Capturing new demographics
Aug. 30, 2013
by Eric Schroeder
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It appears everyone is on the lookout for a good cookie.
Whether it be long-standing favorites such as Oreo or Chips Ahoy!, new varieties capturing new demographics, such as El Duende from Kellogg Co., or niche products targeting the gluten-free and organic categories, cookie sales over the past year have been on the upswing.
In the 52 weeks ended July 14, dollar sales in the cookie category totaled $7,509,766,000, up nearly 5% from the same period a year ago, according to Information Resources, Inc. (I.R.I.), a Chicago-based market research firm. Unit sales also improved, rising 3% to 3,337,294,000.
By far the largest player in the cookie category with a 38% market share, Mondelez International, Inc., Deerfield, Ill., generated an 8% increase in dollar sales and 7% gain in unit sales in the 52 weeks ended July 14, according to I.R.I.
In an Aug. 7 conference call with analysts to discuss second-quarter results, Irene Rosenfeld, chairman and chief executive officer of Mondelez, called the company’s U.S. cookies business “a standout” performer, with revenues up more than 5% in the second quarter.
“That represents the eighth consecutive quarter of growth of 5% or more,” Ms. Rosenfeld said of the business, which Mondelez refers to as its biscuits business. “Oreo, Honeymade, belVita, Chips Ahoy! and Triscuit each made solid contributions to the second half.
“This business continues to benefit from the renewed focus on in-store execution by our direct-store delivery sales force following the spin. For example, through our ‘one more in the store’ initiative, we increased the number of displays nearly 17% in Q2. D.S.D. is also a key enabler to get our new products on shelves. In the first half, 9 of the top 10 new biscuit products in the U.S. were ours. As a result, our market share is up 140 basis points in the quarter and 100 points year to date.”
BelVita, especially, has been a hit for Mondelez since debuting in the United States in February 2012. In the 52 weeks ended July 14, sales of belVita eclipsed $87 million, up 111% from the same period a year ago, according to I.R.I.
In August, Mondelez announced plans to build off the crunchy belVita platform by adding soft baked breakfast biscuits. The new products, which are available in mixed berry and oats and chocolate flavors, are considered an excellent source of fiber and are made with 11 grams of whole grains per biscuit.
“After only 18 months in the market, many Americans have already made belVita part of their morning routines,” said Gary Osifchin, senior marketing director for Mondelez International. “We’re pleased to have introduced this new breakfast option to American consumers.”
Shifts in capacity
Since announcing plans last year to close its Mr. Christie cookie plant in Toronto in the third quarter of 2013, Mondelez has stepped forward with two projects that should significantly boost its global cookie business. In June, Kraft Foods (Suzhou) Co. Ltd., part of Mondelez International, broke ground on an $85 million expansion at its cookie plant in Suzhou, China. The 98,000-square-foot expansion project will more than double the plant’s current capacity and create 340 new jobs. Mondelez said the expanded plant will include new production lines for Oreo and Chips Ahoy! cookies, and it fits the company’s strategy of investing in emerging markets to drive sustainable, profitable growth.
Then, in July, Mondelez announced it would invest approximately $350 million in the construction of a new cookie manufacturing facility in Mexico.
“When its stores open in the second half of 2014, this facility will support biscuit growth across the Americas and will enhance margins by utilizing state-of-the-art technologies that enable manufacturing at world class costs,” Ms. Rosenfeld said during the Aug. 7 conference call.
The facility in Mexico is expected to be the world’s largest cookie plant.
Fresh flavors, simple ingredients
Despite a 7% decline in dollar sales and 6% drop in unit sales in the 52 weeks ended July 14, The Kellogg Co., Battle Creek, Mich., believes it can incorporate new flavors and simple ingredients into its Keebler cookie line in a way that spurs sales.
Consumers looking for a sweet treat will be able to try Kellogg’s new Keebler Simply Made cookies. The cookies are baked with basic ingredients, including wheat flour, butter, eggs, sugar and vanilla, reflecting the desire of some consumers for simpler foods. They will be available in two varieties: chocolate chip and butter.
Keebler also has launched new cookies that reflect the importance of Hispanic consumers, the fastest growing ethnic group in the United States. New Keebler El Duende (“The Elf”) cookies are available in coconut and lemon sandwich varieties.
“Snacking is an important part of peoples’ diets, and consumers are constantly seeking new options,” said Brian Huff, president of Kellogg U.S. Snacks. “We continue to respond with flavors, ingredients and entirely new foods to meet this demand for snacking alternatives.”
A ‘sweet’ turnaround
Irene Chang Britt, senior vice-president of global baking and snacking at Campbell Soup Co. and president of Pepperidge Farm, in a July 25 analyst meeting expressed her pleasure with the turnaround taking place in the company’s sweet portfolio, which she said has been challenged in recent years.
“We have returned to growth,” she said. “This turnaround is the result of carefully focused investment in three areas: refreshing our core range, evolving our leading brand, Milano, and launching innovation designed to attract new consumers to the category.”
Keying the turnaround was the introduction of the Dessert Shop range of soft dessert-inspired cookies as a limited-edition seasonal offering.
“The consumer response has been so enthusiastic that we introduced year-round varieties in fiscal ’13, starting with strawberry cheesecake and dark chocolate cheesecake,” Ms. Britt said. “To continue our successful seasonal product line, we will bring back our popular pumpkin cheesecake and caramel apple varieties this fall.”
In the 52 weeks ended July 14, cookie dollar sales at Pepperidge Farm were $361,227,500, up 2% from the same period a year ago, while unit sales increased 6% to 121,499,700, according to I.R.I.
Acquisitions bring in new players
A couple of transactions in August may have flown beneath the radar, but nonetheless may provide potential going forward in some of the “niche” cookie sub-categories.
First, Post Holdings, Inc., St. Louis, on Aug. 2 signed a definitive agreement to acquire Premier Nutrition Corp. for $180 million in cash. Based in Emeryville, Calif., Premier Nutrition markets and distributes protein bars and shakes under the Premier Protein brand, high protein bars and cookies under the Titan brand, and nutritional supplements under the Joint Juice brand.
Sold in 24-count boxes and packaged two to a pack, each two-cookie serving of Titan brand cookies contains 20 grams of protein. The cookies are available in three flavors: chocolate chip, oatmeal raisin and peanut butter.
“We are excited to enter this high growth and dynamic category,” said Bill Stiritz, chairman and c.e.o. of Post Holdings.
More recently, Orrville, Ohio-based The J.M. Smucker Co. acquired Enray, Inc., a Livermore, Calif.-based manufacturer and marketer of organic, gluten-free grain products.
Enray’s products include sprouted and non-sprouted grains, pasta and cookies, most of which are sold under the truRoots brand. The cookies are marketed under the Qookies label, and are available in five varieties: Ancient Three-Seed; Aztec chocolate chunk; classic vanilla; orange ginger; and rich chocolate chip.
“Baked with organic sprouted and whole grain ingredients, these Qookies may look, smell and taste traditional — however they are anything but,” the company’s web site states. “Cookies just evolved.”
Richard Smucker, chief executive officer of J.M. Smucker Co., said the acquisition “strengthens and adds to the breadth” of Smucker’s natural foods business, extending it beyond the leadership position it currently hold in the natural and organic beverages category.
“The addition of the truRoots brand and its organic quinoa and other ancient grain products provides an on-trend, compelling product platform across the rapidly growing gluten-free market,” he said.
Another niche cookie product hitting the market this summer was introduced by Koochikoo, L.L.C., Seattle. In partnership with KeHE Distributors out of Chicago, Koochikoo launched all-natural, sugar-free cookies that feature monk fruit as a natural high-intensity sweetener. Monk fruit, also known as luo han guo, is about 200 times sweeter than sugar and has 0 calories per serving.
Sally Cox, founder of Koochikoo, said it took a year of research and development to determine the right amount of monk fruit and other ingredients to use in the cookies. The cookies are available in four varieties: Blissful Chocolately Brownie; Joyful Mapley Oatmeal; Sunny Strawberry Twist; and Cheerful Chocolatey Chip.
In addition to monk fruit extracts the cookies feature stevia plant extracts, erythritol (a polyol) and dietary fiber (resistant dextrin and inulin).
David’s Cookies opens new headquarters
CEDAR GROVE, N.J. — David’s Cookies held a grand opening Aug. 14 for its new 160,000-square-foot facility in Cedar Grove that will serve as corporate headquarters and a production facility. The company invested $15 million in the facility.
The company’s more than 350 employees attended the ceremony as did Kim Guadagno, lieutenant governor of New Jersey; Senator Kevin O’Toole; and Robert O’Toole, mayor of Cedar Grove. Food service vendors, distributors and business partners were invited to tour the facility.
In the near future David’s Cookies plans to consolidate facilities from Fairfield, N.J., and Longwood, Fla. Originally formed in 1979, David’s Cookies manufactures and distributes cookies and frozen cookie dough for the food service and co-branding baking industries and fresh baked cookies sold on-line.