Are Sweet Snacks Sales Going Stale?

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Are Sweet Snacks Sales Going Stale?

By D. Gail Fleenor

Packaged snack cakes, cookies, cupcakes, brownies and doughnuts are the classic grab-and-go snacks, satisfying the sweet tooth of convenience store customers for decades. Sales growth in the category, however, has been somewhat lackluster recently, with few new items introduced by longtime manufacturers. New better-for-you lines and premium products are stimulating some interest, but as a whole, the category has not received the lift in sales that an infusion of new items can bring.

Average c-store sales for the packaged sweet snack category were up 4.8 percent in 2006, according to Convenience Store News'2007 Industry Report. The snack cakes/pastries/dessert category component showed an average store-sales increase of 9.7 percent, but sales of cookies, muffins and other items in the category increased by only half that amount. In 2006, snack cakes/pastries/desserts represented 60 percent of category average store sales. Cookies accounted for 23 percent, while muffin sales were 13 percent. All other packaged sweet snacks stood at 4 percent.

At the Snack Food Association's 2007 Snaxpo, research was presented based on data from Information Resources Inc. (IRI), showing that most sweet snack categories were lagging in sales.

"Healthier" snack sales in 2006, according to the research, outpaced most other categories, including indulgent snacks, salty snacks and chocolate. Natural and organic snacks also showed strong growth, increasing 11.7 percent in 2006. While 78 percent of consumers are said to be attempting to eat healthier, 66 percent are looking for snacks with nutritional value and 63 percent are trying to replace high-calorie snacks with healthier snacks.

"Sales are flat for us in the category, but with the war against childhood obesity and things going on like removing soft drinks from schools, people are more educated about eating habits," said Johnny Benson, president of Circle C Stores, headquartered in Huntsville, Ala.
However, indulgent snacks still have a sizable market among consumers. In the IRI State of the Industry report on snack foods, at least 50 percent in each adult age category of consumers said high-calorie snacks can be part of a healthy diet, and 63 percent overall said they are likely to eat what tastes good versus what is good for them, which is no secret to c-stores.

"Customers come in looking for new, healthy items, but they go out with a Snickers," said Brad Eaton, category manager for Greenville, S.C.-based The Spinx Co., which operates more than 78 convenience stores in North and South Carolina.

Key drivers for snack sales identified in the IRI study included eating-on-the-go and new product innovation, but some c-stores have not seen much innovation in the packaged sweet snack category.

"We really haven't seen much innovation in products in packaged sweet snacks, which could be one of the reasons the category isn't growing more," said Dan Desposito, director of marketing at Quarles Petroleum, Fredericksburg, Va. "We haven't seen any big declines in sales, but we haven't seen any real growth either."

Quarles Petroleum operates 15 food stores with gasoline in Virginia. Its stores place packaged sweet snacks strategically near the coffee bar and add new items yearly. Desposito said the category is not promoted in his stores very often. "We might do a combination of coffee and a pastry. This promotion works best in fall or winter," he said.

Bill King, owner of 12-store Quik Sak, based in Fort Worth, Texas, said the chain hasn't seen any new items in the past year. "Hostess and Mrs. Baird's aren't as aggressive as they used to be. The category really sells itself. We used to do a promotion with Hostess once in a while."

Hostess -- a brand of Interstate Bakery Corp. (IBC) in Kansas City, Mo. -- recently launched Banana Twinkies and mini-pound cakes. "Banana creme filling was the original Twinkie flavor," said David Leavitt, vice president of snack marketing at IBC. Consumer feedback during a limited-time promotion last year convinced IBC that the flavor would be successful.

At the Spinx Co., Eaton said his stores used to sell Dolly Madison cakes (another IBC brand), but now that there is no longer DSD service, it is hard to get product. "You don't want to ask the bread man to stock cakes," he said. IBC's Leavitt said a new program is in place to help c-stores get Dolly Madison product. "We recently introduced Dolly Direct, our Dolly Madison warehouse program for all retailers, including convenience stores," he said. "This program allows any customer with a warehouse program to have the ability to carry one of IBC's popular national brands." Leavitt added that this program does not replace Hostess, IBC's premium DSD brand.

While some chains report no innovation, some operators said they have added some new items in the past year. "Mrs. Freshley's introduced several new items," said Joe J. Collins, executive vice president of Fast Track Inc. of Wilkesboro, N.C. Collins said his 33 stores don't have to do promotions in the category because "our customers buy the heck out of snack cakes. We just pile them out there at a reasonable price in high-traffic areas."

Sue Koski -- category manager of Mid-Atlantic regional Fas Mart, based in Mechanicsville, Va. -- said she has seen a few new items, such as cookies, presented. "We are doing a cookie/cracker reset currently and incorporating new items. We also use shippers," said Koski, of the 280-plus store chain.

A lot of the new products "are lower cost take-offs on Bon Appetit items," said Eaton, of Spinx Stores, adding that the Little Debbie brand accounts for 34 percent of his company's packaged sweet snack sales, with Bon Appetit ranking "a high" second. "These are two big sellers, but there is not a lot of innovation."

Spinx Stores runs the typical sweet snack specials, but has made some changes over time, according to Eaton. "Last year, we were selling down. We offered a Little Debbie cake and coffee for 99 cents, which meant we had to cut the coffee price or sell down. This year, we decided to sell up by offering a Bon Appetit Danish and coffee for $1.99. The product is better-quality, and there's more margin," he said. The promotion was offered through a deal with Bon Appetit.

And depending on the region where a chain is operating, there can be limitations to adding new items. "Our stores can't carry all the new innovations in packaged sweet snacks," Eaton said. "In the South, there are more c-stores and fewer customers per store. We aren't like a Sheetz or Wawa in other parts of the country. They can bring in short-dated product of seven to 14 days and sell it because they have more customers coming through." Eaton said his stores and others in the area have to sell Little Debbie and Bon Appetit products that have a shelf life of 30 days. "We don't like to throw away product or profit."

Sweet Sales

Some convenience store chains are happy with sales in the packaged sweet snack category. "We are up in this category about 5 percent year-to-date," said John Matlock, buyer/foodservice director, for 14-unit Radiant Stores, based in Tampa, Fla. "Our vendors have been doing an excellent job keeping product in stock. We also went into several stores and repositioned the category. We don’t do in-and-out displays."

Matlock said his stores don't promote the category very often, but packaged sweet snacks are given a prime location at the point-of-sale.

Driving Sales

"Most of the snacks we sell are Bon Appetit. We also installed their Hispanic line," Matlock said. "We have Mrs. Freshley's also and it does well. It is manager-driven, not vendor-stocked, so the manager has to date the items and put out the merchandise."

"New products are important to the success of any snack cake brand, especially when it comes to c-stores, where so many snack cakes are purchased on impulse," said Brent Bradshaw, brand manager at Flowers Foods in Thomasville, Ga. The Mrs. Freshley's brand is carried at Flowers. "We are always looking at new items to add to our line -- not just healthier snacks but also new, indulgent snack cakes as well."

Increased sweet snack sales also goes hand-in-hand with c-stores' efforts to improve their gourmet coffee programs in response to increased breakfast competition from Starbucks, McDonald's, Panera and Dunkin' Donuts. Bill Skeens, president of Prairie City Bakery -- whose sales in the c-store channel are up 40 percent year-to-date -- told CSNews that when consumers purchase gourmet coffee at a c-store, they "don't want a ding-dong" to go with it.

"If they want a better cup of coffee, they also want a better-quality baked good," Skeens said. Prairie City's offering to c-stores includes Danish, bear claw doughnuts and cookies, all at the same price. Promotions tied to coffee work best, he added.

"What c-stores are missing in promotions is helping consumers make a fast decision," Skeens said. "C-stores need to be more convenient by offering a bundled deal, like coffee and a Danish. They don't have to reduce the price, just help customers make a fast decision like McDonald's does because the average person spends less than 90 seconds in a c-store. If c-stores aren't careful, gourmet coffee shops will take their business.

"One c-store told me that customers who used to come in every day now come in once a week when they get gas because of the offerings at gourmet coffee shops," he said.