Big Dipper

AMY SUNG

Not only are customers eating at home more, but they're entertaining at home more as well. And, whether shoppers are looking to serve the best for their guests, or to have healthy snacks available for their family, these trends have been a boon to the refrigerated dips, dressings and spreads category. Many consumers are still willing to dole out a little more money for premium items, especially when entertaining.

Steady demand, combined with versatile promotion and merchandising opportunities for these products, has many retailers seeing strong, if not increasing, category sales.

Sales of refrigerated dips, dressings and spreads have been off the charts at Tops Friendly Markets, according to Sam Qureshi, produce and floral director for the Williamsville, N.Y.-based chain.

“The market appears to be up, and Tops has been outperforming the market trends,” Qureshi told SN.

Several retailers, including Tops, told SN that the category lends itself well to promotions and cross-merchandising, and that suppliers are generally willing to work with supermarkets on specials.

“In partnership with our suppliers, we have been able to obtain lower costs and have passed these savings on to customers through increased promotions and sales,” Qureshi said.

Associated Food Stores, Salt Lake City, also attributes a spike in sales to partnering with suppliers such as Sandpoint, Idaho-based Litehouse Foods, and offering increased ad activity.

“Our sales have been running ahead of last year, and much of that success has to do with increased ad activity that has been initiated from the manufacturers,” said Leigh Vaughn, director of produce at AFS.

“One of the most successful campaigns that we have run on the refrigerated dressing category is what Litehouse calls a ‘family ad.’ We take every SKU in the Litehouse line and run them all at an aggressive line price. This not only includes the dressings and dips, but also covers the apple dips, herbs and other items in their line. We have seen huge increases with these particular ad pulls.”

Refrigerated dips, dressings and sauces are also great for cross-promoting, said Jim Wisner, president of Wisner Marketing Group, Libertyville, Ill.

“They are ideal cross-promoted items and should be stocked in multiple locations, both in the dairy case and in produce,” Wisner told SN. “Some stores are incorporating refrigerated sections within grocery aisles, enabling tie-ins to snacks and other items as well.”

Qureshi said that Tops has increased its focus on creating theme displays and leveraged cross-merchandising opportunities.

“We have a refrigerated dressings rack built right into our lettuce displays, and have also increased the frequency of secondary packaged salad and vegetable displays with dressings and dips tied in,” he said. “These theme displays have done wonders in creating incremental sales for the category.”

DIPS AT HOME

AFS has seen a serious upturn in these products due, in part, to the consumer's desire to have a restaurant type of eating experience, without the restaurant price tag, Vaughn told SN.

“The quality of these products, including Litehouse and Marie's dressings, I think far outweighs the grocery department's line of shelf-stable products,” Vaughn said. “It makes it an easy sell — with the help of demos — in the produce department.

“In spite of the fact that these refrigerated dressings are perishable, still their code dates are usually quite long and allow ample time for the salad enthusiast to use the product.”

The desire to offer a premium dining or snacking experience at home may be especially true when people are entertaining guests for dinner or a party.

“People staying in and cooking at home has resulted in a sales increase in this category,” said Traci Gibson, spokeswoman for the Association for Dressings and Sauces, Atlanta. “And, as people are choosing to entertain at home, [such as for] Super Bowl and holiday parties, etc., they incorporate dips, dressings and sauces into their party fare.”

Publix Super Markets has also noticed the category performing well, with customers purchasing more refrigerated dips, dressings and sauces, especially around events, said Maria Brous, spokeswoman for the Lakeland, Fla.-based retailer.

“Dips are very mainstream in a customer's basket, especially surrounding events, such as tailgating, the big game, picnics and so on,” she said.

Brous added that Publix cross-merchandises the items whenever possible, and occasionally offers refrigerated dips, sauces and spreads as part of their buy-one-get-one deals.

Wisner also said he believes a primary driver in category sales involves consumers going out less and entertaining at home more often.

“There are two key reasons for this: One, it is a way to economize without giving up a nice meal; and two, the rise in recreational cooking, fueled by the Food Network, Bravo's Top Chef, celebrity chefs and other drivers, is moving many to ‘eat out at home,’ trying new foods and recipes,” he said.

“In the case of dips, what's better to munch on while waiting for dinner than fresh vegetables and dip? It's low calorie, good for you and doesn't spoil your appetite.

“Produce is on a 20-year growth trend,” he continued. “Interest in health and wellness will continue to support the growth of fresh fruits and vegetables — and the way in which they are eaten — including with sauces and dips.”

While many factors have helped the category grow during the recession, retailers shouldn't discount the health-and-wellness aspect of the trend.

“Customers have been trending towards eating at home and preparing their own meals, which enables them to try new products and really get creative,” Qureshi said. “A focus on a healthier lifestyle is very prevalent, and Tops has been there for them with a wide assortment of products, whether it's low-fat or fat-free refrigerated dips in dairy, or all-natural and organic product offerings.”

In fact, the top two claims on new refrigerated sauces, dips, dressings and vinegar are “All Natural” and “No Additives/Preservatives.” Kosher came in as the third claim, according to Mintel International, a Chicago-based consumer and marketing research firm.

GROWTH POTENTIAL

Melissa Abbott, trends and culinary insights manager at the Hartman Group, Bellevue, Wash., agreed that the category has done well through the recession because of the longer-term trend of consumer interest in health, and added that retailers should be wary of attributing too many patterns in sales to the recession.

“At the most general level, we are witnessing a tendency among the analyst community to attribute almost any variation in sales to the recession,” Abbott said. “In reality, most of the variation has much more to do with longer-term trends than the recession per se. In the case of refrigerated sauces, dips and spreads, we believe the increase is part of the longer-term trend towards all things fresh, which explains the growth.”

Abbott added that since food expenditures typically represent about 8% of household expenditures, trying to scrimp and save at the product level will have almost no impact on one's overall lifestyle, which is why she said she suspects that the moderate difference in price between chilled products and shelf-stable products is simply irrelevant.

“It is easy to get caught up in recession mania and mistake short-term patterns of variation for something critically meaningful,” she said. “We know that nervous consumers are trying to get bargains when they can, but in categories such as food and beverage, they are not generally changing their eating habits.”

While the number of new U.S. refrigerated dip and dressing launches have decreased in the past year, new products are still coming out, according to Mintel. In fact, refrigerated cooking sauce product launches have been on a steady decline all the way to when it reached zero in 2008, but in 2009, two new cooking sauces were introduced.

New dip products decreased from 96 in 2008 to 54 in 2009, but still represents an increase from new dips introduced in 2005, which totaled 51. Refrigerated dressings and vinegar went from 34 new product launches in 2008 to 32 in 2009.

At Tops, the bleu cheese segment, guacamole dips, salsas and hummus have brought a lot of excitement and sales to the category, Qureshi said.

“People love a fusion of flavors and are enjoying different taste experiences,” he said.

Qureshi added that he believes there is still potential for more growth in the category.

“We see a huge opportunity for growth with the popularity of lines such as healthy yogurt dressings, potato salad dressings and ‘hot’ items like guacamole sauces and hummus vegetable dips,” Qureshi said.

AFS has seen great success with regional product lines, such as Litehouse, and the Wild Coyote brand from southern Utah, Vaughn said.

“This gives us a local feel and it helps us to support local business, which is an important part of our business strategy,” he said, adding that he believes innovation and new ways to package and merchandise the product are key to category growth.

“This is a very mature category and in order to grow the category we will need to get the average ranch dressing consumer to try something new, periodically,” Vaughn said.

“Some of the trends that we have been seeing are the continued expansion of nontraditional flavor profiles and, of course, the organic lines.”

Wisner said he believes new growth is likely to come from new flavors and the emergence of global cuisines.

“The dramatic increase in sales of hummus and pita chips over the past few years is just one example. Refrigerated fresh salsas are another,” he said.