Strong snack markets facing threats from new forms of shopping

by Nico Roesler
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E-commerce and shifting retail strategies are reducing opportunities for impulse purchases.

ATLANTA — So much of the snack food market’s success is based on impulse consumer purchases. However, the commercial landscape is changing, and more people are shopping for food online while traditional retail stores are rethinking how they attract customers. How will this affect the global snack market? 

Jared Koerten, senior analyst with Euromonitor International, outlined the current consumer trends and offered several answers and strategies to capitalize on the shifting market during a presentation at SNAXPO18 in Atlanta, held March 12-14.

He said the savory snack market is the fastest growing segment in snack and staple goods in the U.S. and that the better-for-you market continues to define the savory snack segment. The U.S. makes up 31% of global sales in savory snacks, according to Euromonitor.

Jared Koerten, senior analyst with Euromonitor International at SNAXPO18 in Atlanta.

“The strong consistent growth of savory snacks in the U.S. has helped it keep pace with the rest of the world,” Mr. Koerten said. 

Emerging regions like the Middle East, Latin America, Eastern Europe and Asia Pacific were some of the fastest growing savory snack markets, each seeing 8% to 12% growth, he added. Euromonitor forecasts that there will be $4.5 billion growth in the savory snack market in China over the next five years and that the global share of sales from Asia Pacific and Latin America will reach 40% by 2022. 

Euromonitor studied these growth figures and how impulse purchasing is driving them. Mr. Koerten said the statement “I often make impulse purchases” for snacks resonates across the world and across all demographics.

“Impulse shopping is universal, and it is critical to snack foods,” Mr. Koerten said.

According to Euromonitor, 18% of savory snack dollar sales in the U.S. were through c-store and forecourt retailers in 2017. Growth in these convenience channels increased 25% from 2012 to 2017, and 68% of savory snack purchases at c-stores were unplanned.

The U.S. makes up 31% of global sales in savory snacks.

But Mr. Koerten suggested that impulse purchases may be under siege due to several developments in how people buy their food. The first is declining trip frequency to retail locations thanks to new online delivery and “click and collect” programs. The second is the changing shopping habits thanks to a new focus on perimeter of the store and the decline of traditional checkouts.

“These two things are shaking up impulse purchasing at an alarming rate,” he said.

According to Euromonitor, only 30% of people aged 20 to 30 are making weekly trips to a grocery store in the U.S. And 30% of that same demographic are now making monthly online grocery purchases. Internet retail of snacks is growing at 20% to 25% year over year for the past five years, according to Euromonitor. 

Mr. Koerten said interest in online grocery shopping is rising sharply around the world. Online grocery services like Instacart, Shipt and Grocer Direct are seeing tremendous growth. Instacart is now in 170 markets and has partnerships with retailers like Wegmans, Aldi and Albertson’s. Shipt was recently acquired by Target, and Walmart is testing new delivery methods like “Direct-to-Fridge” where a delivery driver is allowed limited access to a home to deliver groceries directly into consumers’ refrigerators. The number of “click and collect” locations rose from 200 in 2014 to more than 4,000 in 2018, Mr. Koerten said.


Other trending concepts like meal kits and subscription grocery services are also presenting challenges to impulse purchases. 

The second area challenging consumers’ ability to make impulse snack purchases is shifting in-store shopping habits. One of the most important “impulse zones” in a store is the checkout line, Mr. Koerten explained. But with self-checkouts that occupy all of a consumers’ attention, scan-and-go programs and automated stores, the opportunity for impulse purchasing is dwindling. 

The other area of traditional retail stores that encourages impulse purchasing is the center aisles. But a new focus on perimeter shopping is detracting from that. Mr. Koerten said the perimeter of the store offers the perceived notion of freshness and serves as a health food destination. 

Online shopping is changing the retail landscape for snack makers.

Mr. Koerten then provided some strategies to overcome the challenges facing impulse purchasing. He said snack companies should review how their products are portrayed in all online spaces. He said reviews are critically important, and search engine optimization can help direct people to certain snack products. He said companies can also start their own subscription model where an automatic order is placed for a bag of potato chips every month. 

“Companies need to think about ways to replicate impulse sales in an online environment,” he said, adding that things like pre-checkout pop-up ads can accomplish this. 

In the changing retail landscape, c-stores are seeing big growth. Over the next five years, Euromonitor projects that 3,000 more c-stores, will be built in the U.S. While people may not be venturing into center aisles of grocery stores as much, they are going to c-stores. 

“People still want to make impulse purchases; companies just need to reach consumers where they are,” Mr. Koerten said.

He suggested that companies look for ways to improve conversion rates at checkouts to compensate for reduced traffic in traditional markets. He said creating a unique in-person shopping experience can also help.

“Think of snacking as an experience; think of ways that can make a brand an experiential destination that consumers want to go look for, and it will break down these barriers of e-commerce,” Mr. Koerten said.
 
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