Secret Weapons

December 1, 2004
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Secret Weapons
By Andy Hanacek
Just when you thought it was all tied up in knots, the pretzel industry looks as though it might be in store for better times. The revival thus far can be attributed, in part, to a new, double-barreled “twist” in the industry: the honey wheat-flavored braid.
In a category in which the innovation machine has been stuck in mud of the low-carb mess, honey wheat braids are giving the pretzel industry a big push and new firepower against cracker manufacturers that have designs on the pretzel’s territory among healthy snacks and against other snack manufacturers pushing the borders of shelf space in the snack aisle.
“We’re always fighting the fight for space in the snack aisle,” says Kevin O’Shea, regional sales manager for Shultz Foods in Hanover, Pa. “So our main challenge has always been maintaining our space on our private-label business, introducing our branded product, and being able to do more than just in-and-outs and have permanent shelf space.”
Pretzels Top 10 Brands
(For 52 weeks ending Oct. 3, 2004)
  Dollar Volume % Dollar Unit Sales %
Rank Brand (in millions) Change Share (in millions) Change
1 Rold Gold $152.8 -10.6 29.6 81.3 -13.0
2 Snyder’s of Hanover $141.3 -4.6 27.3 72.3 -7.9
3 Private Label $54.6 -3.2 10.6 46.8 +0.2
4 Utz $26.0 -3.5 5.0 15.4 -3.5
5 Combos $20.2 -0.6 3.9 11.8 -2.4
6 Bachman $13.1 -13.4 2.5 6.8 -20.7
7 Herr’s $12.6 -0.5 2.4 7.1 -7.9
8 Pepperidge Farm Goldfish $9.2 -6.8 1.8 5.0 -4.4
9 Anderson $7.9 +5.4 1.5 4.9 -9.4
10 Kraft Handi Snacks $7.5 +8.2 1.5 4.1 +2.1
  TOTAL* $516.9 -7.3 100.0 298.7 -9.1
*Including brands not shown
SOURCE: Information Resources Inc., Supermarkets, Drug Stores and Mass Merchandisers, excluding Wal-Mart
Braids, which are baked differently than your typical pretzel, have awakened a category that O’Shea believes backed off a bit when low-carb diets hit the fan.
“I think [the industry] used it as an excuse,” O’Shea says. “But I still think the base of the business was always very strong.”
That base sparked to life when braids were introduced.
“If you look at the category, there hadn’t been a lot of changes up until Frito-Lay introduced the braided twist about two years ago. And that’s really set the category on its head,” he adds.
Now, the pretzel industry must take the momentum built up by braids and rebound, because the salted snack aisle at the supermarket isn’t getting any less crowded.
But not everyone has taken the same lesson from the braid’s success. Snyder’s of Hanover, for example, has taken a different approach, according to Claude O’Connor, vice president of sales & marketing.
“With a braid, you have areas of the actual piece that are thicker than others, and what we find is some inconsistency in the overall texture, with some of the product actually becoming somewhat gummy,” O’Connor explains. “We simply said, ‘Let’s take the popular [honey wheat] flavor that we have in organic and launch it under a traditional pretzel.’ … We didn’t go after the braid shape. We tried to perfect the actual qualities of honey wheat pretzels.”
Over the last nine months, O’Connor says, the Hanover, Pa.-based producer has experienced good success with the Honey Wheat Sticks. Much of the renewed consumer popularity comes from the newness of the shapes and flavors that pretzel manufacturers are introducing, such as the braids, but also including sticks, nuggets, pretzel pieces and flavors that include pretzels enrobed in chocolate or stuffed with peanut butter.
Still, health-consciousness often plays a part in snacking decisions nowadays. But recently, consumers seem to be feeling better about snacking and maintaining a healthy diet. O’Connor says consumer perception goes a long way in this area.
“The consumer is looking for better snack alternatives and what they perceive to be better snack alternatives, evidenced by the change in the cereal category, where you’re seeing more and more whole-wheat cereals and commitments from some of the major packers to go 100% whole wheat,” he says. “And I believe the perception of honey wheat is that it falls into that same classification.”
The honey wheat pretzels can lift the industry in that arena because they carry that image of being a good-tasting and good-for-you snack. Yet the challenge to continue making new products that meet several different criteria for the consumer is not always easy for pretzel producers, says Daryl Thomas, vice president of marketing at Nottingham, Pa-based Herr Foods Inc.
“It’s not like a potato chip where you just put some new flavoring on it, and you have a new product,” he explains. “Pretzels are more complicated.”
At least the pretzel industry can breathe a sigh of relief, however, as far as the “Rush to Reformulate” products sets in on the eve of trans fat-labeling mandates in the United States. Many pretzel manufacturers don’t need to address the trans fat issue, because it’s already been addressed.
“As these different diet trends or fads keep coming in like waves crashing on the shore, yeah, you’re always looking to see what the next one coming is,” Thomas says. The trans fat thing obviously has been evolving, … and I think the one good thing is, contrary to some of these focuses that come along, where sometimes you kind of say you’re going to have to take it on the chin with this, [trans fat labeling] presents our products in a more positive light.”
Pretzels Top 10 Vendors
(For 52 weeks ending Oct. 3, 2004)
 Dollar Volume%DollarUnit Sales%
RankBrand(in millions)ChangeShare(in millions)Change
1Frito Lay$155.2-11.530.082.5-13.9
2Snyder’s of Hanover Inc.$141.3-4.627.372.3-7.9
3Private Label$54.6-3.210.646.8+0.2
4Utz Quality Foods$26.6-1.05.215.7-1.8
5Masterfoods USA$20.2-0.63.911.8-2.4
6Bachman Co.$17.6-14.43.49.2-20.1
7Herr Foods Inc.$12.7-0.12.57.1-7.8
8Pepperidge Farm$9.2-6.81.85.0-4.4
9Anderson Bkr. Inc.$8.0+4.81.55.0-9.7
10Kraft Foods Inc.$7.5+8.21.54.1+2.1
 TOTAL*$516.9-7.3100.0298.7-9.1
*Including vendors not shown
SOURCE: Information Resources Inc., Supermarkets, Drug Stores and Mass Merchandisers, excluding Wal-Mart
Of course, there are plenty of positive things the pretzel industry has to look forward to, from great positioning regarding trans fats to a slowly expanding consumer base to the fading of the low-carb craze. But, the secret weapon the pretzel industry probably will unleash upon the rest of the snack food aisle in defense of shelf space is stepped-up innovation, which Thomas says could be right around the corner.
“We’ll probably see more heightened activity in the development of new products for pretzels,” he says. “Just the scope of interest out there is going to be greater, so it’s probably a little more rewarding to invest R&D dollars in pretzels.”
Braids and other innovations in shapes and flavors could give the pretzel industry the ammo it needs to fend off other snack manufacturers in the battle for shelf space and stomach share.

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