Exclusive: IRI’s Take On Candy, Snack Markets

EmailFacebookTwitter

From seasonal opportunities to how new products drive growth, IRI category experts Larry Levin and Sally Lyons Wyatt share their views on the candy and snack markets.

Cleveland — Candy & Snack TODAY got together with IRI’s CPG and retail industry experts Larry Levin, executive vice-president, consumer and shopper insights, and Sally Lyons Wyatt, executive vice-president and practice leader, to delve into where the confectionery and snack categories are heading and the factors impelling growth in these markets.

Taking A look at Confectionery

CST: What is behind the category’s ability to surpass total store gains during 2017?

Levin: It is really driven by innovation. The U.S. population has gotten back to the mindset of permissible indulgences. I’ll add that while it is nice to see dollar gains, units also grew, so these increases are not all coming from inflation.

CST: How are new products contributing to growth in the confectionery category?

Larry Levin, IRI

Levin: Within candy we saw growth at 1.8 percent, with about 7.5 percent of all candy sales coming from new items. New product innovation helps rebuild some floundering segments and creates excitement in the market. We are always looking for incrementality, but new products can help keep things at sea level for struggling sectors too.

CST: With channels such as dollar experiencing strong growth, is it fair to say consumers are still operating under a “recession” mindset?

Levin: Maybe it’s not a recession mindset, but rather a smart-spending mindset. Consumers are stretching their buying power by shopping dollar and online retailers.

In a couple of years, we see the confectionery industry at more than $2 billion for online sales. That growth could be driven by the fact it is easier to buy a product and have it show up at your house instead of having to make a special trip for it. It is a shuffling of how trips are changing around the country in general. Dollar and online are just a few areas with growth in trips, but Walmart has seen a big increase as well. So there might be a value mindset, but just in general it is more prudent buying.

CST: Do you find any demographic particularly drawn to the category?

Levin: We find gen X and millennials are driving much of the growth, at nearly 87 percent. They are driving gains because they are increasing their family sizes.

Additionally, a lot of growth we are seeing is around non-chocolate, and some of the research we’ve seen over time is a bit of a propensity for those segments to be multicultural. Latinos in particular have a preference for non-chocolate candies, and there is a lot of growth from the younger generations for the sector.

CST: What factors are driving the gains seen in seasonal candy the past few years?

Levin: Disproportionate innovation, which breeds excitement and marketing activities, has a lot to do with it. For the second year in a row, half of IRI’s New Product Pacesetters were indulgent items, and half of overall innovations in candy were driven by seasons.

There is also a little more acknowledgment for secondary seasons, such as the Fourth of July or Patriot’s Day, and we are seeing innovations around those holidays too. One message we talk about is, theoretically, there is always a reason to celebrate with candy. The industry is paying homage to the fact you can celebrate all the time, and manufacturers can make customized products to fit the holiday and they don’t have to be part of the big four.

Lyons Wyatt: I would add that when you think about the seasons, with a lot of fun and excitement around them, they become a time when it is even more permissible to treat than on a regular calendar day.

Sally Lyons Wyatt, IRI

CST: Is this growth for seasonal products sustainable?

Levin: It is sustainable if we pay homage to the holidays and recognize that, frankly, every other week there could be a holiday involving candy. Seasonal candy also tempts people that want to get away from the “same old, same old,” and that could be with a fun flavor variety to celebrate the Fourth of July, for example.

Examining The Snack Market

CST: What are some of the larger factors at play driving snack growth to outpace total store?

Lyons Wyatt: We have seen consumers making more of their choices based on lifestyle, meaning they are looking at holistic health and the role diet and exercise play, or looking to have a balance between treating themselves and eating healthy.

The second factor is around ecommerce, which is opening another opportunity for consumers to get new snacks that are not readily accessible. We have seen huge increases in ecommerce growth and private label has really expanded. Private label items are capturing attention because they offer variety.

Lastly, true indulgence is also driving snack growth. When you look at snacking, indulgent products are where you see a lot of consumers purchasing, consuming and enjoying.

CST: What accounts for the popularity of private label in snacks, which is much more robust than in the candy set?

Lyons Wyatt: Retailers saw snacking increasing throughout the day and started investing in private label snack programs years ago, where in candy private label brands have not been as strong and the investment has not been there.

The other side of it is private label items have evolved into tiers. They can offer value brands, mainstream products and then premium and organic items. That gets them into households they were not in previously. You have all of that and they are expanding snacking assortment in the store, and not just the center, but also perimeters.

Levin: Additionally, we have seen that millennials and Gen X are more open to private label. They grew up during a time when private label didn’t stand for a black and white brand. There is also a lot more brand architecture around private label products now. That’s part of smart-spending that we talked about earlier.

CST: We hear a lot about how shifting consumer preferences are driving snack sales. Can you give a few examples of how this plays out?

Lyons Wyatt: It used to be consumer preferences might be that they want a savory snack or something sweet, but during the past few years we have seen the popularity of sweet and savory combinations.

It can also go back to lifestyle, which can drive niche products or premium items that deliver on transparency or other benefits, such as protein. It is not about how much a product costs, it is about the product’s benefits and what it can deliver.

CST: Along the same line, there is a lot of news about product claims impacting sales. What product claims are being leveraged by snack companies that are resonating strongly with shoppers?

Lyons Wyatt: Functional, allergy and diet claims were top increasers. We also see dairy claims, whether it is added or non-dairy, and non-GMO are gaining traction. Vegan and vegetarian claims are hitting the list too. Again, it is all around lifestyle choices.C&ST