Analyst: Campbell could steal convenience store share from Kellogg

AUTHOR

Cathy Siegner

PUBLISHED

Jan. 3, 2018

Dive Brief:

• Kellogg's snacks segment could face serious convenience store competition from Campbell Soup, which recently announced that it would acquire snack maker Snyder's-Lance, according to Food Navigator.
• With this new brand, Campbell can take advantage of on-shelf merchandising for potato chips and other popular snacks in convenience stores as Kellogg shifts its snack business from direct store delivery to e-commerce, Jared Koerton, senior food analyst at Euromonitor International, told Food Navigator. 
• Campbell's purchase of Snyder's-Lance will add well-known snack brands such as Cape Cod potato chips, Archway cookies, Snyder's pretzels and Pop Secret popcorn to the food giant's portfolio, giving it a better foothold in the salty snacks space. This isn't likely to threaten big players like Frito-Lay and Kraft Heinz, but could be an obstacle for non-national brands like Utz and Golden Flake, Koerton said. 

Dive Insight:

Campbell already has a roster of popular snack brands, including Pepperidge Farm and Goldfish crackers. Once its acquisition of Snyder’s-Lance closes in the second quarter of this year, the iconic soup company will gain some c-store staples, including lucrative potato chip brands Kettle and Cape Cod. While snacks currently generate about 31% of Campbell's sales, adding the Snyder's-Lance brands is expected to bring that proportion up to about 46%.

Kellogg's decision to transition its entire North American snack business from direct store delivery (DSD) to warehouse distribution systems also gives Campbell a window of opportunity in c-store formats. Euromonitor's Koerten told Food Navigator that because Snyder's-Lance has its own DSD division, "... maybe there is a potential for Campbell to use DSD to take up more shelf space and do more in-store promotion."

It's hard to predict whether shoppers of the future will be more likely to grab snacks at a convenience store or buy them online. Regardless, the segment is giving traditional brick-and-mortar grocery stores a run for their money and catching the attention of manufacturers like Campbell. Between 1988 and 2016, the c-store share of grocery sales doubled from 8% to 16%.

Online grocery sales have been relatively slow in the U.S., but Packaged Facts predicts gains will accelerate in the coming years, with annual growth increasing from 19.4% between 2013 and 2017 to 27.1% between 2017 and 2022. The market research firm predicts online grocery sales will be worth nearly $42 billion in 2022 — more than triple the market’s current value. A recent Packaged Facts report also shows that 28% of online sales currently goes to canned and pantry goods and 16% goes toward snacks.

But snacks aren't the main reason why consumers are visiting convenience stores. In 2016, the top-selling categories for c-stores included tobacco, with 36% of in-store sales, and foodservice, which accounted for 22% of in-store sales, according to an April report. Snacks — salty, candy, packaged sweet snacks and alternative snacks — made up just 9.8% of sales.

Still, consumer demand for snacks shows no sign of slowing down, pushing big food companies into — or further into — the $33 billion snack space. One of the most high-profile examples of this is Kellogg's $600 million purchase of Chicago Bar Company, maker of the RXBAR clean-label protein bars. By adding the popular RXBAR to its existing snacks lineup — which already features Pringles and Pop-Tarts — Kellogg is signaling its intention to gain a higher profile in the better-for-you snack segment. 

This move spurred several other big food manufacturers to make similar investments in the snack space. Most recently, Hershey made a deal to buy Amplify Snack Brands, parent company of SkinnyPop — and whose portfolio includes Tyrrells potato chips, Oatmega protein bars and cookies and Paqui tortilla chips. Mars also recently bought a minority stake in KIND fruit and nut bars.

Time will tell what kind of waves Campbell's acquisition of Snyder's-Lance will make in the snack space and whether the company's bet on brick-and-mortar distribution will pay off in the long run. One thing is certain — the category is heating up and could soon crowd out manufacturers late to the game.