Uncommon ValueIf I heard it once, I heard it a million times. To be on trend, the perfect product needs to be great tasting, healthy, nutritional, natural, convenient, and to a lesser extent, sustainable.
Take out the trans fats and throw in some grains, fruit and fiber? Heck, you have a winner.
But how the world has changed during the past eight months. In fielding the dozens of interviews for our state-of-the-industry report, which comes out next month, the first word out of nearly every executive’s mouth is not “whole grains” as in the past. It’s “value.”
As the saying goes, it’s the economy, stupid.
With consumers spending less or just simply afraid to spend more, a greater number of executives are redefining what “value” means to the perception of their products. It isn’t simply cutting prices. Today, it’s more than that. Value also means providing added nutrition benefits in addition to discount prices, as many bakers are doing. It involves providing two varieties in a package for the price of one as snack producers have done. It’s introducing premium, specialty crackers at the same price as mainstream ones.
Real value requires giving consumers something extra so they feel they received a solid bang for their hard-to-give-up buck.
At the Snack Food Association’s Snaxpo exhibition this spring, Information Resources Inc.’s Sally Lyons Wyatt noted that 79% of shoppers are actively looking for the best value while 46% of them have increased their private label activity in response to economic hardship. An increasing number of budget-conscious shoppers are making lists and deciding what they want to purchase at home. In some cases, they’re loading up e-coupons onto their frequent shopper cards instead of clipping them. In an impulse-driven category like snacks or baked goods, brand managers need to find innovative ways of reaching consumers before they go to the store.
Affordability is another component of value, and again, it’s not only about price. In fact, IRI notes, 94% of consumers define it as “product satisfaction,” 87% describe it as “product can last longer,” and it’s a tie at 81% between “family usage/appeal” and “price.” Visit the www.sfa.org to download this insightful presentation.
That doesn’t mean bakers and snack producers aren’t getting creative with pricing to spark sales to maintain brand loyalty and slow the pace of consumers trading down to private label. In the bread aisle, bakers are trying to minimize the price point gap between branded and non-branded with “two-for” pricing and alternate week discounting. Likewise, snack and cracker producers are duking it out with premium-positioned baked “hybrid” sticks and crisps that are competitively priced and can compete in either aisle.
Yes, consumers are looking beyond the price of a package and making decisions based on price per ounce. Just look at the sales for 100-calorie products. During the past few years, you could have come out with 100-calorie dog biscuits, and they would fly off the shelf. Today, that’s not the case. In some incidences, sales of 100-calorie packs have declined because of the high price per ounce. Simply put, the value proposition isn’t there. Portion control can’t win in head-to-head competition with the pocketbook.
Yet it’s not only consumers who are banging the value drum. Retailers like Safeway have threatened to promote private label products like its O Organic line if food producers don’t lower their prices, and Frito-Lay, which reportedly had reduced the amount of chips per bag, has reversed its course and begun adding more.
Last year, bakers and snack producers got hefty price increases in response to the skyrocketing commodity costs, and it’s reflected in IRI scanning data. In almost every category, the year-over-year percentage of units sold significantly trails the percentage increase or decrease in sales.
Today, consumers are looking for uncommon value. Yes, they want a lower price, but they also seek a whole lot more.
Dan Malovany, editor
Editor’s Note: Go to www.snackandbakery.com to read Dan’s exclusive online-only columns.