US Savoury & Sweet Snacking Sector – H2 2021 Update
& Category Trends – 30 September 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Tyler Olivas (TO)
Former Product Sales Manager, Larabar, Fiber One & Kid Sweet Treats at General Mills Inc
Agenda:
1. Consumer preferences toward indulgence
2. Competitive overview of the sweet and savoury snack sector
3. Category opportunities and potential growth – ingredient switching and clean labeling
4. Pricing trends, channel dynamics and Q4 2021 sector outlook
Contents
Q: Could you give an overview of sweet snacking and the categories that are really driving growth across
sweet, savoury and baked?
Q: Was the cookie that you launched with the icing a new product or a relaunch? How do you think new
product launches were impacted throughout coronavirus?
3
4
Q: How do you decide when to bring products back? Why do you decide to take products off the market in
the first place? If there’s a whole meme account dedicated to this snack, demand was probably there when it
was taken off. Can you discuss some of those dynamics from a manufacturer side and how you choose to
reset your own category offerings?
4
Q: Why do you think there is so much crossover between some of these brands trying to service a wider array
of categories, and why hasn’t this trend come sooner? Would it make sense to start early and expand into
everything that’s growing, since all of it is?
5
Q: You mentioned this trend towards health and wellness and how the category didn’t fare as well because
everyone was looking for indulgence. How did that play into how the CPG companies are thinking about
their more healthy or better-for-you footprint?
5
Q: Are there any subcategories in the health and wellness or better ingredient front vs others, where
consumers will stay indulgent vs where consumers are much more likely to buy a sugar-free alternative? Are
there any trends within that front regarding health and wellness?
6
Q: How much are retailers seeking these better-for-you offerings? A new trend is setting out whole aisles just
for healthy products or better-for-you products. Could CPGs consider this a new opportunity for shelf space,
where all of these incumbent brands seem to be making a lot of gains? Could you discuss how retailers are
repositioning the store for better-for-you products?
6
Q: How may e-commerce be playing into some of these dynamics regarding SKU rationalisation? For
traditional growing indulgent categories, how has that impacted sweet and savoury snacks?
7
Q: There has been a trend where Coca-Cola would launch an energy drink or a hard seltzer internationally,
and then bring it to the US. Are there any opportunities or trends from CPG companies launching new
products outside of the US to gauge interest and bringing it back into the US? How does that work, or is that
prevalent in this category of snacks?
7
Q: Could you discuss the trends in snacking from the convenience side, and how that’s impacted the
crowdedness in retail? What’s that’s done for pricing and an ability to increase prices?
8
Q: What trends would you note in convenience? Could you comment on anything of a rebound or volumes? 8
Q: What are the ad spend and marketing costs for some of these products? How are General Mills and
companies of such trying to connect with the consumer and get their product name or brand out there?
Q: Alongside that reinvesting in the brand, how aggressive do you think some of these CPGs are getting on
acquiring other smaller insurgent brands that were growing 3-5x?
9
9
Q: What consumer trends have you noticed in the continued demand for legacy products or the brands they
grew up with? Are consumers starting to get tired and switch around or seek out other things? Is there any
data you have good measurable insights into?
10
Q: What are you noticing on the competitive front regarding those brands playing nicely with each other
instead of a price war? Who’s getting aggressive for more share? How is share being captured, or would you
say overall, the category is growing so much that everyone is benefiting from it?
10
Q: What have you noticed in snacking as a whole and retailers’ ability to really build out a private label
presence? Why has private label really struggled, or are some retailers doing better than others in snacking
and making those private label offerings?
11
Q: Are there any other subcategories you think are easier for private label to really build a presence, such as
sugar-free popcorn? What are the other opportunities across categories?
11
Q: What’s really causing supply disruptions, and who’s really faring the best in getting that product to
market? Did some of these supply crunches provide an opportunity for small players to make up some of that
11
lost supply?
Q: Which key players in this sweet and savoury snacking are you monitoring for strategic decisions that have
perhaps sparked your interest, whether it’s management changes, organisational restructures or branding?
Who are you tracking that’s doing something unique, that you think could lead the way for others to follow?12
Q: Are there any channels that you think CPG companies do best in promoting some of those new product
launches in, regarding digital ad spend or a big push to gaming? Many people have been using TikTok and
influencers. Where are you gaining the most money for your ad dollars?
12
Q: What’s your outlook for Q4 2021 and into 2022 in the sweet and savoury snacking category’s pricing and
growth? What are you tracking or do you think there will be some type of normalisation soon?
13
US Savoury & Sweet Snacking Sector – H2 2021
Update & Category Trends
Transcription begins at 00:00:02 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview entitled US Savory & Sweet Snacking Sector – H2 2021
Update & Category Trends. I am Nyree Hinton and I will be facilitating today’s Interview with Mr Tyler Olivas,
former Product Sales Manager, Fiber One and Kid Sweet Treats at General Mills Inc.
Tyler, before we get started with today’s Interview, please state I agree or I disagree to the following statement:
You understand the definition of material non-public information and agree not to disclose any such
information, or any other information which is confidential, during this Interview.
TO: I agree.
NH: Could you start by giving the audience an introduction of your background and various roles you’ve held
in the industry?
TO: Currently, I’m at Impossible Foods as a Senior Account Manager over most of our strategic grocery
accounts. Obviously, it’s a lot different in terms of category vs what we’ll be talking about today. Previous to
that, I had worked with General Mills about eight years. I had done a wide-varying amount of roles, from
category to account management, the most recent one being Product Sales Manager, which was the sales
spokesperson on the marketing floor as decisions were being made. That could involve anything from
innovation to core renovation, to channel dynamics to trade strategy, to selling into customers, so it was a
great role in terms of seeing the entire strategy of whatever brands you were assigned to. I was assigned to all
snack brands in that role. Initially in that role, I was more around healthier-focused brands, like Lärabar and
Fiber One. Towards the end, we did pivot the role to be more focused on some sweet innovation that we were
launching. You might have seen some of those hit market recently. Dunkaroos was one of them, Pillsbury
Cookies, the soft-bake cookies that you see that compete in the same category as Oreos and Chips Ahoy, and
there were some products that we also launched in the sweet baked goods category, like Hostess and Little
Debbie. I left that role about nine months ago, and I’ve been at Impossible ever since.
[00:02:16]
Q: Could you give an overview of sweet snacking and the categories that are really driving growth across
sweet, savoury and baked?
TO: During COVID, it was pretty much anything and everything that was indulgent, that was salty or sweet. I
did still have visibility to some more of the healthier snacking, so you think the bars category specifically, like
Lärabar and Fiber One and Nature Valley, things like that, those brands were hurting. I think that was a big
shift vs what we had expected. Usually during national issues, things like hurricanes and tornadoes and things
like that, we actually saw a lot of these brands really explode in popularity, and so we went into crisis mode
and assumed a jump in what we normally see a jump in. It was the exact opposite, honestly. A lot of the meal
occasion brands grew, but within the snacking world, anything that was super indulgent was on fire. We had
some cereal treat bars, they’re basically bars that were made out of cereal pieces. Those were doing extremely
well. Rice Krispies Treats were doing extremely well. The entire cookie category was on fire.
We had launched Dunkaroos around the same timing as well, which is like a graham cracker and icing, if
you’re not familiar with the product. We had launched it right in the middle of COVID, and it was frankly the
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best timing. It flew off the shelves. People were looking for that nostalgic look, but if you look at the super
macro trends, it was really those things that probably weren’t the best for you but made you happy as you ate
them, the health of the soul if you wanted to look at it that way, were areas that were really growing the
business. Outside of just straight products, the larger sizes also grew tremendously, so if you think about price
pack architecture, which is what we called it at General Mills, the larger sizes were also on fire, driving growth
for a lot of different retailers.
[00:04:33]
Q: Was the cookie that you launched with the icing a new product or a relaunch? How do you think new
product launches were impacted throughout coronavirus?
TO: The product that we had launched was an item that existed back in the ’90s. It was a really popular ’90s
snack that was actually discontinued, and there was always all this uproar for it to be relaunched. We finally
did relaunch it, and so there was still some brand equity in the marketplace. There was an Instagram account
called, “Bring back Dunkaroos,” and that worked out really well, so it was a relaunch. It was a very wide-gap
relaunch in terms of the time between when it was discontinued and when they brought it back. What I would
say in terms of completely new products, it became difficult for a multitude of reasons. One, during COVID, a
lot of retailers frankly stopped resetting their shelves. They didn’t accept any new items. They really didn’t
discontinue items unless you couldn’t service them. Just getting on shelves was extremely difficult, because
retailers were purely focused on making sure what they had was shelved, or sorry, in stock. They weren’t
looking at resetting anything, so a lot of newer brands or brands that were trying to enter into new stores or
different channels probably had challenges just getting through that. If you were able to get in store, a lot of
the typical levers that you’d use for sampling were gone. You couldn’t do any more in-store sampling, which is
a huge way of getting product in consumers’ mouths, so that really hurt.
The only upside that I really saw in terms of new product innovation was a lot of the heritage brands were
obviously flying off the shelves so fast that they couldn’t produce it, so we did see some uptake in items that
were just on the shelf because they weren’t being bought. You think about mac and cheese, so if every Kraft
box of mac and cheese was off the shelf and all you had was the private label version of it, there was a good
chance that the consumer was going to pick that up. You saw a little bit of that, and you did see an uptick. I
don’t think that household penetration was super sticky, to be honest. I don’t think that was something that
consumers stayed with, but some new products did see a bump from that.
[00:07:21]
Q: How do you decide when to bring products back? Why do you decide to take products off the market in the
first place? If there’s a whole meme account dedicated to this snack, demand was probably there when it was
taken off. Can you discuss some of those dynamics from a manufacturer side and how you choose to reset your
own category offerings?
TO: For Dunkaroos, the reason it got discontinued, it got discontinued in the early 2000s. General Mills was
focusing more towards healthy snacking, so from a macro General Mills lens, it wasn’t the direction that we
wanted to take, and so that had a piece of it. The other thing, too, was that it wasn’t growing anymore. I know
there are people that want it now, but I think in the early 2000s, it had died off. We still had a great presence
in Dollar General. I think Sam’s Club still had it as well, but outside of those types of retailers that really feed
on those indulgent consumer needs, there wasn’t much of a demand, so it made sense why they had
discontinued it. Why we had brought it back, I honestly think the ’90s nostalgia was hitting a peak in terms of
interest. Millennials were hitting the age of now starting to have kids, and we thought it was a really unique
moment in which the ’90s consumers could come and get that nostalgia feel, but also feed their children so
that we could get them on board with the brand as well. It was a really unique time that we thought we
couldn’t pass up. There were also some other internal pieces that we finally got approval to do. We had to go
through an external supply chain partner. The tolls were generally high, and I think General Mills was more
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willing to take risks on products like these, and it was something that we moved forward on.
I think what we’re starting to see more and more from an innovation standpoint from vendors is starting to
break into new categories. We weren’t in the cookie category really, as General Mills, and I think when you
look at the entrance of Cheetos into the mac and cheese set, Dunkaroos going into the cookie set, Pillsbury
going into the shelf-ready cookie set, you see, I believe it’s Kind, the Kind bars going into the ice cream set,
you’re starting to see this proliferation of brands across the store. That can be either a licensing play or an
actual play within the actual manufacturer. I think I saw Cinnamon Toast Crunch launch a popcorn at Sam’s
Club the other day, so I think manufacturers are going to really start pushing outside of the normal bounds of
the categories, and using the powerhouse brands that they have to really start disrupting other categories
outside the store, or outside of the category that they’re playing in.
[00:10:26]
Q: Why do you think there is so much crossover between some of these brands trying to service a wider array
of categories, and why hasn’t this trend come sooner? Would it make sense to start early and expand into
everything that’s growing, since all of it is?
TO: It’s a good question, why not do it sooner? I think brands that have these huge powerhouse names are
careful to not go too quick into categories or into products that don’t make as much sense, and so I think most
CPG companies, the marketing teams are the ones that own the decisions in terms of innovation. A lot of
times, these marketing teams have to give up some control in order for these brands to go into new categories,
so for cereal, for instance, the Cinnamon Toast Crunch, obviously a huge brand. I managed a Cinnamon Toast
Crunch bar that was sold in the snack bar aisle. Anything I did with the packaging, anything I did with
marketing had to be signed off from them, so you’re almost adding additional red tape because of that within
an organisation that probably already has way too much red tape to move fast, and so to ask these marketers
to give up some kind of creative control is a lot to ask, and they want to be very cognisant and very deliberate
in the categories that they’re going to.
I think you’re starting to see it pick up, because there’s success in it, and I think there are a couple of reasons
why they’re doing it. One is just brand awareness. I think the cereal brands have done a really good job of
going across the entire store. I think Cinnamon Toast Crunch has a snack bar, they have coffee creamer, I
think I saw an ice cream launch, they have oatmeal now. Oreo has done a good job of it. Reese’s has done a
good job of it. It just grows the breadth of the brand, and allows it to stretch to new occasions. If you think
about, again, back to the same reference of the Cinnamon Toast Crunch cereal and the Cinnamon Toast
Crunch bar, CTC, Cinnamon Toast Crunch, is really only eaten in the morning. Put it in a bar format, you can
now stretch that brand into an evening occasion, into a snacking occasion that a cereal, by itself, could never
do. I think you’re starting to see it more and more. Manufacturers are taking two different approaches, either
brand or licensing it out to a different manufacturer, but some, and I think this is a growing trend, some are
actually just doing it themselves and looping in an external supply chain partner and benefiting themselves,
obviously, with it.
[00:13:30]
Q: You mentioned this trend towards health and wellness and how the category didn’t fare as well because
everyone was looking for indulgence. How did that play into how the CPG companies are thinking about their
more healthy or better-for-you footprint?
TO: I don’t think CPG businesses are going to completely go away from it. I think health and wellness is a
macro trend that took a little bit of a bump during COVID. I know those categories are coming back now.
Obviously, you’re comparing vs last year. Last year during this time, it was in the depths of COVID. You see
those bar categories returning to growth. I don’t know if they’re at the same growth of what they were at prior
to COVID, but they’re getting back there. I just think health and wellness is way too macro of a trend for CPG
Private and confidential 5
companies to completely go away from. I do think there were some CPG companies though, prior to COVID,
where they were almost putting all their eggs in that basket in terms of everything is going to health and
wellness, we need to start phasing out these super indulgent snacks. I think post-COVID, it’s a little bit more
balanced of an approach. I think it’s being very intentional with what your brand’s purpose is, and making
sure your portfolio can address both sides of this consumer need. If you think about cereal, if you’re a major
player, you need to be on both ends of that stick, and make sure you know which brands are going to appeal to
indulgence and which brands are going to appeal to health and wellness. I saw a lot of brands that didn’t
exactly know their identity. Those were the ones that really lost out in the last couple of years. Obviously, the
health and wellness brands hurt during COVID, but I do believe they’re going to come back as people start
getting out, travelling more, being outside more. They’ll make a comeback. It was a blip in the radar, I think.
[00:15:36]
Q: Are there any subcategories in the health and wellness or better ingredient front vs others, where
consumers will stay indulgent vs where consumers are much more likely to buy a sugar-free alternative? Are
there any trends within that front regarding health and wellness?
TO: Obviously, the snack bar category is super advanced in that. You walk that set now, and you have every
type of health and wellness trend that you could ever humanly imagine. As I think about categories that beat
that to the mountaintop, that would be one. One that I haven’t really seen much of a better-for-you option is
chips. You walk that set and it’s massive. Obviously, it’s managed by DSD companies, and you still really don’t
have much of a better-for-you set. There are a couple of baked chips in there that have been around for a
while. Pork rinds have started popping up, just because it’s a higher-protein snack, but really, it’s still
dominated by those shifts that are frankly not good for you, just very indulgent salty snack types of offerings.
Even as you look at some of the innovation coming out by the major CPG players in that space, they’re not
making any big bets on health and wellness. I think I saw there, for a while, the black bean chips that Frito-Lay
was bringing out. I walked the store the other day and I couldn’t find them anywhere.
I think it’ll be in there, but I don’t think you’re going to see any manufacturers really go heavy on health and
wellness. It’s not going to be their number one plan maker for the year. I can speak at General Mills, it
definitely took a back seat. We used to have dedicated resources for natural organic, and now they have all
been reabsorbed into the parent operating units, so Annie’s snacking no longer fell underneath natural
organic. They just said, “Alright, you’re going to go within the snacking portfolio, and the snacking president
needs to determine how much investment you get. There is no longer a dedicated investment in natural
organic.” I think the move around parsing out separate resources for this growing natural organic and growing
better-for-you set is done. They now have to earn their keep, and really warrant all the resources that they get.
Some brands will warrant resources, the ones that sell and the ones that are able to fly off the shelves, but
there frankly are going to be a lot that probably, if they haven’t already, will fall to the wayside, just because of
lack of attention from a CPG standpoint, and also from a retailer standpoint.
[00:18:48]
Q: How much are retailers seeking these better-for-you offerings? A new trend is setting out whole aisles just
for healthy products or better-for-you products. Could CPGs consider this a new opportunity for shelf space,
where all of these incumbent brands seem to be making a lot of gains? Could you discuss how retailers are
repositioning the store for better-for-you products?
TO: I’ve seen more and more stores get away from a store within a store, and they’re starting to integrate the
products a lot more, and so they do have to go up against the big dogs. I think there will always be one or two
brands in the better-for-you segment of a category. I think gone are the days that retailers just bring in
everything that somebody brings to them. I can speak to the role I’m in right now, with plant-based meat as a
better-for-you option. There are currently still 15-20 brands, there seems to be another brand every other
week, of brands being brought to retailers. With COVID, it’s really forced retailers to focus on execution, and
Private and confidential 6
the more SKUs, the more brands that you have out there, the more complicated it gets at store level, and so
they’re starting to parse that back. I know plenty of retailers that have cut back a 10-branded better-for-you
category down to just two players. I think you’re going to see that, and I think you’re even hearing it in a lot of
the quarterly calls that retailers have on SKU rationalisation, focus on execution, making it simple for the
consumer and making it simple for the in-store labour, because we all know labour is so strained right now. I
think there will only be one or two brands in the better-for-you set in these categories, because they just need
to make sure that products are, frankly, on the shelf. Until we start seeing supply chains catch up to whatever
trends they’re trying to catch up to, I don’t see stores becoming more complex in how they operate, and
bringing in new brands is more complex.
[00:21:09]
Q: How may e-commerce be playing into some of these dynamics regarding SKU rationalisation? For
traditional growing indulgent categories, how has that impacted sweet and savoury snacks?
TO: I think if you look at traditional core retailers and their e-commerce websites, they use the stores’
inventory to service all of their online orders. If you’re not in the store, you can’t do a pick-up order, and that’s
also another reason why retailers are doing this SKU rationalisation. It’s so that they can build inventory,
because they’ve opened up a new channel for the store, which is online pick-up or delivery. A lot of these chips
and stuff like that are coming directly out of store inventory. I’ve never heard of a store having additional
SKUs that are not on shelf for consumers but available for pick-up. I haven’t heard of that happening. Maybe
it’s somewhere, but it’s got to be a very select amount. Amazon and those more traditional e-commerce players
will always be a huge part of any emerging brand, I would think, or even the direct-to-consumer.
You see direct-to-consumer a lot. What I will say is I’ve gone through a lot of direct-to-consumer iterations
with big brands like Lärabar and even here at Impossible. They’re extremely unprofitable. They’re not easy to
execute. Nobody really seems to do it well. I haven’t seen any major brand really stick with it and make it a big
part of their portfolio play by any means, but if you’re a mom-and-pop garage, “I’m going to start making a
granola bar in my backyard,” kind of person, Amazon is a great place to start, because you could have a billion
items on Amazon and it’s not going to matter. At retail, it’s not like that though. I think you’re going to have to
prove yourself in an e-commerce way, in Amazon, and maybe then go to the nat-org channel with Whole
Foods and Sprouts. You’re going to have to prove yourself with data now, whereas I think maybe 10 years ago,
you could go to Expo West, get discovered there and get into 2,000 Kroger stores. I think they’re not as willing
to do that with natural organic brands, and even savoury brands that are small, savoury indulgent brands, you
really need to prove yourself before retailers will make a big bet on you.
[00:23:55]
Q: There has been a trend where Coca-Cola would launch an energy drink or a hard seltzer internationally,
and then bring it to the US. Are there any opportunities or trends from CPG companies launching new
products outside of the US to gauge interest and bringing it back into the US? How does that work, or is that
prevalent in this category of snacks?
TO: I haven’t seen it too much in snacks. There is sharing across the board. There is, I think we had called it a
global bar council is what we used to call it, and the R&D and sales leads of each country across the world
would meet and share best practices, and if something worked really, really well, they’d give it a go, but it
wasn’t like a big play. A lot of those best practices weren’t necessarily, “A product is doing really well, let’s
bring it over.” It was more from manufacturing or maybe a merchandising style. I haven’t seen it too much. I
think what you might see a little bit more of is brands looking at what is big internationally and what’s starting
to make its way into the US, and using those insights to apply it to an existing brand that they have. Trader
Joe’s does a really good job of bringing international flair and international flavours to Trader Joe’s, and that
almost seems like a jumping-off point for those flavours. I think big brands will just incorporate that in.
Private and confidential 7
I think something else you’ve got to think about though too, not just within retail or not just within the
international scope, but also different channels, Impossible does a really good job of this. We launched a
majority of our products in foodservice first, so we launched with Burger King and we launched with a lot of
named chefs, famous chefs, and then brought it to retail. I think more and more products will start looking at
that in snacking or whatever it might be vs launching it internationally and then bring it directly in. I’m not
saying it won’t happen, it’s just I’ve never seen a plan that has, “Let’s go launch in China and then bring it to
the US.”
[00:26:27]
Q: Could you discuss the trends in snacking from the convenience side, and how that’s impacted the
crowdedness in retail? What’s that’s done for pricing and an ability to increase prices?
TO: You’re asking the different roles of each of the channels, or are you asking, because of the hit that
convenience took during COVID, how that’s impacted pricing?
NH: Yes, exactly. How has coronavirus shifted supply, resources and then all the way to retail grocery, and
then how that’s impacted your ability to price effectively in retail vs a convenience?
TO: The convenience obviously took a big hit during COVID. I felt real bad for that team. The thing that’s
really unique and the thing that I learned a lot during COVID was how complex the supply chain world was.
Just because the product is the same, like a bar is bar, no matter if you buy in the single unit or in a 12-pack
case, a lot of times, those are completely different lines and you can’t just switch one to another. We actually
had a lot of conversations with buyers in retail saying, “Hey, convenience is completely shut down. Why can’t
we just put those bars in a 12-count case?” Some retailers were able to make convenience SKUs work in their
channel. This is an example, it’s not specific to the bars, but to give you an example of what I’m saying, Gold
Medal Flour, we were completely out of stock on five- to 10-pound bags. In the convenience channel, which
also we have foodservice in there as well, there is a 50-pound bag of flour. Typically, it’s used for bakers and
restaurants and things like that. Obviously, all those were closed down. Walmart was able to activate a SKU for
a 50-pound bag of flour for that one SKU. That was probably a unique exception to that. I didn’t see that
happen broadly, so unfortunately, at least for our manufacturing, a lot of it was completely siloed in terms of
what they could and couldn’t produce, which was extremely frustrating. How that impacted pricing, it frankly
didn’t too much.
The other thing I’d say is I believe that manufacturers are pricing now, just because they can. There’s always
going to be an inflationary story, no matter what year. If you want to take pricing 10 years ago, five years ago,
next year, this year, there’s always an inflation story to be told. Five years ago or even before COVID, even
mentioning the word price advance in a Walmart room was so faux pas. It was a battle to the death to get them
to even pass that along. Sales teams within CPG companies would completely turn away from even the idea of
pricing. Now, retailers are accepting it because it’s just a part of the new norm, and so I think CPG companies
are using it as a growth driver, frankly, to take price advances. I don’t think they’re going to do it broadly, and
not as simple as you might think. They might not just say, “Hey, you’re going to pay 10% more for this one
item.” They might just take 10% of product out of that same item and charge the same amount, because there
are some brands where pricing is super important, and you’ve got to keep that in mind. There are other ways
of passing on pricing to the retailer or to the consumer without necessarily keeping that same SKU and
charging more for it. You’re seeing portfolio-wide price advances to this day. I keep on hearing about them, so
I don’t know if the channel dynamics are affecting, at least I haven’t heard of channel dynamics impacting
price advances throughout the industry.
[00:30:54]
Q: What trends would you note in convenience? Could you comment on anything of a rebound or volumes?
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TO: I wasn’t as close to the convenience side. I would imagine that they’ve made a little bit of a comeback,
because the convenience stores are at least open now, so I would hope that they’re making a comeback. The
other thing I’d tell you, too, is that I would imagine outside of salty snacks, the convenience channel was a
relatively small portion of the overall portfolio, so it didn’t really impact the broader message or the broader
strategy, but I wasn’t as close to the convenience channel as I was the retail.
[00:31:52]
Q: What are the ad spend and marketing costs for some of these products? How are General Mills and
companies of such trying to connect with the consumer and get their product name or brand out there?
TO: I think they are reinvesting in their brand. I know they specifically did so during COVID, and frankly, a lot
of these price advances, the message, and I do think CPG companies are holding true to this, not entirely but
to a good portion of it, they’re using these price advances to invest in their brand. They are sinking some of it
to the bottom line, for sure, but I know they do believe investing in the brand is the right thing to do, especially
when the consumption was through the roof, so they’re going to continue to invest in brand messaging. What
you might see a little bit more of, though, is the methodology that they apply those funds, probably a lot more
online. Gaming is starting to become a huge part of a lot of different portfolios that I never thought I’d see the
day, frankly, that it’s such a big thing. I know Kroger, their big event next year is gaming, and they’re planning
up as many big brands as they possibly can, because gaming is such a huge part of the millennial and Gen Z
mind, so that’s been a surprise.
The only thing I’ve seen a pull-back on is merchandising, and the reason for that is they frankly couldn’t keep a
lot of those brands stocked, so there wasn’t a reason to merchandise something that wasn’t even there on the
store shelves. I think CPG companies are starting to become a lot more savvy in terms of price points and what
they do need to merchandise and what they don’t. COVID put a big spin on everything in terms of comps, and
so it’s harder for retailers to demand the same type of investments, because now, if you look a year ago, there
really wasn’t a lot of trade investment, because there was no point in having trade when you couldn’t even
produce enough. It’s almost like it’s wiped the slate clean, not that they’ve gone from 30 weeks of
merchandising down to zero, but it’s allowed them to reset their merch counter to make sure that they’re only
making investments in merch investments that make sense to the CPG player.
[00:34:31]
Q: Alongside that reinvesting in the brand, how aggressive do you think some of these CPGs are getting on
acquiring other smaller insurgent brands that were growing 3-5x?
TO: It’s a good question. I haven’t seen as much acquisition as I thought I would. I feel like the new
acquisition hot category is pet food, maybe just because I came from General Mills, but it seems like every CPG
company now is getting into pet food, which is really interesting. I think what companies are trying to do now,
instead of just buying brands outright, right off the get-go, they’re starting to buy a vesting interest in them, or
giving them a seat at the table or co-branding with them, to get a good idea of what the brand is really like
before jumping all the way in. I think you’re seeing that with Kind right now. Beyond Meat is also doing it,
where I believe they partnered with PepsiCo. Kind, I believe, did it with Mars. General Mills did it with
GoodBelly, if you are aware of that brand, where they didn’t buy them, but they launched a bunch of brands or
a bunch of products, co-branded with GoodBelly, with the stigma of, “Hey, if these do well, we’ll buy out the
brand.”
I think you’re going to see a lot more very close, quote, unquote, partnerships between small companies and
large CPG companies to see if it’s a good fit, and then they’ll take that next move. I know General Mills had
been burned on a couple in terms of what they thought they were getting and what they actually got. Even
thinking about RX being bought by Kellogg’s, if you asked Kellogg’s, “Would you do this again,” I think they
would say no, because if you look at the trends, probably when I was there, the trends were not that great. I
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think you’re going to see a lot more partnerships, rather than straight-out buying of brands, unless it just
makes complete sense to do so.
[00:36:42]
Q: What consumer trends have you noticed in the continued demand for legacy products or the brands they
grew up with? Are consumers starting to get tired and switch around or seek out other things? Is there any
data you have good measurable insights into?
TO: The one piece of feedback that I’d give you is that the thing I’d say is millennials are currently the biggest
consumer base or buying power, and Gen Zs will be right behind that here pretty soon. COVID fast-forwarded
a lot of millennials’ lifestyles in terms of living on their own to moving in with their significant other, or
already living with their significant other and deciding to have kids. There was a huge, I think it was about five
years ago, six years ago, you had heard about, “The cereal category is dead, the cereal category is never coming
back.” The area that we saw the biggest loss in was millennials not having kids, and I think when you see
millennials start having kids, a lot of their drinking green shakes and avocado toast went out the window for
what they grew up with, because what do you do when you’re raising a kid? You think back to when you were a
kid, when you tried to bring those same joys and thoughts and lifestyles, and so we actually saw a lot of them
come back to the brands that they grew up with.
You’ve got to stay relevant within it. It’s not like they’re going to go buy every brand that they ever grew up
with, but those brands that have remained in their mind, either by doing co-branding across the store in
categories that maybe they stayed with, even though they didn’t have kids, but I think those brands that are so
big that you can’t ignore, as they start having kids, they’re going to start going back to them, because it’s what’s
comforting. It’s what they know, and so I think the big brands have actually seen a big resurgence. I know
during COVID, the big brands are really the ones that won, and so I haven’t seen any fall-off in that. All these
CPG companies are announcing their quarterly earnings, and I haven’t really heard of very many that are
having bad quarters. I’m not saying we’re out of COVID right now, but we are definitely on the, or I should say
I hope we’re on the side of it, and they continue to have YoY, QoQ amazing profits, dollar share gains, market
share gains, so I don’t see the big brands dying off any time soon.
[00:39:27]
Q: What are you noticing on the competitive front regarding those brands playing nicely with each other
instead of a price war? Who’s getting aggressive for more share? How is share being captured, or would you
say overall, the category is growing so much that everyone is benefiting from it?
TO: I think it’s a bit of both. I honestly don’t think there’s some huge collusion going on in the CPG world
where it’s like, “Hey, let’s all just take pricing.” I have actually seen, when CPG companies or brands take
pricing, it actually helps their dollar share, because you don’t have to sell as many units to grow as much in
dollars. The reason that I think that’s happening is that CPG companies are not just, willy nilly, raising prices
across every single item at a 10% rate. They know which brands can take a price advance, which ones cannot,
so they’re not going to raise a brand that’s focused on value up 20%. That’s not going to translate to dollar
share growth. I think CPG companies are looking at other CPG companies that have taken price advances.
Obviously, there’s a huge benefit to the bottom line, but too, they’re also seeing dollar share growth in the
category, so it’s hard to really make the case right now not to take a price advance. Now, from an execution
standpoint, retailers are taking them, because every single CPG company seems to be doing a price advance.
Two, it seems to be translating to dollar share growth, and then even to that point then, market share growth
for that retailer if they pass that price along quickly. Three, everybody is doing it. I don’t think you have to be
the cheapest player in the category to grow dollar share. I see a lot of merchandising that doesn’t translate to
the dollar share growth or even to dollar growth, and I know General Mills specifically has started to shy away
from those types of activities, unless they really, really needed tonnage at the end of a quarter.
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[00:41:54]
Q: What have you noticed in snacking as a whole and retailers’ ability to really build out a private label
presence? Why has private label really struggled, or are some retailers doing better than others in snacking
and making those private label offerings?
TO: I think Target, they’ve become very efficient with their private label, Good & Gather. I was on Lärabar
when they launched their Good & Gather, and it did work on the brand in terms of market share or dollar
share within the category. I think it’s a tale of two worlds in terms of private label. I think some retailers are
starting to get really good at creating a, quote, unquote, premium private label, so ones that can compete with
the name brands well. It’s not going to compete with every name brand. There are some exceptions to that
rule. What they haven’t done a good job is creating a value play that really brings consumers. Of course,
private labels are always going to be cheaper than the name brands, but I think great value, which is really just
a value play, it’s not even to necessarily just knock off the number one player in the set, I don’t think I’ve seen
a retailer launch a value private label offering that’s done well.
I think specific to the snacking categories, I continue to think the super indulgent snacking categories are
going to be tough to bring in private label, because the taste isn’t the only thing that makes you feel good.
Opening the bag and seeing the brand also makes you feel good, so when price isn’t as much of an issue for
you, or all you really want is to feel good when you eat it in terms of a soul feel-good, I don’t know how a
private label can really play in that space effectively, at least I haven’t seen it done well.
[00:44:06]
Q: Are there any other subcategories you think are easier for private label to really build a presence, such as
sugar-free popcorn? What are the other opportunities across categories?
TO: Good question. I think subcategories that don’t have any huge marketing players, there are subcategories
you need to think about, like flour. Anything that’s commodity obviously is an easy target for private label,
because there are not any brands in there that are spending a lot of money in marketing and reminding the
consumers why they’re special. If I was a private label retailer, I would look at the categories that have the
smallest marketing spend and go after those categories, because marketing is one of the biggest differentiators
when it comes to private label vs name brand. There are a lot of brands out there that are happy with what
they’re doing and they don’t need to market at all, and so if I was a private label manufacturer, that’s who I
would be going after. I think popcorn is probably a good one. I don’t remember the last time I saw a popcorn
ad. Nuts, probably another. Outside of Planters, I haven’t really seen too much of it, and that’s really a
commodity, honestly. I think that’s the biggest differentiator, and you’re seeing those categories probably
suffer a lot from private label.
[00:45:41]
Q: What’s really causing supply disruptions, and who’s really faring the best in getting that product to market?
Did some of these supply crunches provide an opportunity for small players to make up some of that lost
supply?
TO: To answer your last, yes, 100%. Anybody that could get them product would be the ones that won. I can
specifically say I’ve benefited from that, even in this current role, where major manufacturers are not able to
produce and I’m the one that wins, because we can produce right now. One of the biggest ones that gets
overlooked a lot is trucking. It’s extremely hard to get trucks now. It’s expensive, it’s difficult to schedule. The
other thing just outside of trucking is having enough people for warehouses, just having enough people to
stock shelves. Before COVID, if a retailer was really excited about a product launch, they would be able to cut
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something in a lot of times. Now, retailers are being told, or buyers are being told by the retailer that you only
have this many hours to reset, and you get nothing outside of that. Unless it’s a massive exception or a massive
launch by a CPG company, it’s not happening, and so that type of thing is affecting everything up and down
the supply chain. I know I have warehouses with retailers where only half of the ship windows are being
opened up, or appointment windows are being opened up, because they don’t have enough people to staff the
others. To pass it down, there aren’t many trucks.
I have heard a lot of disruption in the meat industry. Anything with meat seems to be in short demand, but I
think the biggest winners are the ones that have really simplified everything, that are only focusing on a couple
of SKUs. At the end of the day, I think a majority of the portfolios I’ve worked on, it’s usually the top 10% of
SKUs do 60% of volume, 70% of volume, so any portfolios that are really diverse in terms of SKU proliferation
are probably the brands that are suffering the most, because it’s tough to focus on that many brands in the
situation that we’re in now.
[00:48:19]
Q: Which key players in this sweet and savoury snacking are you monitoring for strategic decisions that have
perhaps sparked your interest, whether it’s management changes, organisational restructures or branding?
Who are you tracking that’s doing something unique, that you think could lead the way for others to follow?
TO: It’s a good question. Lay’s has done a really good job, I feel like. I feel like they’ve done a good job of still
having some really fun, they do a good job, it’s similar to Oreo. Oreo is always a good one to look at, and I
think a lot of people are actually using their playbook now, going forward. I feel like Oreo was one of the first
brands to use these, I wouldn’t even call them seasonal flavours. I’d call them more like fun flavours, their in-
and-outs that they use to bring news to their brand. I think they have a pumpkin spice Oreo out there. I think
they’ve had that one before. I think I saw an animal crackers Oreo the other day, and it’s really interesting.
They don’t use it for necessarily a volume drive. They use it to bring (1) brand awareness and then (2) you get
display everywhere that you get that item accepted. Then, the core Oreos item also gets brought along. They’ve
done a fantastic job in terms of always having news to their product line.
The other thing that they’ve done a really good job on that, if you weren’t looking super closely, it would be
hard to miss, they’ve done a great job of upsizing their portfolio. If you go to a grocery store, I think they have
one or two SKUs left of their core Oreo size. Every other Oreo size is a value pack, and then you go to Walmart,
80% of the SKUs there are a mega-pack, so they’ve done an amazing job of upsizing their portfolio, along with
bringing fun news to their portfolio at the same time. I think it’s led to dollar share growth. When you upsize a
consumer and they’re willing to expand their consumption, they’re going to pay more for more product, and it
turns out to dollar share. I feel like I always get something in my news feed about the new Oreos flavour, and I
don’t even eat Oreos, so you know they’re doing something right.
[00:51:01]
Q: Are there any channels that you think CPG companies do best in promoting some of those new product
launches in, regarding digital ad spend or a big push to gaming? Many people have been using TikTok and
influencers. Where are you gaining the most money for your ad dollars?
TO: A bigger and bigger portion of companies’ ad dollars are going to go to retailer-specific ad agencies, so
KPI is Kroger’s ad agency. You have Target that requires marketing spend within Target. I think with those
spends, the retailers that can do it the best will get more investments, because you can buy a lot more than just
marketing dollars with those things. For Target for instance, if you invest in Roundel, which is their marketing
platform, you get in-store display with it, and so it’s a lot easier to warrant that type of investment, because
you get more than just a banner on Target.com or something like that. With Kroger, what’s so good about
Kroger’s investments is that they’re able to target specific consumers because of all the data that they have,
and so I think you’re going to continue to see and more investment in retailer-specific ad dollars and ad
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investments, because it can stretch across display and actual marketing levers.
Also, I think retailers are trying to figure out how much that can pad their bottom line, so they’re doing
everything they can to make sure that this spend is super efficient for CPG companies. Target just hired, I
believe she was an ex-Apple exec, to run their marketing, the Roundel agency, which is their marketing,
because right now, to be 100% honest, Roundel was just Target’s marketing agency, isn’t the best ROI and they
know that, and so they’re bringing in big talent in order to improve that, because they know that the likes of
Kroger and Walmart have a much better ROI and it’s much easier for a CPG company to say, “I’m going to go
and invest in Walmart’s ad agency vs Target’s.”
[00:53:36]
Q: What’s your outlook for Q4 2021 and into 2022 in the sweet and savoury snacking category’s pricing
and growth? What are you tracking or do you think there will be some type of normalisation soon?
TO: I think we’re getting towards the end of pricing. I think you’ll still see a couple more come through, and
when I say pricing, I mean just a strict price advance on the same SKU. I think that’s going to start closing. I
think the rationalisation to retailers will start closing. COVID hopefully is in the rear-view mirror, and I think
for CPG companies to be able to warrant to do these types of things will start coming to a close. What I don’t
think is going to end is going to be pricing in different types of ways. Price-back architecture, I think every
major brand across the CPG industry, across every single category, it’s happening. When I say price-back
architecture, I mean upsizing or creating a different size to open up a new occasion or a new channel. That
allows for supply chains to still remain hopefully a little bit more simplistic, rather than launching a whole new
product, and that also keeps, we used to call it the pantry, which is the number of inputs that go into our
product, it keeps the pantry with less ingredients in it.
I do think that major brands will continue to be the winners broadly, because I haven’t seen retailers lose their
focus in terms of execution. I think I actually see retailers doubling down on it. I think they see why it works,
like, “Let’s keep the number of brands that we have in the store simple. Let’s continue to rationalise the
number of SKUs that we have,” so that as the online presence within these retailers grows, that they can
actually service it. It’s a lot easier to pick somebody’s grocery order when there are only 10 SKUs to pick from
vs 20 or 50, so I continue to expect they’re going to simplify. When they simplify, they have to get rid of
brands, and they’re not going to get rid of the biggest brands. I see these brands continue to invest, so I think
it’s going to be a two-branded play plus private label in a lot of categories. That really is going to start
squeezing out those smaller brands that aren’t figuring it out or that, frankly, just don’t warrant the space.
[00:56:17]
NH: I think that’s a good place to end the Interview. Let me close by saying thank you, Tyler, for your time
today. We were able to cover an extensive amount in high detail, and thank you to clients for joining Third
Bridge Forum’s Interview. Have a good one.
TO: Thanks.
Transcription ends at 00:56:31 of the recorded material
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