Thursday, July 21, 2016

What's Going On In The Australian Biscuits Market? Part Six: Sweet Biscuits Growth Prospects Not So Sweet

What's Going On In The Australian Biscuits Market? Part Six: Sweet Biscuits Growth Prospects Not So Sweet
“Sweet biscuits”- and in this case we are using the Retail World definition of “sweet biscuits” which includes plain biscuits, cream biscuits, and cookies, but not chocolate coated biscuits which are a whole other thing - make up just over a third of the total biscuit market in Australia.  Sweet biscuits are also by some distance the largest biscuit category in Australia, big enough that their performance is critical to the performance of the biscuit aisle overall.

And the performance of the “sweet biscuits” category in recent years has largely been lacklustre.  Even if we assume that the sudden dip in 2013 was an aberration at least partially due to the Zumbo-led Tim Tam revival being experienced over in the chocolate coated biscuit category, the one-and-a-bit percent value growth over the last two years is hardly something to get excited about.

This lacklustre performance of “sweet biscuits” is even more concerning when you consider that since 2013 it has included a new brand; a brand so different from what you usually think of when you say “sweet biscuits” that some might argue it should not be included at all.  Some might argue that it shouldn’t even be stocked in the biscuit aisle, but the breakfast aisle. I myself am rather sympathetic to these arguments. 

I am of course referring to Belvita, the “sweet biscuit” so big that it is marketed as a breakfast replacement.  Launched into the Australian “sweet biscuit” market with quite a bit of hype, it grabbed 3.2% value market share that year, and has gradually expanded its popularity from there.  Very gradually.  In 2015 Belvita’s market share reached 4%.  Belvita’s momentum might be slow, but it’s still one of the more dynamic performers of the “sweet biscuits” category.

The only brand more dynamic is Oreo.  Although Oreo's performance over the last five years has been inconsistent; sometimes up, sometimes down, but always hovering somewhere between 5-8% market share, which actually makes them the most popular sweet biscuit brand in Australia.  But 2015 was one of the good years.  And that's before the launch of Oreo Thins, which didn't happen until early 2016.  A good time then for Mondelez - who own Oreo - to launch an Oreo Cadbury Dairy Milk!

Yes, 2015 was certainly a good year for Oreo.

A bad year however for Arnott's Tiny Teddy, a brand that only until last year was the largest brand in sweet biscuits; it's now No.2.  Are the parents of Australia looking for a healthier snack for their children?

What's particularly impressive about Oreo's success - although looking at the longer term of five years their market share has barely budged - is that they have achieved this despite having the highest unit price on the market.

Therefore, much of the already slow growth being experienced by the “sweet biscuits” category is coming from outside of the category’s traditional market.  A look at which demographics particularlyenjoy a “sweet biscuit” – as we did a few blog posts ago - goes a long way in revealing why; “sweet biscuits” are particularly favoured by elderly Australians (and particularly elderly ladies) who like to partake of an Arnott’s Kingston (my personal favourite “sweet biscuit”) whilst having a cupof tea or coffee.

And this is the problem that “sweet biscuits” face.  As we mentioned in a previous post, the Australian tea market is in a seemingly irreversible decline, largely due to the fact that the consumption of tea is particularly skewed towards those over the age of 70, an age group that is - to put it in as sensitive a manner as possible - coming to the end of their lifecycle. 

The prospects for “sweet biscuits” are not quite as dire.  Whilst consumption of tea is very generation-specific, the consumption of coffee is not; and coffee consumers still need something to dunk in their coffee.  Still the idea of a relaxing coffee/biscuit combination is increasingly seeming quaint, particularly if you could have something a bit fancier instead: a brownie perhaps, or a friand.  Or a chocolate coated biscuit.

The result is that “sweet biscuits” consumption is increasingly skewed towards the sweet old lady demographic.

Little surprise therefore that by far the largest player in the “sweet biscuits” category is a company whose brands – for the most part – go back even further than their key demographic. 

I am referring of course to Arnott’s; a company with 58.5% value market share of the “sweet biscuits” market in 2015.  A company whose Facebook page currently features a cover photo of an old fashioned biscuit tin.  Their nostalgia-hungry fans – no doubt – would approve.

Nostalgic photos of biscuit tins are fine for reinforcing Arnott’s brand image as the great Australian biscuit company, but it’s not the sort of thing that lends itself to category growth.  Particularly in the face of the rather more dynamic chocolate coated biscuit category which appears to be stealing consumers from the neighbouring “sweet biscuits” portion of the biscuits aisle. 

Chocolate coatedbiscuits have grown because of the innovative flavours launched by Tim Tam, who are of course also owned by Arnott’s. Arnott’s have paid a lot of attention to their chocolate coated biscuits brands, and relatively little attention to their “sweet biscuits” brands, which have remained virtually unchanged for decades.

Little surprise then that Coles has gone off searching around the world for a brand to bring a little pizzazz to the biscuit aisle.  Although, as with most things Coles does, that simply means importing a popular British brand: Maryland, otherwise known as “Britain’s Favourite Cookie,” - who appear to have taken a kind of Cadbury’s Marvellous Creations take on the cookie: “Mix’ems with Fruit Jellies and Candy Shells”! – and Fox’s. 

Woolworths’ preferred pizzazzing strategy is to launch a range of cookies under their gourmet Woolworths’ Gold private label brand.

Private labels have a relatively strong presence in “sweet biscuits”, hovering just over 10%.  Whilst not particularly high in the grand scheme of things, that’s twice as high as is the case in chocolate coated biscuits, where Tim Tam’s range of fancy biscuits has kept them a step or two ahead of competition.

There is more to the “sweet biscuits” market than just the continued dominance of Arnott’s and the rise of Belvita however.  Mondelez’ other brand – Oreo – appears to have found a stable following in Australia, hovering just over 5%, but the final relatively major player – Green’s, the owner of Paradise and Greens cookies since 2014, before which Paradise was owned by Goodman Fielder – appears to have lost its way, losing 4.4% market share over the last four years.

Specializing in cookies, Greens appears to have lost the cookie consumer to the moister offerings of store baked cookies, their market share almost halving from 11.3% in 2011 down to 6.9% in 2015. It is rather difficult to compete with freshly baked cookies after all.

Which is yet another threat that Arnott’s needs to deal with.  It’s not just the demographic difficulties, it’s the temptation of freshly baked cookies outside of the biscuit aisle.  They’ve already succeeded in revitalizing the chocolate coated biscuit category; what can they do with “sweet biscuits”?

Following the success of Tim Tam’s efforts, Arnott’s have finally come up with a two-pronged strategy to revitalise the “sweet biscuits” category.  The first, and less exciting of the two, is to reinvent the packaging from white to a more majestic looking metallic red.  The second is their Twisted Faves range, another example of what I like to call the Marvellous Creationism of snack foods.  There is a Salted Caramel Monte Carlo.  A Jaffa Choc Orange Delta Cream.  A Strawberries & Cream Shortbread Cream.  A Choc Chip Scotch Finger.  

It’s not quite Espresso Martini flavour, but it’s something.

Arnott’s claimed that all of this was just to celebrate their 150th Anniversary. But it’s probably also to inject some excitement into a quite frankly stale category.  It certainly needs it.