Wednesday, July 13, 2016

What's Going On In The Australian Biscuit Market? Part Five: Tim Tam Slams The Chocolate Coated Biscuit Market

The Australian chocolate coated biscuit market is BACK!  More or less.

Things had been looking shaking there for a couple of years, dipping into quite worrying levels of negative value growth in 2012, at which time the impulse purchase nature of the category encouraged retailers to discount them heavily.  Which, it has to be said, was not the most imaginative solution in the world.  Which was a pity, because if there was one thing that the chocolate coated biscuits market needed, it was imagination. And they were about to get it!

Because something big had to change.  Or to be more specific, something big had to change for the one brand big enough to single handedly change the course of the entire category. 

And I think we all know which brand that was.

If you ask the average Australian on the street to name a brand of chocolate coated biscuit, most of the time (I’d wager as often as 99%) they will say Arnott’s Tim Tams. Arnott’s Tim Tams are pretty much what chocolate biscuits mean to the majority of Australians.  You don’t see Australians teach foreigners the intricacies of how to do a Mint Slice Slam do you?  So it may be surprising to hear that for all of its fame, Arnott’s Tim Tams actually make up less than half of the chocolate biscuit market in Australia.  Although it does come quite close.  And is getting closer.  But we’ll discuss that in more detail later.

The fortunes of both Tim Tam and consequently the overall chocolate biscuit market began to change in 2013 when the brand started to focus on flavours other than the classic Tim Tam Original, first by launching Tim Tam Treat Packs, small packs of Tim Tam’s in a wider range of flavours than previously thought possible.

Anyone who thought that this was as far as they could go was in for a rude shock.  In 2014, Tim Tam brought Adriano Zumbo – almost certainly Australia’s most famous pastry chef – to invent three new flavours.

These flavours – Salted Caramel, Choc Brownie and Raspberry White Choc – were a significant departure from the previous offerings, such as Original, Dark Chocolate, Caramel, White Chocolate.  The old flavours were very well and good, but nothing you could really call “on trend”.  Nothing that captured the zeitgeist.  But “salted caramel”!  It might seem a little pass√© now, but in 2014 that was some true “finger on the pulse” work.  They stood out on the shelf, and not only because Raspberry White Choc came in a bright pink pack.

It’s only been two and a half years since Adriano Zumbo introduced the Salted Caramel Tim Tam, but it sometimes feels like there have been more flavours invented in those two and a half years than in the entire history of, not just Tim Tams, but the entire chocolate coated biscuit industry!

Here’s a quick rundown of some of the various versions of Tim Tams that have appeared over the last couple of years: Espresso Martini, Pina Colada, Strawberry Champagne, Toffee Apple, Red Velvet, Three Beans, Chocolate Coconut and the rest of the Adriano Zumbo range.  Not to mention the whole Chocolicious range which is becoming increasingly fancy itself with such flavours as Velvet Mudslide.    

So many flavours in fact that they’ve had to divide their new releases between Woolworths and Coles; Woolworths have received the “mocktails” range, whilst Coles have been delivered Choc Banana and Choc Pineapple.

Not all of these variations have been successes, but they have certainly helped keep the Tim Tam brand at the front of every chocolate coated biscuit lovers mind. 

Whether this strategy has been a success has been a matter of much debate amongst commentators within the chocolate coated biscuit industry; with rumours of late night meetings between the Australian office and their American masters, apologising that maybe this time – with the Pina Colada or Strawberry Champagne range – they went too far.

And that seems to be the common consensus opinion: Salted Caramel may have been an inspired idea, but now things are just getting ridiculous.

Still, you can’t say that the experiment hasn’t been at least a partial success. Value growth of chocolate coated biscuits returned to positive territory, even whilst volume growth remained negative and seemingly trending downwards.  More revenue for less chocolate coated biscuits; that must count as some sort of success.

The reason volume growth has gone down is largely because those fancy new flavours of Tim Tam come in smaller pack sizes, of 165-175g compared to 200g for the Tim Tam original.

Meanwhile Tim Tams have also grabbed a larger slice of the Australian chocolate coated biscuit market.  In 2015, Tim Tams made up 45.6% of the market (according to the Retail World Annual Report), just less than half.  Strong gains that have continued into 2015.

The Tim Tam revolution is not the only thing to have happened in the Australian chocolate coated biscuit market over the last half decade or so.  There has also been the rise, and then fall of the Cadbury biscuits brand. 

Cadbury arrived on the chocolate coated biscuit block in 2013, and made some rather impressive early gains, debuting at 7.6% market share. There was clearly a high level of excitement about the possibility of a Cadbury biscuit – a chocolate biscuit made by people who know about chocolate, with a range of popular chocolate brand names to wack on them – but it didn’t really work out.  Two years later and Cadbury’s now only hold 3.5% value market share in 2015.

Then there has been the fall of private labels.  Don’t fall for the whole “private labels are taking over the world” line, because as Tim Tam has convinced Australian consumers to expect so much more from a chocolate coated biscuit, private label brands have fallen back.  Private label have declined each year over the last half decade, from 13.9% in 2010 down to 7% in 2015. It just goes to show that it is a trend that can be reversed if you just make something a little bit exciting.

Not to mention possibly surprisingly cheap.  Because despite all this text-book premiumisation and gourmet flavours to excite the "foodies", Tim Tam remains one of the least expensive chocolate coated biscuits on the market, largely due to being such a big drawcard for supermarkets that it's almost permanently on special.

No wonder it's slamming the competition.

It hasn’t been all good news for Arnott’s though, since virtually every other non-Tim Tam Arnott’s brand has also suffered. Simply because why would you eat an Arnott’s Royal when you could have a Tim Tam? 

Arnott’s Mint Slice has been the exception to the rule.  Slightly.  Although even they have fallen backwards in 2015.

Which means that, as a result, Arnott's corporate market share has actually gone backwards, despite the success of Tim Tam.  Although they are clearly still far far ahead.

So Arnott’s Tim Tam have revolutionised the Australian chocolate coated biscuit market and returned the category to reasonable levels of positive growth.  Categories don’t operate in a vacuum though, and most of this growth has come from the category that is chocolate coated biscuits most obvious and closest substitute: sweet biscuits, a category whose performance over the last few years could be described as shaky at best.  And this is something that Arnott’s probably isn’t too happy about.