Call to the bar

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The emergence of branded healthy snacks over the last five years has been rapid, to say the least.

Between 2013 and 2018, packaged food grew at a CAGR of 1.0%. Over the same period salty snacks (mainly crisps) grew (+0.7%) and chocolate countlines (bars) declined (-1.2%); while snack bars grew (+7.0%) as did nuts, seeds and trail mixes (+7.5%), popcorn enjoyed even greater growth (+14.6%).

Snacking and `lunchbox' occasions are not new for consumers. However, the associated need-states have evolved beyond the fundamentals of satiety (food term for being full-up), portability, and energy, to include perceived nutritional benefit.

The snack bar category is of particular interest. The more contemporary snack bar brands have moved on from the cereal bars that established the category in the 1990s, such as Kelloggs and Tracker. Specifically they now communicate nutritional benefits, e.g. all natural, dairy, gluten free or extra protein.

They are also gaining traction with consumers as shown by their CAGRs between 2013 and 2018: Bounce+46%, Nakd +39%, Clif Bar +25%, Trek +23%. This reinvigoration of the category is helping incumbents like Nature Valley (+13%) and Eat Natural (+19%), while creating a headache for the cereal brands such as Kelloggs (-3.2%) and Jordans (-16%). This is not a fad: some brands have achieved meaningful scale (Nature Valley: £60m, Nakd: £57m). That said, these are still behind the scale of the larger chocolate countlines – Mars Bar generated £111m in 2017, with Kit Kat larger still at £240m.

We consider there to be four critical growth enablers:

1. Distribution: brands need to establish themselves with grocery multiples, symbol groups and wholesalers serving the independent newsagents. This is no mean feat and having a plan to engage or not in these retailers' core meal deals is critical. In addition, driving volume can be best achieved through the larger, super and hyper market channel, although success generally requires the development of a multipack format.

2. Brand story: how does a brand stand out, for both retailers and consumers? Tribe operates a subscription model and has a mission to end modern slavery. The Squirrel Sisters (seen above) started as a blog about healthy eating and after building a loyal following, the sisters launched a range of healthy snack bars.

3. Production capability: can production be ramped up if that big listing lands? Given many start-ups use third parties as a cost-effective way to begin production, this is a key consideration – as is the protection of the IP.

4. Price point: this is the elephant in the room. At between £1.80 and £2.49 each, these bars are expensive. Even in multipacks this is the case: a Bounce 3-pack is £3.99, which is a lot more than a Twix 4-pack at £1.00 or a 6-pack of Walkers crisps at £1.50. Regardless of the perceived health benefits, this is a significant premium to ask consumers to pay. Nakd's route to growth has been supported by its pricing closer to established norms – singles at £1.00 and 4-packs at £2.00-£2.49.

We still love chocolate and there is a limited health risk when consuming it in moderation. Therefore, it is unlikely that snack bars will replace countlines completely. But with chocolate countlines worth £1.3bn in 2017 and snacks bars worth £0.6bn, the snacking revolution is in full flow.

If you would like to learn more about Pragma’s work in retail strategy, click here.

Tony Reynolds