ROSEMONT, Ill. -- The future for store-brand snacks is in marketing upscale, value-added products, while the "piled high and sold cheap" approach will fade out, said exhibitors and attendees at the Private Label Manufacturers Association convention held here earlier this month.
At least 50 makers of chips, pretzels, popcorn, cookies, crackers and nuts crowded the PLMA show floor, many of them with upscale wares bearing prominent retail brands.
In interviews on the floor, suppliers, retailers and wholesalers said the trends to watch this year include any reduced-fat salty snacks and lines with upscale packaging.
Store-brand tortilla chips and pretzels will also make gains in sales, they said. Another category to watch: reduced-fat and fat-free cookies, especially store-brand alternatives to the filled cookies offered in Nabisco's Snackwell line.
On the other hand, retail strategies for selling snacks based on price alone are likely to falter, given the national-brand segment's emphasis on price competition, sources said.
They also said maintaining control of merchandising what is essentially a warehouse snack program, against national-brand direct store distribution, is likely to be difficult.
"There is a lot of potential out in the market for private-label snacks," said Kimberly Gavin, category manager of private label for the Phoenix division of Fleming Cos. "We have had a lot of success, especially with new items, including 12-ounce pretzels under our Rainbow label and P.B. Prestos [peanut butter-filled pretzels] under the Marquee Premium label. And we expect more success next year."
Gavin, working the show floor accompanied by a representative of Daymon Associates, New York, said a heavy volume of product demonstrations at the store level was helping to increase Fleming's private-label snack business.
Gavin said fat-free cookies will be the up and coming private-label snack for 1995. "The difficulty we've been seeing is getting retailers to pay attention in the stores; given the DSD nature of the aisle they tend to ignore it. The obstacle is going to be educating personnel to be down that aisle, keep the stock rotated and make sure it's seen as important."
For some chains, that self-educating process is well under way. "We've done a full category review, and private label is a factor in how we are improving the merchandising and profit structure of the salty snack category," said a category manager from a Midwestern supermarket chain who asked not to be named.
"There are certain segments where the premium end is not tapped out, maybe chips, nuts, tortilla chips. I'm here checking that out," the retailer said. He added that upscale chips could help retailers counter the flat performance of more "generic big bags of chips."
"The supermarket trade is realigning itself," said Jeff Kreidenweis, a marketing executive with Real Foods of America, Springfield, Ohio. "They used to hang their programs on generic offerings, but now some of them are readjusting for more quality and better value. The chains that are doing that, at least, are doing particularly well with store-brand snacks.
"Others are still shaping their snack business around deals from national-brand companies, and for them, private label is not doing so well. But more than a few are on the right track. I'd say it is the trend," Kreidenweis said.
A sales executive from the private-label division of a major branded snack supplier concurred that sharp retailers are driving the growth in private label. "We do packing for successful store-brand and wholesaler programs. Retailers are looking to expand their programs beyond potato chips, which for a lot of chains has been all they'd done for years. Now they are carrying cheese puffs, more pretzels, tortilla chips and so on, and that will grow their business."
Wyandot, Marion, Ohio, was showing a full line of reduced-fat and fat-free corn-based chips, available for private label. Interest was high, said Doug Brown, a regional sales manager.
"Specialized private label is looking to be a large percentage of our business," Brown said. "The growth opportunities for retailers are being driven by the successes of lines like President's Choice and Safeway Select."
He said the upscale products to watch will be blue corn, white nacho, toffee popcorn and cheesier cheese puffs. Mark A. Frazier, Wyandot's national sales manager, told SN that retailers are trending away from the every-day-low-price marketing of store-brand snacks, to high-low promotional strategies. "You'll see private-label warehouse programs with all the marketing bells and whistles. Retailers are making new commitments based on the profits available, commitments beyond EDLP, to treat their retail store brands more like a true brand," Frazier said. "I think we will see minimal store-brand share gains in dollars and poundage in 1995, and then growth throughout the rest of the 1990s. And more important, retailers are seeing that profit is really where the rubber hits the road."
Several exhibitors were on hand at this year's show expressly to build new business in store-brand snacks. One such company, Mesa Food Products, Louisville Ky., manufacturer of snacks for the Chi-Chi's label, had just modernized its plant and was looking to exploit its greater capacity by linking with retail programs.
"Higher quality salty snacks are growing more important as an option to national brands. The quality is up all over the private-label side of the business now, and it's getting extremely competitive. I've felt it even at this show," said Tim Cavallo, Mesa's national sales manager.
Healthful ingredients are another facet of the trend to upscale in store-brands, said John Halpin, national sales manager of Pepe's Mexican foods, Etobicoke, Ontario. "The direction is changing. Generics are on the demise. Instead, a more upscale, healthier snack is where the market is going," he said, pointing to President's Choice, Sam's American Choice and Master Choice.
