In order to drive growth in the Canadian potato chip market, manufacturers have been experimenting with new and extraordinary flavours, such as octopus and cuttle fish. But different flavours are not the only things affecting the sector – convenience and health are also making an impact, as David Kosub reports.
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When it comes to snack foods, most agree the potato chip (or crisp, to UK readers) reigns supreme. At the same time consumers want variety and recent years have seen the potato chip industry explode with every possible flavour – from bonafide winners like sour cream and onion, salt and vinegar, ketchup and nacho cheese to more dubious recent entrants to the marketplace like octopus and cuttle fish flavoured chips. It’s all about experimentation, according to Frito Lay Canada’s marketing manager Jason McDonnell.
“There are products and flavours in the market place that consumers would never have thought of trying three, four, five years ago. The consumer palate is ever changing and the potato chip portfolio is just one element of that changing palate.”
Last year in Canada potato chips accounted for C$454m (US$344.4m) in sales – or 65 % of all salty snack sales. Those are the kinds of figures to which Kim McKinnon, vice president of the Canadian Council of Grocery Distributors, pays close attention. Canada’s grocers represent 80% of snack food sales and much of the potato chip’s continued success, she says, can be traced to new consumer demand.
“It’s all about segmenting the market and different products to meet different needs that are emerging out there, for example, the ethnic changes and the aging population. These are helping to drive greater variety.”
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By GlobalDataNew products driving growth
And not just a broader variety of flavours, but of snack food products themselves. In 2003, AC Nielsen reported a 10% increases in annual unit sales growth for both corn chips and party mix. Pre-packaged shelled nuts enjoyed a 12% increase in the same sales category, while energy bars and drinks shot up 25%. “When you look at what’s hot and what’s not,” says McKinnon, “energy bars and nutritious snacks are definitely high growth items in stores.” McKinnon is even more impressed by the performance of pretzels, up a whopping 59% in annual unit sales growth.
Nine months into 2004, growth in the snack foods industry overall appears modest, however. “I don’t think it’s growing in leaps and bounds like it used to, but there’s lots of new things coming out,” says Kent Hawkins, president of the Canadian Snack Foods Association. “That’s where the growth keeps coming from.” Ironically, Hawkins’ own company has resisted the trend towards experimentation in new products and flavours, content to produce a single product, the highly successful all-Canadian cheddar cheese sticks Cheezies. Moreover, if there’s a danger in this drive to ever more interesting snack food flavours, says Hawkins, it’s that’s snack food manufactures may be trying to be all things to all people and overwhelming consumers with choice.
“Frito Lay comes out with a lot of different things, but that’s just to keep the consumer looking at them and sometimes they’ll bring something out and discontinue it in a half a year. If they find a winner they’ll go with it,” says Hawkins.
Trend towards convenience
That’s precisely what happened both this year and last. In 2003 Frito Lay Canada persuaded thousands of consumers to vote for their favourites from among a dozen new flavours. Wild Stampede BBQ and PEI Loaded Baked Potato flavoured chips, the choice of Frito Lay employees in May, quickly gave way to Toronto College Street Pizza among consumers in October and to its final regionally inspired flavour Quebec 4 Cheese in March of this year. Then in August, Frito Lay announced the results from its vote for an overall winner: Cape Breton Sea Salt & Pepper enjoyed a relaunch as a nationally available potato chip and according to Frito Lay has now assumed a permanent place on store shelves.
Product and flavour variety help to explain the growth of the potato chip, pretzel and energy bar in 2003, but McDonnell says “the biggest thing impacting snack foods right now by far is the trend towards convenience.” More consumers, he says, are gravitating to the smaller, single service products, i.e. portable, easy to open, easy to eat.
Product weights appear to be getting smaller, too, says Kent Hawkins, in an apparent effort by some manufacturers to offset higher ingredient costs. “If someone goes from 250 grams to 200 grams obviously that’s a way to absorb a cost increase. If you can get away with it. Or you could go the other way, i.e. trading up to a larger weight for a higher dollar yield.”
Healthier products
Not to be outdone by Frito Lay, Jack Pong of Toronto introduced a new flavour to his line of Snackie Jacks soy chips early in 2004 – Plain and Simple, a natural unflavoured chip aimed directly at health conscious consumers in California and British Columbia. When Plain and Simple failed to catch on with consumers, the man who takes credit for having introduced the soy chip to North America in the early 1990s, while working for Soy King Ltd. of Australia, decided on a name change – to Original soy chips. If Pong takes any comfort in the aftermath of Plain and Simple’s failure to take off, it’s that the low carb craze appears to have bottomed out in favour of zero trans fats and high protein.
“That’s our product. Our soy product provides much more soy protein than any other product. Even Frito Lay is trying to come out with a soy product, but it doesn’t taste very good,” Pong says.
According to Hawkins, major companies such as Frito Lay, Old Dutch and Humpty Dumpty, along with the smaller firms like his, have taken steps to reduce the trans fat content in their snacks – driven in part by consumer choice, but also by a fortuitous drop in the cost of oils. Hawkins believes quality, not the number of products or flavours that can be generated, will help operations like his compete with the bigger players. As yet, high quality health food snacks may account for mostly single digit growth over other snack foods in Canada, but that, says Hawkins, is bound to change.
“Going forward the big things happening now in the industry are steps to reduce or eliminate transfats and to provide nutritional labelling These are things we’re looking at because we know the consumer’s going to be looking at them.”
