A POSITIVE TWIST

BOB BAUER

ST. LOUIS -- Kevin Bowler, president of Eagle Snacks here, is bullish on the future of the snack industry -- pretzels in particular.

"It will continue to grow," he said of the snack category. "The demography is good. What we'll call the mobility of the society -- the fact that you don't have sedentary people sitting around eating major meals -- speaks to the fact that consumers are going to continue to use snacks as an in-between way to get some calories." Pretzels, he said, are the hottest item within the category, increasing in dollar volume by about 20% over the past two years. "There's a product that has no fat in it that the consumer is going for."

The swell in pretzel popularity has created a merchandising trend of "getting pretzels off the bottom shelf of every supermarket and getting a 1-foot vertical stripe to 2-foot vertical stripe as the category has become much more electric," Bowler said.

"Clearly, pretzels are doing better in linear shelf space, not only in terms of space allocated, but in terms of better positioning. It's clearly a hot category that's now achieving much more placement of full-price displays."

The pretzel category, Bowler added, still has room to grow, particularly in certain areas of the country. The Northeast continues to be the strongest area in the country in terms of pretzel sales, but other regions are closing the gap by experiencing higher rates of growth within the category. "So that tells me it's not mature in some of those other regions, such as the South, Midwest and West," Bowler said.

The maturing process will continue, he predicted, but it won't happen overnight. "It's consumer trends. Consumers never change as rapidly as marketers like them to. They evolve into things."

Retailers, Bowler said, have also evolved in terms of how they merchandise pretzels and other snacks.

"They [snacks] have extremely high product turns. They're also immediate-consumable, so if you can get them in the basket, the shoppers will consume it and be right back for more." The fact that the category provides "very good gross margins, high turns, and store-door service, which cuts down your labor costs, makes the snack food industry an extremely attractive one," Bowler said.

Eagle Snacks, an Anheuser-Busch company that moved here from Dallas in June, is the No. 2 manufacturer in the snack category. Bowler suggests large national players are in the best position to service retailers.

"I would say as the supermarket retailers deal with the snack food category, what they're looking for are people who can bring them high-quality products that will turn sufficiently off their shelves, with a strong DSD organization to service those shelves and innovative programs. There are some regionals out there still in the business. But the more the population continues to move around, the more you want brands on your shelf that people know; that they'll pull off the shelf."

Bowler said the strong presence of national companies such as Eagle, Frito-Lay and Herr's has and will continue to make it hard for private-label brands to increase their share of the market. "Private label over the past few years has not done a whole lot," Bowler said. "It ranges within the categories from between 5% and 10% of the category. Actually, it's been decreasing, as opposed to a lot of other fields where retailer brands have become a more important component. The only category that's above 10% is the nut segment. But overall, retailer brands have not done well in the snack food field."

Another factor holding back private-label snacks is the category's merchandising requirements.

"The shelf life of the product itself and its cubic density relative to other products that can go through a retailer's warehouse are important considerations," he said. While pretzels and tortilla chips are the hot snack items, potato chips are off. Bowler's hoping a new ingredient used in Eagle's Ripples potato chips will breathe some life into what he said is a flat potato chip market.

The chips, introduced in May, are made with Clear Valley Cooking Oil and contain a half gram of saturated fat per serving, compared to 3 grams of fat for chips cooked with other vegetable oils, Bowler said.

The product was the result of more than three years of testing, he said. Clear Valley is the first premium canola cooking oil and it's produced by InterMountain Canola Co., Idaho Falls, Idaho.

"What you end up with is a totally bland oil," said Bruce McEvoy, president of InterMountain. "It sounds crazy, but it's a bland oil. That's what you want so you can taste the potato. If the oil and parts are flavored, then you distort the flavor of what you're really trying to eat -- the potato. So it really becomes a cooking mechanism, but with better nutrition."

In spite of his own company's move to a healthier snack, Bowler said he doesn't see light snacks as a threat to existing offerings.

"We've all seen no-fat fad products in the snacking field that just haven't done well because the consumer has been unwilling to give up good taste," he said. "I would say there's an interest [toward healthier products] in the snack food field, but not so much in terms of dietary snacks because that's kind of a logical disconnect, an oxymoron. People enjoy snacking as part of an overall dietary plan."