Tuesday, August 23, 2016

What's Going On In The Australian Biscuits Market? Part Eight: "Flavoured Snacks" Back In Good Shape!

What's Going On In The Australian Biscuits Market? Part Eight: "Flavoured Snacks" Back In Good Shape!
“Flavoured Snacks.”  Probably not the illuminative category description in the world – I mean, aren’t all snacks flavoured? – but it’s what Retail World have decided to call those cracker-like biscuits with “flavour you can see.”  Flavours like BBQ, Chicken, Pizza, the generic Savoury.  And increasingly flavours like Sweet Chilli & Sour Cream, Honey BBQ Chicken, BBQ Ribs Blast, Hot Dog, Peri Peri Chicken Slam and Caramelised Onion & Cheddar (which just goes to show that there may be no category on the supermarket shelves that has not become foodie-fied).

Other people just call them “Savoury Crackers.”

Probably the easiest way to describe the category to an Australian would just be to say, “like Arnott’s Shapes.”

No surprise then what the dominant brand is.

“Flavoured snacks” aren’t only Arnott’s Shapes however.  There are challengers of sorts, or at least wannabe challenges.  They are just far, far behind.  According to Retail World Annual Report, Arnott’s were on 84.9% value market share in 2015.  No other brand even came close to breaking double figures.  

Fantastic Delite is even heading backwards, hence their pinkish hue in our graph, where green means making market share gains and red means market share losses.

There is Fantastic Delites for the more sophisticated snacker.  And Ritz Snackz for the only slightly more sophisticated snacker.  There used to be Ritz In A Biskit, but they were discontinued in 2014 (unfairly I believe, for whilst In A Biskit’s market share was certainly trending downward, it was quite a gradual trend and they were still holding a quite respectable 7% value market share in 2013, which means that their absence left a significant number of fans feeling distraught)

Arnott’s is not only the dominant brand in “Flavoured Snacks” but is becoming more so, gaining a smidgeon over ten percentage points between 2010 and 2015, as other brands have crumbled away.  First they saw off the threat of In A Biskit – which was, as I mentioned, discontinued in 2014, to be replaced by the so far not as popular Ritz Snackz which are clearly just TUC’s in disguise – and appear to be doing the same to Fantastic Delite, the only brand that has managed to look anything like a competitive threat. 

Ritz Snackz have made 4% in market share gains in 2015, but that is off of a previously non-existent base.

Fantastic Delite’s more sophisticated take on the “Flavoured Snacks” category  - flavours such as Vintage Cheddar & Red Onion and Sean Salt & Balsamic Vinegar - gave them just under 10% value market share at their peak in 2014.  They too however have now slipped backwards, so much so that - as this graph shows - they are not only behind where they were in 2014, but also behind where they were back in 2011.  

Pretty much all of the market share gains over the last five years have gone to Arnott's Shapes.

Which would be great news for Arnott’s Shapes if value growth of the “Flavoured Snacks” market hadn’t been negative for four out of the last six years.

There has been something of a come-back over the last year or so, as Arnott’s strategy of expanding Shapes’ target market beyond teenage boys has begun to kick in.  A strategy which we will discuss after the next graph, on volume growth.

Volume growth is a bit more irregular, impacted as it is by one-off effects such as the reduction in pack size in 2011. Still, it shows more or less the same trend; a sharp downwards fall around 2011 and 2012, before a gradual recovery.

Similar to Arnott’s strategy with Tim Tams (although arguably less dramatically) Shapes’ success – and their revival of the “Flavoured Snacks” category overall - has largely been achieved through a constant barrage of new ranges.  There was Flavors Of The World in 2009. The Roadies range in 2011.  And the Sizzling Summer range of 2012.  The single year of 2013 gave Australia, the Footy Fever range, the Soundz Range, and the Sensations Range.  2014 saw the introduction of the Light & Crispy range, and 2015 the Extreme Range.

This might look like a text-book premiumisation strategy - and perhaps to a certain extent it is - but on a unit price basis, Arnott's Shapes remains amongst the cheapest brands in the "flavoured snacks" segment. This is no doubt an addition factor in their growing popularity over the last five years.

The low unit price of Arnott's Shapes is only beaten by private labels, who despite offering a unit price about half that of Arnott's Shapes have only managed to pull of some rather pitiful market share gains.

These new introductions have spread the appeal of the Shapes brand in two opposite directions – towards the diet conscious sophisticated female, and the footy-loving bogan, reminding the latter demographic of why they loved Shapes in the first place, back when they were a teenager.
Because teenagers, particularly teenage males, are Shapes natural constituency, as can be seen in this graph here.

The number of teenagers have not, sadly, been growing over the last decade or so, due to Australia’s low birth rate in the 1990s and early 2000s.  A quick glance at Australia’s population pyramid confirms that Australia has been going through a teenage-trough.

 Teenagers are no longer a growing demographic segment will not for at least a couple more years until the kids born during the mini-baby-boom of around 2006 reach their peak-Shapes consuming years.

In the absence of their key demographic then, Arnott’s Shapes have gone chasing other demographic segments.  And other flavours, including those with very un-Shapes like ingredients such as sesame and poppy seeds.  Not only has this strategy led to a return of the “Flavoured Snacks” category to positive growth, but it has negated much of the appeal of Fantastic Delite, leading to a reversal of their previous strong growth prospects.

So by the end of 2015 this strategy had both brought the category back to positive growth and successfully win back share from their closest competitor: Fantastic Delite. 

But then, Arnott’s Shapes had to go and change the Original flavours (they also added cornflour).  BBQ. Chicken.  Savoury. Those flavours not associated with any brand extensions.  Those flavours which still made up the bulk of Shapes’ sales.  It was a scandal that seemed to almost break the Internet.
What, the “Flavoured Snack” fans of Australia demanded to know, was going on?  Is this some kind of manipulative New Coke publicity stunt, to create a rush on the biscuit aisle as thousands of cracker connoisseurs panic buy all the “original” flavours they can grab?  Or was it to try and gain an extra Health Star or two?

But “the kids” weren’t happy.

Well said.

It's probably the biggest backlashes ever to be experienced by the Australian biscuit industry.  Which begs the question: if Arnott's Shapes had just under 85% value market share last year, how far are they going to fall?  And since they dominate the "Flavoured Snacks" category to such an almost monopolistic extent, are "Flavoured Snacks" due for another fall?