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Small But Mighty

Rocking to their own beat, alternative snacks sing of higher retail rings.

By Traci Carneal

The snack section in most convenience stores looks nothing like it did a decade ago.

The gradual shift, which has permeated other in-store sales leaders like foodservice and packaged beverages, has been driven by growing consumer demand for unique and healthful snacking experiences — and that trend continues to drive product innovation and sales in the alternative snacks category.

While 99% of c-stores carry alternative snacks, these products glean a small percentage of convenience channel sales. Comprised of bars (including energy and protein), meat snacks, trail mix, granola, fruit snacks, and yogurt- and chocolate-covered pretzels and raisins, the category made up less than 2% of in-store sales in 2012, according to NACS data. However, newly released NACS State of the Industry Data reveals that alternative snacks, in combination with other center-of-the-store categories, contributed 9.9% to total average in-store sales and 12.4% of gross profit dollars in 2013.

With a gross margin percentage of close to 42% (based on 2012 data), these products hold huge profit potential for c-stores, which are an ideal venue for alternative snacks.

“The impression has been that c-stores attract consumers with different mindsets,” said Josh Schroeter, co-founder and chief business development officer for Seattle, Washington-based Sahale Snacks. “While that is still true, it’s changing very quickly, and that mirrors the behavioral shifts of the general population.”

A bonus for c-stores is that premium or artisan snacks garner higher price points than traditional snack food items. Retailers in all channels are seeing tremendous momentum and interest in these types of alternative snacks, as well as those with a better-for-you message.

Inroads are clearly being paved for alternative snacks in the convenience channel. 7-Eleven, for example, recently announced a focus on premium snacks as an entirely new category — running adjacent to traditional snack foods.

The move follows the chain’s launch of a selection of gourmet, organic and better-for-you snacks last fall.

While premium, healthier snack options have traditionally been most popular with consumers in the West, Southeast and South Central regions of the United States, some speculate this trend applies to a broader audience.

“Many c-stores in our area are catering to the health conscious consumer, offering more snacks that are sustainable, have less sodium and include more fruit,” said Tommy Stine, senior vice president of Long Wholesale Distributors in Corinth, Mississippi. “There are lots of selling opportunities for these products, especially in growing regions like ours that formerly were limited to snacks that were high in fat and cholesterol.”

The Healthy Spin
While the trend toward healthy snacking is nothing new, the number of offerings that include yogurt, dark chocolate and nuts — plus the growth of various types of bars with many different ingredient and content claims — have increased exponentially.

As more people continue to move toward adopting a healthier lifestyle they look for snacks that incorporate foods with nutritious, natural ingredients. “People want to see these types of snacks in c-stores,” said Jessi Brennan, director of marketing at Westlake Village, California-based Crunchies Natural Snacks.

The company’s 11 varieties of fruit freeze-dried snacks and nine in the vegetable category, retain 94% of their nutrients with no preservatives or additives. New varieties include buttered corn, barbecue roasted vegetables and grapes.

“Snack sales are increasing largely in part because consumers are beginning to associate better metabolism with eating more often throughout the day and snacking between meals,” said Kristen Arakaki, associate product manager, snacks, at Chicago-based Blue Diamond Growers.

Consumers also are looking for more value beyond convenience. This not only includes healthier foods, but also unique flavors, functional ingredients and different types of snacks to meet specific dietary needs. As a result, gluten-free and low sodium alternative snack lines are on the rise.

“There are two current trends in snacking,” said Kevin Papacek, director of marketing for Minong, Wisconsin-based Jack Link’s. “First off, there is a growing emphasis on the importance of satiety and protein [think protein bars]. The second trend has revealed itself in many snacks with globally inspired flavors.”

Providing a wide range of alternative snacks, both healthy and indulgent, is key since shoppers are seeking both types. “Generally, we are seeing that convenience store shoppers are looking for healthier options than what is typically available,” said Jodi Katz, manager, communications at NBTY Inc., Ronkonkoma, New York. “That being said, more than two-thirds of these shoppers will allow themselves the indulgence of less healthy snacks if that’s what they see front and center.”

Placement Is Key
To compete in the alternative snacks arena, c-store retailers need to create a destination that is highly visible at the store level — a challenge with limited shelf space.

“It can be difficult for category managers who are looking to expand their alternative snack offerings to take space from traditional profit makers like candy,” said Andrew Simmon, business unit manager, convenience channel, at Battle Creek, Michigan-based Kellogg Co.

Therefore, secondary placement opportunities such as in open-air coolers, on cooler doors, by the coffee section, at the register or via a clip strip, are attractive options. Retailers also should draw attention to the products with straightforward external or in-store signage.

Many manufacturers assist retail customers with marketing. In addition to providing couponing programs for retailer use, Crunchies Natural Snacks samples and demos its products nationwide to educate consumers about its freeze-dried snack line.

Jack Link’s offers a number of placement options for retailers that capitalize on the impulse-driven portion of the category. Chalifoux noted that meat snacks are becoming more popular as an alternative protein source.

Paramount Farms recently launched a pre-packed display shipper comprised of a variety of the company’s almond and pistachio products. “We’ve seen optimal retail placement with these shippers because they take up little room, and that lends well to tight, premium real estate within the store,” said Steven Bram, senior associate, public relations for Los Angeles-based Paramount Farms.

Because alternative snack displays drive sales, c-stores should maintain an assortment of different package sizes and adjust according to shopper consumer demographics, adds Chalifoux. Another tip is to increase display size or implement a secondary display to attract shoppers and cover volume needs during promotions, like back to school.

“If space allocation is undersized, the category will fail to grow, despite the innovative packaging and product mixes [available],” said Tony Freytag, senior vice president of sales and marketing at Crunch Pak in Cashmere, Washington. “We recommend increasing the display and providing secondary displays, especially during peak snack seasons.”

At the end of the day, “consumers want to feel they are doing the right thing for their health without sacrificing the enjoyment of eating snacks that taste great,” said Josh Shapiro, vice president of marketing for Allendale, New Jersey-based The Promotion In Motion Companies Inc.

Overall, retailers are playing consumers’ song by staying on trend with snacks and consumer taste preferences. A mix of traditional and alternative items is the formula needed to score a profitable hit.

Traci Carneal, a contributor to NACS Magazine, is a freelance writer and editor. Email her at tgcarneal@comcast.net and follow her on Twitter @finally50.