment with flavors
Consumers could soon notice a transformation, or blurring, of the cookie and cracker categories, Nielsen says.
"The shapes are starting to change, as cookies are being made in cracker-like forms with a brittle texture, and crackers have sweeter flavors such as the Mia Dolci Gourmet Cookie Crisp from Partners Crackers," she says.
Another cookie trend is that toward specialty flavors such as key lime and hazelnut, as well as gourmet ingredients such as cocoa nibs that evoke bakeries, Nielsen says.
Yet another trend she noticed at the 2010 Fancy Food Show was the infusion of wine flavors within cookies, or cookies created to be eaten with wine, including the Vin'Tucci, Wine Snaps and Cookies & Corks lines.
"Private label folks could explore this murky area between cookies and crackers, particularly as more people are exploring artisan cheese, for example, with their snacks," Nielsen says.
Consumers want to indulge, but they also are looking for better-for-you products with clean ingredient decks, notes Tom Mosk, marketing director for Fantasy Cookie Co., Sylmar, Calif.
"People are going to pay more for a premium delicious product because they're not going to Europe in this economy," he adds. "So when they shop, they look for the kind of fun, interesting products they may have found on vacation."
Mosk says high-end, premium specialty grocers are leading the way with innovative product selections.
"They are looking at other mechanisms than price points or upfront fees, to draw customers," he says. "Premium store brand cookies don't even have a noticeably higher price anyway, so you're not losing customers with them."
Mosk also advises retailers to use social media such as Facebook to interact with customers and build word of mouth about their products.
Control costs
It is important for retailers and suppliers to counteract rising commodity prices by controlling packaging changes and production and labor costs, if they do not want consumers to see higher prices on the shelf, says Roy Peterson, vice president of sales for Plant City, Fla.-based Toufayan Bakeries.
"Now, that we're back to 2008 prices, there hasn't been a lot of relief," he says. "Most retailers are just trying to provide value because the economy is also affecting the category."
Mintel's cracker report indicates that between 2005 and 2008, rising food prices accounted for much of the category's dollar sales growth, and the firm expects to see this situation continue for the next few years.
For that reason, many retailers have put innovation on the back burner as they work to control costs, Peterson says. He suggests that these retailers emphasize value instead.
"They can gain sales by promoting four items for $5.00, for example, or two for $5.00, when the national brands are selling one for $2.99," he says.
Product assortment also is crucial, however, and retailers should not carry the same items that every other retailer carriers — or that the club stores offer at a lower price, Thompson contends.
Other common missteps, he notes, are duplication or over-facing on the grocery shelf and failure to employ cross-merchandising with store brand items.
"Frankly, I see the cracker category continuing to decline in units as healthy alternatives replace their primary role as snacks," he says. "However, I also see segments within the category growing, such as flatbreads, as consumers continue to look for convenient ways to serve their guests."
Do consider offering gourmet-type cookies and crackers in pretty packaging — and at a reasonable price.
Don't forget to cross-merchandise store brand crackers with popular toppings such as cheese and hummus.
Do consider some of the trendy new flavors for cookies and crackers, particularly on upscale store brand offerings.
Don't just offer what every other retailer is offering; explore cookies and cracker offerings that differentiate your stores.
Top 5 Markets for Cookies and Crackers
- Chicago, Naperville, Joliet, Ill./Ind./Wis., Metro
- Cincinnati, Middletown, Ohio/Ky./Ind., Metro
- Dallas, Fort Worth, Arlington, Texas, Metro
- Detroit, Warren, Livonia, Mich., Metro
- Houston, Sugar Land, Baytown, Texas, Metro
Regions with the largest percentage of people with a tendency to buy store brand cookies and crackers, reported by Core Based Statistical Areas (CBSA) defined by the U.S. Office of Management and Budget.
Source: Buxton Co., Fort Worth, Texas.
