Cookies and crackers: Peripheral vision
September 27, 2016
by Matt Hamer
Love, Cookie relies on dedicated repeat customers and a strong regional following to sell its gourmet treats.
Walk down the cookie and cracker aisle of any grocery store in the US, and you will see a lot of familiar names. Boxes of Oreos, Cheez-Its, Chips Ahoy! cookies and Triscuits are certain to be there for your perusing pleasure, both in classic and limited-edition varieties. There’s only so much space on the shelf, however. Despite the wide selection present in these aisles, they might not be the best place for up-and-coming manufacturers to showcase their wares. To make an impact, bakers are turning to the periphery.
“That’s part of their strategy for not getting lost on the shelves,” said David Van Laar, president, the Biscuit & Cracker Manufacturers’ Association (B&CMA). “The newer startups that we’re seeing, that’s where they’re getting put for several reasons. There’s no space on the shelf now.”
According to Nielsen research, cookies sold in the perimeter of stores consist of $1.2 billion annual sales. This is up 7% in dollars and 4% in volume over the last year. Similarly, crackers sold in the perimeter are up 7% in dollars, 6% in volume and made up 74% of deli snack dollars spent in the same time period.
“The perimeter of the store is where growth is happening, whereas center aisles may be stagnant or may be overloaded with a bunch of brands,” said Sarah Schmansky, director, business operations, Nielsen. “To break out and be in that perimeter and hopefully ride the wave of some of that growth would be a main factor that would prompt cookie or cracker manufacturers to go beyond the center store.”
This kind of opportunity is what drove Greg Sorensen, brand manager, Love, Cookie, New Orleans, to market his company’s cookies in the grocery store perimeter.
“I think people just really want something new,” Mr. Sorensen said. “If you walk down the cookie aisle, it’s dominated by Nabisco, Keebler and Pepperidge Farm. That’s all you get.”
Love, Cookie bakes indulgent cookies with flavors like Almond Toffee Crunch, Dark Chocolate Orange and Lemon Cooler. Its Dark Chocolate Mint is also a best seller. According to Mr. Sorensen, Love, Cookie products stand out from middle-store offerings by being marketed to adults who want something to savor with a glass of red wine after a full day of work.
“You want to be able to say, ‘This is good; this is really tasty,’ ” Mr. Sorensen said. “Maybe it costs a dollar more, but it’s awesome.”
Know your audience
For brands considering marketing their products outside of the center aisles, it helps to know who is shopping there and what they expect to find. As far as the bakery department is concerned, it seems like everyone ends up there at some point.
“Almost every US household purchases from the in-store bakery annually (99% of households purchase bakery items), but some demographics overspend in the department,” Ms. Schmansky said. “The key spending demographics include affluent, larger families (annual income over $100,000) and older bustling families with households of five or more members and children between ages 13 and 17.”
Busier lifestyles and an increase of families with all parents working outside the home have contributed to consumers looking for prepared meals during their trips to the grocery store perimeter. In fact, the Food Marketing Institute’s 2015 Grocery Shopper Trend Study shows that 34% of survey respondents consider premade grocery store meals an easier alternative to eating out at a restaurant, opening up a world of opportunity for both cracker and cookie manufacturers. La Panzanella Artisanal Foods, Seattle, has had great success in selling crackers to these consumers in the deli department.
“They’re looking for grocery retailers to help them out in terms of preparing a meal ahead of time,” said Steve Lorenz, director of marketing, La Panzanella. “When they’re in the deli looking for prepared foods if there’s a way to enhance a meal — whether it’s for their own family or for guests — by adding in fancy cheese and crackers, then they’re going to look to our products.”
La Panzanella recently launched a line of seasoned crackers called Croccantini Bites, targeting younger consumers with active lifestyles. Available in Italian Herb, Spicy Olive and Sundried Tomato Basil varieties, these crackers are packaged in brightly colored, resealable bags for eye-catching visibility and easy on-the-go snacking.
“Our core line tends to be for more mature audiences, and the younger generation — millennials — are more on-the-go, more likely to snack,” Mr. Lorenz said. “The average American is eating at least two snacks a day in between meals. Millennials snack four to five times a day. This is really more keeping with that trend.”
Increased snacking isn’t just for millennials, though. According to a recent study by the NPD Group tracking US consumers’ daily snacking habits, baby boomers actually eat ready-to-eat snack food 20% more often than millennials do. An estimated 90.4 billion snacks are consumed annually by boomers in the US compared to 83.1 billion by millennials. Since this demographic is also a big spender in the grocery perimeter, cookie and cracker producers shouldn’t count the older generations out when marketing their products.
La Panzanella’s Croccantini Bites are aimed at young, on-the-go consumers looking for bold flavors and artisanal quality.
Keep it local
The perceived size of a company can also play into a consumer’s willingness to purchase a product. Increasingly, shoppers have a “big is bad” mentality. A 2015 study published by the Center for Food Integrity revealed that “whether comparing local food companies to national food companies or small farms to large farms, the results are the same: a significant percentage of the public (in some cases a majority) feel smaller companies and farms are more likely to share their values.”
The grocery store perimeter is the perfect place for local and regional cookie and cracker makers to connect with consumers looking for a brand they consider to be approachable and trustworthy.
“There’s a lot of regional traction to these things,” Mr. Van Laar said. “The name may be known in an area, and do well there, but in another area there is no brand recognition at all. It’s almost a boutique business.”
The team at Love, Cookie took this into consideration when marketing their product to grocery store chains in and around New Orleans and the larger Gulf South region.
“We’re good with being more or less a local/regional player right now because that appeals to people more,” Mr. Sorensen said. “Somebody in Portland might not want to buy something from New Orleans if they can get something from Portland.”
La Panzanella got a similar start when it moved from being a family bread bakery to a grocery retailer.
“We started locally, and the crackers were kind of a happenstance,” Mr. Lorenz said. According to company legend, the head of sales at the time, Antonio Galati, was making a sales call to the Four Seasons hotel in Seattle, where the buyer mentioned his frustrations with the hotel’s current cracker supplier. Mr. Galati’s mother was visiting and had developed a flatbread cracker while playing around in the kitchen. He asked if he could come back the following day with some samples, and the Four Seasons ended up being La Panzanella’s first account for crackers.
Stories like this help brands — even national ones — tap into consumers’ desire to support smaller, more personable companies.
Another major force driving consumers to the periphery of the store is a concern for health and wellness. Nielsen research shows that this is an opportunity still largely untapped by in-store bakeries.
“Of all in-store bakery sales, about 95% of items have no declared health benefit attached to them,” Ms. Schmansky said. “But when you also take a look at the demographics that are buying bakery goods, older consumers have special interest in health and wellness and better-for-you products. There’s a real opportunity to capture those consumers and provide products that are relevant for their changing demographic needs.”
Though the bakery section has a lot of room for growth in regard to health and wellness, items toting niche health benefits such as vegan and gluten- and dairy-free routinely find spots in unconventional areas of the store where a specific consumer base might find them.
“Sugar-free, for instance, is over in the health and beauty care area,” Mr. Van Laar said. He added that many stores remain resistant to moving cookies and crackers proven to sell well out of the way in center aisles to make room for these specialty products.
“Until those trends or fads or whatever they turn out to be mature, they’re certainly not going to carve out a large spot on the shelf,” he said.
Within in-store bakeries, private label and unbranded cookies are often the go-to for perimeter shoppers wanting to feel healthier. A study commissioned by the Private Label Manufacturers Association and conducted by SurveyLab showed that nearly one-third of consumers favor items baked on-site in grocery stores, and the same number of shoppers seek products containing “less fructose, sugar, corn syrup and bad fats.”
“In-store bakery is in the best position to communicate freshness, naturalness and a lesser dependence on the preservatives needed to make products more shelf-stable,” Ms. Schmansky said. “Unbranded products can convey more of a fresh-out-of-the-oven sense to consumers.” She also shared that unbranded and private-label sales hold the largest share of in-store bakery sales and continue to grow, up 6% and 12%, respectively. “Unique local brands are also showing strong growth,” she added.
Unbranded and private label products hold the lion’s share of in-store bakery profits.
Big to small
The success that smaller cookie and cracker manufacturers are having in the periphery is prompting larger corporations to try getting in on the action. Many times, that involves buying smaller brands that are showing growth potential.
“It used to be, 10 years ago, the big push for us was to bring the big names new products and help them develop and get them out there, but they couldn’t get them on the shelf,” Mr. Van Laar said. “So what we’re seeing is almost the opposite. Somebody else is developing some space and then selling the brand to them, and then they execute it better and grow it.”
He added that many companies build their entire business model around capturing the attention of potential buyers.
“We’ll get 10 people that start a halfway decent production, one of them will flourish, they’ll get big enough to get recognition, and somebody will buy them,” he explained. “That’s their strategy.”
According to Mr. Sorensen, this business model has a few potential drawbacks — the biggest of which being product quality.
“Some new brands rely too much on marketing and the product isn’t quite up to snuff,” he said. “I feel like once someone tries our stuff, we have a repeat customer because it’s really good. It’s where we have an edge.”
The main innovation legwork for larger companies is often accomplished by smaller boutique brands seeking a larger consumer base, according to Mr. Van Laar.
“They want to be marketing companies, and they’re using many contract manufacturers to come up with the products for them,” he said. “They want to innovate, but the easiest way for them to do that is for them to buy something.”
An abundance of brands
Foodie culture is another big contributor to increased grocery perimeter sales. Consumers looking for higher quality or more adventurous and indulgent flavors often scan the outer edge of stores to satisfy their cravings, and they will find no shortage of new brands vying for their attention.
“‘Gourmetization’ of products is taking place more frequently in the in-store bakery,” Ms. Schmansky said. “Perimeter shoppers have more disposable income, and so the goal for bakery is to really turn that shopping behavior into a destination by carrying more gourmet, premium products.”
The tough reality for cookie and cracker manufacturers selling in grocery stores is that they are up against hundreds of other like-minded companies. And there’s only so much space in the shopping cart.
“There are so many cool, interesting new brands, and you have a lot of competition,” Mr. Sorensen said. “People might try one or two new things when they go to the grocery store, best case scenario. In my opinion, you’re competing with every SKU in the store.”
Even more seasoned brands like La Panzanella are being forced to develop new products to keep pace with up-and-comers in the deli department.
“It used to be, maybe five years ago, you’d go into the deli and see cheese and charcuterie and some artisanal crackers like ours,” Mr. Lorenz said. “But over the past several years, you’ve seen things that are also alternatives to potato and corn chips, things like pita chips or pretzel thins. Those have come into the deli space where we operate and have started compete for shalf presence.”
For the in-store bakery segment, 2015 saw a significant increase in number of brands. However, that doesn’t mean that every brand turned a significant profit.
“Although more than 1,000 brands were sold last year across the country in in-store bakeries, only four had sales greater than $100 million,” Ms. Schmansky said. “Unbranded and private label still hold the largest share within in-store bakery. They definitely still resonate with consumers, even though there isn’t as a trusted brand name attached to them.”
The challenge for cookie and cracker brands selling in the perimeter is to connect with shoppers by offering high-quality, unique products that inspire consumer trust and appeal to their desire for a well-balanced, healthy life. And if they taste good, even better.