Tea-time in the UK is not complete without the quintessential British snack – the crumbly cookie and the chocolate digestive. Last year, more than 99 per cent of UK households purchased at least one pack of biscuits; and with annual sales in excess of £1.5bn, the biscuits market continues to be at the heart of the grocery industry.
According to the latest survey by Information Resources (IR), most biscuit manufacturers achieved a slight value growth – a welcome shift away from the value-sapping every day low pricing (EDLP) strategies adopted by big grocers. This upturn in value reflects the fact that consumers are moving their spend to premium sectors (such as healthier biscuits) and premium products, rather than being down to a shift in retailer strategies.
Interestingly, the biscuit market continues to be starved of true new product development (npd). Aside from Quaker Snack-a-Jacks, genuinely new brands have been conspicuous by their absence. Brand extensions, on the other hand, have been rife, offering manufacturers a far safer option. These extensions have come in the form of new products such as Twix Tops, Jammie Dodgers Dipz and Caramel Fingers, while new pack formats have offered manufacturers further ways to add value to their brands.
Arguably, this has polarised the market. more than 30 of the top 50 brands have shown healthy year-on-year growth, although of the top ten only Homewheat can really claim to have achieved this without the aid of increased promotional activity. Kit Kat, the largest biscuit brand, sold more than 60 per cent of sales by volume through some kind of offer in 2001. These sales alone would make Kit Kat one of the top 25 biscuit brands.
Private label sales, however, continue to slide – down 7.1 per cent in the year to March. Aggressive temporary price reductions and EDLP make it increasingly attractive for consumers to trade up to branded goods. The concern for medium and small brands, then, must be the increasing ability of larger competitors to flex their muscles. As promotions continue to drive the market, loyalty is at a premium. As a result, entry into the biscuit market becomes more and more difficult. Npd will continue to be the key determinant of success, along with the ability to stick in the consumer’s mind.
However, the biscuit sector faces minimal threat from rival products such as bagged snacks, chocolate and sugar confectionery, since all these markets are showing a decline – 0.1 per cent, 6.8 per cent and 2.6 per cent a year respectively. On the other hand, all three sectors show strong growth in the grocery multiples – the decline is occurring in impulse outlets such as newsagents, corner shops and off-licences. The concern for the biscuit sector is that traditional impulse categories, such as crisps and chocolate, are beginning to strengthen their position in the outlets where biscuit sales dominate.
However, the need for manufacturers to offer something unique applies to all markets, and as a result, npd increasingly broadens categories and encroaches on other categories. More than ever, manufacturers must be aware, not only of their immediate competitors, but also the secondand third-tier categories that compete with their own. An example is Kellogg’s promotion of the two-week cereal diet, which encouraged women to replace a second daily meal with cereal to lose weight. This helped to move Kellogg’s beyond the breakfast market.
The biscuit market is something of a paradox. Realistically, growth will continue to be minimal without the presence of genuine npd. The need for promotional backing continues to grow, but this simply shifts volume between manufacturers and retailers rather than adding value to the market. Because of this pattern, entry into the market is not easy and the trend is likely to continue along the line of brand extensions. It could be argued that the market needs some impetus to pull it out of this cycle.
However, people will always buy biscuits and there is nothing insignificant about a £1.5bn market growing at just over one per cent a year. The true challenge for biscuit marketers is to ensure that the consumer continues to visit the biscuit aisle. They need to ask whether promotions and brand extensions alone will achieve this aim.