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Skip Navigation LinksNACS Online / Magazine / Past Issues / 2011 / October 2011 / Category Close Up: Rise and Shine

Category Close Up: Rise and Shine

Morning dominates the packaged sweet snacks category.
Category Close Up: Rise and Shine

By Joe Bush

Eggs and bacon, pancakes and syrup, coffee and donuts â€" these tastes are joined at the hip. And it’s this marriage of sweet and savory that kept the packaged sweet snacks category in the top 10 in sales per store per month, according to 2010 NACS State of the Industry data, dictating merchandising and promo­tions and even decisions on private label products.

According to NACS CSX data, the category has provided a per-store gross margin near 38 percent for the first six months of 2011. During the same time period, cookies, muffins, donuts and snack cakes posted sales highs of $2,070 per store in March and reached a high of $779 gross margin dollars per store in June of this year.

Muffin sales declined sharply (11.29 percent) in the 52 weeks leading to Au­gust 7 according to Symphony IRI Group, a Chicago-based market re­search firm, but donuts, bakery snacks and pastry/coffee cake/Danish sales all rose 1 to 3 percent.

The data also shows a slight decline in bakery snack unit sales, a 15 percent drop in muffin unit movement, and slight unit-sales increases in donuts, bakery snacks and pastry/coffee cake/Danish. Cookies declined less than a percentage point in sales but rose a per­centage point in unit sales.

"Our sales for the past 11 months have been extremely successful," said Mike Santiago, category manager for 162-store Thorntons, of Louisville, Kentucky. "Our units are up as well…We’ve taken cost increases, which has made us take retail increases and our units are still growing, so we’re very happy."

Demographic Delight

In some locales, sales to Hispanics have given some retailers a category boost.

"There are a tremendous amount of choices competing for the consumer dollar in the convenience channel, how­ever the growth in the Hispanic popula­tion in Texas has resulted in a high demand for our Mexican sweet breads and pastries throughout the state," said Les Havins, director of business devel­opment for Bimbo Bakeries USA (BBU) of Horsham, Pennsylvania.

BBU is a division of Grupo Bimbo, founded in Mexico in 1945 and one of the world’s largest bread companies. With the explosive growth of Hispanics in the United States in the past few de­cades, the company’s place as a Latin American favorite has served it well.

BBU’s Bimbo and Marinela brands of sweet breads, snack cakes, cookies and pies sell so well for Bonham, Texas-based Kwik Chek that category manager Kelly Nelms said his chain’s 33 Texas stores are replacing a major national brand with BBU products, which include Mrs. Baird’s donuts, cinnamon rolls, honey­buns and fruit pies. Kwik Chek also car­ries Flowers Foods’ Mrs. Freshley’s packaged sweet snacks. Ten Kwik Cheks in Oklahoma remain unaffected by the product change because of a smaller His­panic presence in their areas.

Nelms said his top selling packaged sweet snack, by far, is the honeybun, regardless of brand. Powdered donuts and chocolate donuts follow, in pack­ages of six.

Sweet Sunrise

Packaged sweet snacks compete with breakfast foods, more so than with af­ternoon snacks. "Morning rules the cat­egory," said Santiago.

Thorntons’ best-selling items to pair with coffee â€" in dollars and units â€" are chocolate and powdered-sugar mini-donuts, according to Santiago. His chain carries Little Debbie, Hostess and store brand packaged donuts, and their dis­tinction as "good with coffee" guides merchandising decisions.

"We try to make sure [donuts are] front and center and we never run out of stock," Santiago said. "We know custom­ers especially in the morning are looking for that treat. We try to have multiple points of interruption. We’ll have it in­line, and we’ll also have it at the coffee bar, near the cooler, or near the milk door where market baskets are natural."

Nelms at Kwik Chek also merchandises the category near coffee, and said sales in the morning are strong enough that he doesn’t often promote or bundle for special pricing for that daypart. It’s what customers are coming for anyway.

"We’ve done some bundling with cof­fee in the past; it does OK," Nelms said. "That person, when they’re coming in in the morning, they’re coming to get their coffee, or their pastry, or their cigarettes or gas or whatever. Just because you bundle a coffee and a pastry, you don’t really see a lot of upsell."

Santiago said Thorntons has focused more recently on price points and stay­ing in stock, but is always open to pro­motions. "If you put them together I still think you get more customers to pick up a donut who would normally just pick up a coffee," he said. "Even though they’re high in the market basket for af­finity items, you still want to make sure you promote or bundle [the category] when the opportunity arises."

Store Brand Succulence

Mintel’s Prepared Cakes and Pies report from June 2011 states that market lead­ers Hostess Brands and McKee Foods, makers of Little Debbie’s, lost market share and sales in 2010, even though the cakes and pies market increased almost 5 percent. Mintel attributes this drop to the rise of private label and smaller, re­gional brands, such as Flowers Foods’ Tastykake, a Philadelphia-area tradition. Private label offers customers a value, es­pecially in tough economic times.

Santiago said Thorntons’ store brand donuts are important to his packaged sweet snacks category (which comes in second in dollars and units behind salty snacks, but ahead of ice cream and alter­native snacks). "We’re not bringing in a private label that’s going to compete with the 75-cent or the 50-cent items from Little Debbie, it’s in addition to…Between the two DSD companies, we fit right in the middle price-wise…giving our customers a value compared to one of the other brands. We’re kind of fo­cused to stay right in the middle be­tween Little Debbie and Hostess."

New Nibbles

Flowers Bakeries vice president of sales Jeff Blalock said the category is resistant to recession because, similar to candy, packaged sweet snacks are an indulgence consumers don’t want to give up. The Blue Bird and Mrs. Freshley’s brands, both under the Flowers umbrella, intro­duced products co-branded with chocolate giant Hershey’s this year: Chocolate Pies, Crème filled Chocolate Bells, and Chocolate Chip muffins. Mrs. Freshley’s also debuted new Danish flavors Apple and Strawberry/Cheese.

"In the spring, we offered a bundled package of Mrs. Freshley’s products with our new ‘made with Hershey’s’ items," said Blalock. "This allowed re­tailers to buy our best-selling Mrs. Freshley’s items like donuts, honey buns, and cupcakes, and in the same package receive the new Hershey’s items to expand their snack offerings.

Whether it’s brownies, fruit pies, honeybuns or cookies, one thing is for sure: Packaged sweet snacks may be a category in which consumers are least concerned with health. They want the right drink to go with their sweet snack, not the right amount of calories.

"Adults tend to favor upscale brands that are to be savored," said Lisa Costi­gan, business unit manager, conve­nience for Kellogg Food Away From Home, whose cookie brands include Keebler, Famous Amos and Austin. "Taste, brand and price are the most im­portant factors when determining which cookies to buy. People are less concerned about the nutrition and just want to enjoy it."

Joe Bush is a freelance writer based in Warrenville, Illinois. You can find his work at joebushfreelance.com.