Snaxpo 2004 Brings Global Snack Industry Together
April 1, 2004
SNAXPO 2004 Brings Global Snack Industry Together
Serving the International Snack Food Industry
More than 2,000 people from 37 different countries and 243 different snack food manufacturers met in Philadelphia last month to learn about the international snack food industry. SNAXPO 2004 took place March 20-23 in the “Heartland of the Snack Industry.”
Not coincidentally, more than 30 snack food companies, employing some 10,000 industry workers, are located in Pennsylvania. One of those snack food companies provided the keynote speaker for SNAXPO. Charles Pizzi, president and CEO of Philadelphia-based Tasty Baking Co., told attendees that great brands are made, not born.
A great brand is one that people just don’t like, they love it, Pizzi emphasized. He used the occasion as the keynote speaker to tell snack food executives about the turnaround at Tasty Baking he helped to launch.
Founded in 1914, Tasty Baking now has 1,000 employees, 500 routes and lots of competition, Pizzi observed. What he and his new management team have tried to do, he said, was “to transform this company for the 21st century. Tasty Baking is going to be a different kind of company. We’re going to be mean and lean.”
Referring to other successful turnaround leaders, Pizzi noted that they concentrate on financial rigor, good communications, investment in the brand and making sure the plan is simple. Tasty Baking’s “simple” plan rests on five pillars: build brand equity, deliver product innovation, grow core routes, expand into new markets and drive operational efficiencies. But, said Pizzi, “it is all about the people.”
Noting that within months of his joining the company, the existing management abruptly left, Pizzi had the opportunity to bring in fresh managers with new ideas, “energetic, passionate, bright people with a very important characteristic — integrity.”
Yet the people side of the operation means more than simply the management of the company. Pizzi realized that successfully transforming the organization ultimately meant reaching all the employees. He proceeded to question as many employees as he could reach with one simple yet revealing question: “So, what do you think?”
Beyond building brand equity, Tasty Baking also ventured into growing its core routes. Great companies, said Pizzi, need to build margins, and Tasty’s core routes provide the best margins, and part of the reason for this turnaround was to change the route driver from thinking of himself as an owner-operator into seeing himself as an independent sales distributor. Tasty backed this up with giving its management a new passion for success and its trucks a new look.
Pizzi told the audience that he has his entire management team traveling with the drivers to get a feel for the routes, and this has helped in the planning to produce new routes and new channels of distribution. “We’ve put significant investment into this area and the result is that we’re beating the competition.”
In its drive to enhance its operational efficiency, Pizzi pointed to the excellence of its supply chain and also to its new nimbleness in reaching the market. “We intend to be driven by technology,” he pointed out.
Lean Systems Development
The speaker at one of the educational breakout sessions held on SNAXPO’s exhibit floor, provided details from an operational standpoint on how to develop the kind of lean organization discussed by Pizzi. Andy Carlens, engineer and manufacturing consultant told attendees, “When you’ve got the pressures of competition, unrealistic customer expectations, a changing social climate and traditional manufacturing practices that get in the way, you need lean manufacturing systems.”
The bedrock principles of lean manufacturing incorporate structuring every activity, clearly connecting every customer-supplier, specifying every flow path and constantly improving, through experimentation, from the lowest level to the ideal state.
“The purpose of the lean operating system,” Carlens said, “is that it gives us a framework to examine how a company operates. This is important because if different aspects of an operation move in different directions, it can destroy a company.”
At the center of the lean system is thinking, surrounded by such components as evaluation, tools and systems. Success depends on the coordinated action of all four.
According to Carlens, lean is such concepts as just-in-time, continuous flow, cellular manufacturing, six sigma, etc. It is involved in systematic waste elimination, problem-solving and creating a learning organization. The steps to success are: Understand the system, stabilize the organization, develop the culture and advance the business.
“To change the system, apply the rules,” Carlens explained. “To change the culture, apply the principles, to change the work, apply the tools.”
Exhibits Provides Latest Information
More than 150 suppliers to the international snack food industry exhibited equipment, packaging products, ingredients and services at SNAXPO (see sidebar for list of exhibitors).
SNAXPO attendees could also sample the latest snack food introductions on the exhibit floor. Several regional potato chip manufacturers provided samples of salt and pepper varieties of potato chips that were introduced in 2004. These, along with Kosher Dill, Louisiana Hot Sauce, Wavy Barbecue, and Wavy Sour Cream and Onion-flavored potato chips provided visitors a sampling of the new 2004 potato chip flavors. There were also Susquehanna Valley BBQ and Smokin’ Sweet flavored potato chips, introduced in 2003, available for visitors to try.
Among the new flavors of tortilla chips were Margarita Lime, Creamy Ranch and Guacamole. New bite-size tortilla chips were also available for sampling. On the sweet side, recently introduced Caramel Crazy Puffs and Blueberry Crazy Puffs were showcased.
Food Retailing in a Difficult Environment
Information on how to market snack products better was also available at SNAXPO. One of the educational sessions helped snack manufacturers understand the changing consumer. Dr. Richard Kockersperger, St. Joseph’s University, Philadelphia, noted that today’s key consumer profile is a white female, 25-44, and sophisticated. “She’s looking for magic solutions and as a manufacturer I should be asking: What can I provide to make her life easier?”
Working women want different things, but in terms of food purchasing, the decision-making coalesces around wanting the availability: “anytime, anywhere and my way.”
“Consumer needs are changing faster than our ability to change the food supply chain,” Kockersperger observed. “There are 88 million boomers and 71 million boomlets (“Generation Xers”). The two groups have completely different taste patterns.”
At the retail level, competitive trends have propelled the deep discounters into the fastest-growing group, where frequency of turns and low prices have created a huge audience. Yet the future of retailing suggests a much looser supply-consumer relationship.
“The consumer will be communicating with anybody at any point in the supply system, from distributor to manufacturer to retailer,” Kockersperger explained. And this situation is already being stressed because of Wall Street pressures to focus on short-term decision-making.
In the battle of the supply chains, it’ll be Wal-Mart versus the rest of the world, while all combatants will have to contend with the problems of finding enough young workers willing to work nights or weekends, who also have qualifications and show even the hint of some loyalty.
In the future, Kockersperger said, “there’ll be no rules, the electronic marketplace will affect all retailing, and it’ll be a paperless, seamless, portable, 24/7 supply chain with full transparency.”
To compete, manufacturers will need to be first in the market, manage data on behalf of the retailers, choose categories they want to own and watch carefully for a breakthrough in technology.
“Winners will be those who can focus on the consumer experience, segment the marketplace, develop a strategy and successfully integrate electronic technology.”
State of the Snack Food Industry
Speaking to participants at a SNAXPO 2004 breakfast, Kim Feil, CEO of Mosaic Infoforce, prefaced her comments on the state of the snack food industry by noting, first, that obesity has surpassed smoking as the leading cause of death in the U.S. Second, she pointed out that health-related snack foods now fall into a multi-category — low fat, low sugar, low carb — and, third, that the low-carb “craze” is already coming under fire.
“Manufacturers,” Feil suggested, “have two options and inaction is not one of them. Either, they can introduce products with a health benefit or they can defend their current product line up ”
The fact is, Feil acknowledged, that both manufacturers and retailers are struggling to cope with meeting changing consumer needs, and store constraints are bulging under the strain of trying to fit in all the new products filling their shelves.
The total snack category was up 2% in 2002 and 3.6% in 2003. In bakery, Feil noted that driving this surge are snack bars and donuts, while in salted snacks, the impact is coming from pork rinds, nuts and cheese snacks. Dried meats are enjoying the best of times, too. The trends, she pointed out, lie in the health challenges, the type of new products that could succeed, and what she called “In-store chaos.”
With 30% of U.S. households now considered obese, childhood obesity rates soaring and parents showing an increasing concern about their family’s health, manufacturers should see these trends as opportunities. “Ninety million Americans, of whom 76 million are kids, are defined as being obese, 33-44 million state they’re on low-carb diets, 33 million are diabetics, and 35 million are over 65. These categories represent big opportunities,” Feil pointed out.
These new demographics are changing consumer preferences toward the kind of snacks they buy. They’re showing heavy preference for such categories as natural cheese, nuts and snack bars, with high growth in low-carb, pretzels and cheese snacks.
“People want convenience, taste, variety, choice,” Feil noted. “They also want feel-good things — indulgent. What consumers are extremely confused about are the different kinds of health messages.
“No one understands what’s better for them when they see labels about low fat versus low carb.”
For manufacturers, there’s an opportunity in delivering convenience products with a clearly understood health option, “real solutions for breakfast or hand-held snacks.”
Taste and variety are still paramount, says Feil. “People won’t go for healthier snacks without taste, but they also want clear choices between snack products that claim to be nutritional, healthy or indulgent.
Expanding on the new household demographics, those defined as being obese and diabetic skew higher on indulgent products but the percentage of dollars spent on nutritional products is rising. The dollar share of low calorie, low fat and low sugar products is growing. For example, the low carb market exploded from $204 million in 2002 to more than $333 million in 2003, with household penetration reaching 21%.
For snacks, the negative side of the picture, Feil pointed out, regards the fact that with no generally accepted definition of a low carb diet, snack foods are at a disadvantage. The exception is the cheese snack, which “has come back as a roaring success.”
The real growth in low carb has come with snack bars — up 61% and salted snacks — 21% growth.
The counter trend is emerging with aging consumers who are looking for unique information to help them, especially in the health/nutrition areas. “They are prime targets for soy products,” Feil said. “Here, the household penetration for soy is 60%. And soy salted snacks represent a good opportunity.”
Another opportunity, Feil explained, centers on families with children. “Their dollar spending goes much more for nutritional products.”
Manufacturers wanting to take advantage of all these opportunities need to understand how important it is to help retailers merchandise the new categories better.
“The retail environment represents a form of ’in-store chaos’” Feil noted. The manufacturers have done their consumer research, but it has failed to filter down to the stores. Consumers are confused — low fat, light, regular.
“Manufacturers have to pick a space on the product where they can show a benefit, make the benefit very clear to the consumer and help channel consumers to particular solutions.”
Nick Chilton Becomes SFA Chairman
Nick Chilton, president and CEO of Wyandot, Inc., was installed as Chairman of SFA during the Recognition Breakfast. In his remarks to the Association, Chilton noted that the industry has seen major changes in the last 5 years, such as obesity, trans fat, acrylamide, consumer confusion, and consolidation of retailers. Because of these issues, he stressed, “We need to work together even as we compete.”
Among the areas that SFA helps its members, Chilton said, are:
-Public relations’ work on obesity and nutrition
-Government relations work such as the Maryland snack tax
-Education and science (keeping abreast of ever-changing food science issues and educating our members)
-Government relations work such as the Maryland snack tax
-Education and science (keeping abreast of ever-changing food science issues and educating our members)
Elaborating on the networking aspect, Chliton explained that after manufacturing at Wyandot’s Marion, Ohio was halted due to a fire, 16 companies made products for the company. “SFA is the glue of that closeness,” he said.
“I know of no other association within the grocery products industry that has that closeness,” Chilton emphasized, adding “What you get out of SFA is proportionate to what you put into it.”
During the breakfast, David Ray, SFA’s Chairman for March 2003 through March 2004, presented several awards. Dr. Richard Chase was honored for his work with the SFA-founded Chip Trials as he stepped down from that position. Chase, a former professor at Michigan State University, will continue as the SFA potato research advisor. In presenting the plaque, Ray noted that during his years with SFA, Chase enhanced the association’s technical offering.
Ray also presented Liz Wells with a plaque and gift in honor of her 25 years on the staff of SFA.
In addition to the educational presentations and exhibit floor, SNAXPO attendees also had the opportunity to network in a variety of social settings. The convention opened with a Philadelphia-style party, and on the final evening attendees had the opportunity to dine and dance at the glamorous Bellevue Hotel ballroom during the Chairman’s Reception and Gala.
An international reception was held to honor the international attendees. Also, for international attendees, SFA included its fourth annual Latin American Program, completely in Spanish, and an Asian/Pacific Rim Educational Program (see “Up and Down the Street”). Snack manufacturers and suppliers who do business in Latin America had an outstanding opportunity to exchange ideas and address important industry issues affecting the snack food market in that region.
One of the many high points of SNAXPO 2004 was the tour of the Herr Foods facility in Nottingham, Pennsylvania. Wednesday morning, buses transported SNAXPO attendees on a picturesque drive through the Pennsylvania countryside. Herr’s Harold Blank, V.P. of manufacturing, and Phil Bernas, manager of manufacturing and technology, greeted the group as it gathered in the Herr’s visitor center. The participants were given the opportunity to view the product lines that produce Herr’s potato chips, tortilla chips, extruded snacks, pretzels and popcorn. Tour participants also observed the automatic baggers and boxers, which were operating at full capacity.
In summary, SNAXPO 2004 was a world-class convention and exhibition that took full advantage of its proximity to the Heartland of the Snack Food Industry in Pennsylvania.