Whitepaper zur Situation der Snacking-Industrie / Paper on the state of the snacking industry

Experiential Snacking Innovating with Texture, Format and Flavour

Not to be distributed without permission.

The data included in this document is accurate according to Passport, Euromonitor International’s market research database, at time of publication: February 2021

Experiential Snacking Elevating the Sensory Experience

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Contents 1 Introduction 2

Sensory Experience Pivotal to Snacks Sector

3

COVID-19 Cut the Vital, in-store Connection to Snacks

5

Snacks Increasingly Bought from and Eaten at Home

6

Spotlight on the Online World: Experiential Opportunities

Texture innovation: A lighter mouthfeel for a guilt-free experience Visual Innovation: Letting a novel ingredient show its true colours Beyond consumption: Creative ways to deliver an experience at home

12 Conclusion 13

About the Author

14

How Can Euromonitor International Help?

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Introduction

Consumer lifestyles drastically changed as a result of COVID-19. We witnessed an increase in trends like the growth of e-commerce channels, a higher focus on the online world overall, rising health concerns and increasing product development designed to address consumer demands in their homes; while at the same time seeing a slowdown for market trends such as on-the-go consumption and impulse purchases.

Both shifts are reshaping the future of snacks.

This white paper provides an overview of experiential snacking in 2020 and beyond, exploring challenges arising from the COVID-19 pandemic and its impact on the most popular and important distribution channels in the sector. Our analysis helps industry players assess the main threats brought by the latest socio-economic developments and identify key opportunities to consider for long term success in the experiential side of the snacks sector.

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Sensory Experience Pivotal to Snacks Sector Traditionally, snacks purchases have been characterised by a sensory component, more so than any other packaged food products. Consumer demand is typically more driven by concepts such as visual appeal, impulse exposure and a sense of indulgence over the nutritional value of the product. This has provided room for investment in product development in dynamic categories such as confectionery and savoury snacks. One of the key factors which has enabled players to sustain innovations and attract consumers’ interest throughout the years has been flavour. However, changing priorities among consumers mean flavour innovation alone, is not enough to sustain their interest and convince them of purchasing a snack anymore. Instead, they increasingly want a holistic experience from their snacks. According to Euromonitor International’s Lifestyles Survey, at least 40% of respondents in the youngest generations globally seek tailored experiences.

‘I seek curated experiences that are tailored to my tastes’

80% % Agree or Strongly Agree

70% 60% 50% 40% 30% 20% 10% 0%

Asia Pacifc Generation Z

Europe Millenials

Latin America Middle East and North America Africa Generation X

Baby Boomers

Source: Euromonitor Lifestyles Surveys, 2020 n:41231

This recent shift, influenced by changes like home seclusion and channels closures, combined with the growth of already dynamic e-commerce channels has led to a new need: bringing the experience home.

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COVID-19 Cut the Vital, in-store Connection to Snacks In a sector strongly dependent on the visual appeal of physical products and having consumers across all its main distribution channels, the impact of COVID-19 has been disruptive in many ways. Value sales declined through the most common on-the-go snacks channel: convenience stores (-1.13%), forecourt retailers (-7.06%) and vending machines (-10.64%). This negative impact on the more traditional channel has however, boosted the penetration of e-commerce and provided new ways to meet consumer needs amid reduced mobility and staying at home more often.

Global Snack Value Sales Historic Channels Growth

40

Y‐o‐Y % Growth

30 20 10 0 ‐10 ‐20 ‐30

2015

2016

2017

E‐Commerce Sales

2018

2019

2020

On‐the‐go Channels*

*On-the-go Channels: Convenience Stores; Forecourt Retailers; Vending Machines Sources: Euromonitor International Packaged Food 21ed

As closures of important channels like duty free, specialised stores and trips to retailers became more carefully planned, snacks sales were challenged by drastically limited impulse exposure and visibility. Our lifestyles survey shows that grocery shopping has become more of a planned activity, leaving less room for impulse purchases and consumers have simultaneously started to familiarise themselves with e-commerce channels for grocery shopping.

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4

COVID-19 Cut the Vital, in-store Connection to Snacks

Reported Shopping Behaviour, 2015–2020

40%

% of Respondents

35% 30% 25% 20% 15% 10% 5% 0%

2015

2016

2017

I often make impulse purchases

2018

2019

2020

I buy groceries online (at least monthly)

Sources: Euromonitor International Lifestyles Surveys, 2020 n:41231

Even though the way in which consumers buy snacks has changed, the desire and demand for snacking did not decrease in 2020. In fact, home seclusion and social distancing translated into exceptional growth for e-commerce channels, driven by the consumers’ tendency to snack more at home and indulge during a difficult time.

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Snacks Increasingly Bought from and Eaten at Home Snacks players have adapted to the new environment and lifestyles by changing their approach to how they can engage with consumers during the global pandemic. An increasing number of providers introduced direct-to-consumer delivery models in order to bring the snacking experience to the home.

An example of product development aimed at targeting at-home living is the Ben & Jerry’s ice cream line, Netflix & Chill’d, launched in early 2020 in the US to deliver consumers a special moment indoors while entertaining themselves.

Hand in hand with the will to snack during an uncertain time, growing health concerns have also accelerated, as people with health problems are more vulnerable in the face of the virus. This phenomenon has driven the desire to have ‘lighter’ snacks than before. Euromonitor’s Health and Nutrition Survey shows a growing number of consumers worldwide pay more attention to their eating habits to maintain good health.

‘How healthy are your current eating habits?’

% Healthy or Extremely Healthy

60% 50% 40% 30% 20% 10% 0%

Asia Pacifc

Europe

Latin America Middle East and North America Africa 2019

2020

Source: Euromonitor International Health and Nutrition Surveys, 2019 n:20166, 2020 n:21740

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Spotlight on the Online World: Experiential Opportunities The COVID-19 pandemic strongly hit on-the-go consumption and is undeniably having a key impact on the way consumers shop. Less shopping trips and higher sanitary measures in retail outlets have changed consumers’ shopping experiences, forcing the manufacturing sector to find new ways to maintain and develop their level of engagement with consumers. In a contactless world, where in-store opportunities are very limited and the consumer demand for experiences increases, snacks brands are reacting proactively in order to boost consumer reach and experience. Lindt retail for example extended their selling channels by joining Deliveroo in France and the Pepsi Co Direct-To-Consumer channel in the US. This development not only finds new ways of delivering products, it also helps industry players mitigate the consequences of the reduced exposure. As a result, there has been a strong acceleration in the industry’s focus on the digital world through advertisements and online strategies centred around social media in particular. Increasing the online presence of consumers through their own posts, is set to be one of the key drivers of the current and future snacking experience.

With these post-COVID-19 parameters in mind, in order to address and keep stimulating consumer demand, three main pillars in experiential snacking are expected to stand out: • Texture • Appearance • Hometainment

Texture innovation: A lighter mouthfeel for a guilt-free experience

Texture innovation can help diversify and add layers of novelty to a snacking product. Developments aiming to create a lighter effect in the mouth are increasingly being sought by consumers across every region. Crunchy and crispy textures are becoming more appealing even in sweet treats, which by contrast have traditionally been dominated by creamy and melting consistencies, by some considered too heavy and unhealthy in 2020.

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Spotlight on the Online World: Experiential Opportunities

7

As shown in the chart, the performance of savoury snacks stands out in comparison to other areas, largely contributing to the success of this category.

Global Snacks Value Sales 6%

CAGR 2015‐2020

5% 4%

Savoury Snacks

3%

Sweet Biscuits, Snack Bars and Fruit Snacks

2% 1% 0% $50.00

Ice Cream and Frozen Desserts

Confectionery

$100.00

$150.00

$200.00

Billions 2020 Retail Value rsp Source: Euromonitor International Packaged Food 21ed

Crunchy and crispy show promise in sweet snacks

Lighter, crunchier and crispier textures are now becoming more popular in the ‘sweet’ segment, which experienced a slowdown through the historic period. For this reason, leading global confectionery, sweet biscuits and ice cream players are now focusing on reviving consumer demand.

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Spotlight on the Online World: Experiential Opportunities

Sweet Confectionery Trolli Crunchy Crawlers were released in the US with a “thin, crunchy, candy shell” that offers a unique sensory experience leaving a lasting impression.

Chocolate Confectionery In 2021, Kit Kat Thins is expected to launch with two wafer layers instead of three. This also taps into the trend towards providing consumers an iconic product with a lighter mouthfeel and an overall perception of a thinner product.

Biscuits The path towards thinner and crispier biscuits was also adopted by Mondelez’ Oreo’s product, Oreo Thins and Kinder Cards, which launched in various Western European countries, with a thin crispy wafer as a base for the iconic Kinder’s milk chocolate.

Ice Cream Magnum’s ice cream tubs, alongside new flavor launches in 2020, stands out from the crowd of brands in tub packaging by offering the crunchiness of their iconic sticks in their home format. The rigid chocolate layer at the top of the ice cream, which is meant to be cracked and reminisce of the Magnum sticks’ crunchy sound, is clearly suggested on the pack’s design.

Visual Innovation: Letting a novel ingredient show its true colours

In 2020, consumer lifestyles radically changed.

More time spent indoors translated into consumers making their snack purchases online. Our Lifestyle Survey shows at least 60% of consumers from different generational groups browse online on a daily basis, and 50% of them visit a social media platform, with the exception of Baby Boomers. This puts product qualities like colour and shape in the limelight and spurs innovation opportunities to really stand out on social media by having the visual ‘wow’ factor.

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Spotlight on the Online World: Experiential Opportunities

9

Reported Online Activities by Generations 80% 70%

% of 'almost every day'

60% 50% 40% 30% 20% 10% 0%

Generation Z

Millenials Browse Online

Generation X

Baby Boomers

Visit a social network website

Source: Euromonitor International Lifestyles Surveys, 2020 n:41231

One important aspect of colour innovation is the direct link with health concerns. A novel colour which is naturally derived from a key ingredient is a powerful way to promote that ingredient and the natural positioning of the product. Following the example of Magnum Ruby as ‘permissible indulgent novelty’ in the ice cream category, the growing popularity of Jan’s Purple Sweet Potato chips in UAE shows how consumers are intrigued by products with unusual colours, boosted by the permissible snacking perception brought by the short ingredients list and the natural image.

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Spotlight on the Online World: Experiential Opportunities

Bold colours and shapes for a more exciting experience

In addition to the increasing demand for natural ingredients, the desire to escape a reality that is increasingly gloomy and uncertain feeds a growing interest among millennials and younger generations for ‘fantasy’ experiences. Characters and colours stemming from a fictional, fantasy world, such as unicorns and bold bright colours are being used in snacks to provide that escape. While Kellogg’s released a Mermaid, Unicorn and Birthday waffle in blue, pink and yellow with rainbow sprinkles respectively, 2020 also saw the introduction of Bazooka’s Unicorns Gummies in multi-colours.

The pandemic has also severely altered our celebratory occasions; as social distancing prevents in-person gatherings for occasions. Reese’s response to this change led to a new product, peanut butter cups with nutcracker-shaped chocolate figures which was popular with consumers in the US during Christmas 2020.

Beyond consumption: Creative ways to deliver an experience at home

In addition to enhancing the sensorial experience of product consumption, bringing the experience inside homes to generate more consumer-product interactions is also key. Whether it is for a normal occasion, a special one or for gifting, snacks can elevate the consumer experience by providing entertainment and making a product more memorable.

In South Korea, jellies and packaging mimicking bento boxes that would normally be consumed at lunch when working from the office, were released in 2020. The new product targets working-from-home consumers with a simple and fun way to reminisce life before COVID-19.

In the US, Ferrara approached Christmas 2020 with Lik-M-Aid Fun Dip, which appeals to the nostalgia of traditional candy canes but comes with a cherry dip in a fun pouch. Hershey’s Christmas range of BuildA-Santa and Build-A-Snowman, inviting children to “play with their food” by offering chocolates made of various shaped parts was reconducted for Easter 2021 with a new Build-A-Bunny version.

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Spotlight on the Online World: Experiential Opportunities

11

A premium experience at home through personalisation and packaging Snack brand owners have an array of possibilities to elevate their image while delivering a unique experience at home. This will be key for snacking occasions that warrant a slightly higher spend on more indulgent snacks like chocolate confectionery, ice cream and sweet biscuits. In the Gulf countries, UAE chocolatier Al Nassma experienced fewer sales from closures of the malls and duty-free stores amid sudden travel restrictions. In order to offer consumers an exclusive experience which would normally be given in store, the company released a ‘make your own chocolates at home’ kit. In the UK, Make-My-Magnum was similarly rolled out as a limited edition to offer an alternative to the pop-up store experience. It is offered in a premium box for a special unboxing experience. Mondelez made Oreo available as a personalised online service to create and gift customised cookies for any occasion.

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Conclusion COVID-19 has fundamentally altered the way people snack. Brand owners and retailers need to shift their focus from on the go snacks, towards at-home eating occasions; while addressing amplified health concerns and the importance of digital living. Innovation towards lighter, thinner and crispier textures will be key elements of sweet snacks as consumers’ desires to stay healthy, but also being able to indulge in treats becomes more popular. There is still room for development in the visual appearance of snacks to convey a healthier image by leveraging an ingredient’s unique and natural colour. Different shapes can also appeal to consumers’ desire for something exciting, which can be amplified by visual content on social media. Beyond innovation of the product, snacks need to continue to deliver a holistic experience; something which can be achieved by bringing entertainment to the home. This may take the form of fun concepts which invite consumers to engage with their foods more. Finally, gifting, personalisation and unboxing products will also help snacks brands to elevate their image.

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About the Author GIUSEPPE PARLATO Research Analyst Euromonitor International As a Research Analyst within the Food and Nutrition vertical in London, Giuseppe is responsible for management and execution of research projects that focus on Packaged Food, Health and Wellness, Fresh Food, and Pet Care. Since joining Euromonitor International in 2019, Giuseppe has developed his expertise in the food industry. His primary areas of research was in Italian and Spanish markets and has now expanded into the UK, Greek and Netherlands markets. Giuseppe holds a BA (Hons) in International Business with Language from the University of Greenwich.

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