Blurring the lines: confectionery players move into other food categories

One of the key means for companies to extend their products beyond the typical distribution or product development agreement is to push existing brands into new food categories.

Of the various confectionery players, Mars has spearheaded this policy, setting a precedent that has been avidly followed by companies such as Nestlé and Cadbury Schweppes.

The benefit of extending known brand names into other markets is twofold. In the first instance, it builds brand awareness, making the confectionery product more likely to be the subject of an impulse purchase.

Secondly, use of known brands is a higher guarantee for the success of the new product, where a totally new brand might fail.

Moreover, manufacturers have realised that confectionery brands are increasingly under competition from snack bars and individually packaged cakes and biscuits, as well as impulse ice creams in hot weather. They are therefore keen to enter and profit from these sectors, which are also less mature and saturated compared to confectionery.

Increased competition from snack pack biscuits

Snack biscuit packs are increasingly being positioned against chocolate countlines (or chocolate bars), bagged selflines/softlines in particular, and confectionery in general. Mini-biscuit packs are also gaining in popularity, with United Biscuits launching a range of its biscuits in this format over the course of 2001-2002, as well as Mini Oreo “bites” launched in the US in 2000 by Kraft Foods, and Mini Keebler Cookies (Kellogg Co) in 2001. This format specifically competes against bagged selflines/softlines.

While individually wrapped biscuits in multipacks have long been a key competitive lunchbox item versus countline multipacks, the number of wrapped single- or double-pack biscuits is on the increase in highly developed markets such as the UK.

According to the latest research by global market analyst, Euromonitor International, Western Europe as a whole is the largest region for sweet biscuits both in value and volume. Value sales in 2003 reached US$11.8 billion and accounted for over one-third of global value sales. Sweet biscuits in this region is benefiting from a perception among consumers that biscuit-based products are somehow healthier than pure confectionery products. For example, in Italy some people regard a chocolate covered biscuit as being a more balanced snack than a chocolate bar.

Nestlé, Lindt and Mars move into biscuits

Nestlé and Lindt are among the top confectionery players, which are trying to blur the distinction between chocolate and biscuits by launching biscuit products of their own. For example, Nestlé has recently sought to expand its Smarties brand, giving it a boost by launching Smarties cookies. Ferrero also launched its first non-chocolate-based snack under the Kinder brand in the form of Kinder Happy Hippo in 2002. This is made up of a hippo-shaped wafer shell which is filled with hazelnut and milk cream.

Another product which has come onto the market, competing in sweet biscuits but leveraging well-known confectionery brands is Mars’s Bisc& range. This product is available in four varieties: Bisc& Mars, Bisc& Twix, Bisc& M&M’s and Bisc& Bounty.

According to Euromonitor research, in the US, the appeal of single-portion biscuits is somewhat limited. They are most commonly found in convenience stores, where they are sold for immediate consumption. Branding in this segment is typically weak, and the product somewhat commodified. Nonetheless, one regional trait of note in the US is the popularity of sandwich biscuits in the Southeast. A typical offering might include peanut butter, cheese, or both. These products are available as multipack products in southeastern supermarkets, but also enjoy a substantial following in convenience store channels, as individually wrapped products. The Lance brand (Lance Inc) is among the leaders in this segment. This format is also increasingly popular in Japan

Mars leads the way with ice cream

At the forefront of confectionery brand extensions, Mars’s ice cream portfolio mirrors that of confectionery, with Mars, Galaxy/Dove, Snickers, Bounty and Twix all commonly found in the ice cream cabinet, as well as sugar brand Starburst. Furthermore, in 2002 the company extended Maltesers into impulse ice cream.

This policy has also offered Mars significant potential economies of scale, particularly in relation to advertising and promotional investment. There is a major emphasis on encouraging impulse purchase, which ideally suits the promotion of the Mars range, although 2001 witnessed a shift in focus with the launch of several bulk brands, most notably Mars and Bounty.

Cadbury has also extended many of its confectionery products such as Flake, Bourneville, Crunchie and Refreshers into impulse ice cream. Nestlé, on the other hand, which has been aggressively developing its overall ice cream business, has been slower at promoting its confectionery brands, although KitKat does appear in an impulse ice cream format.

Cake bars and chilled desserts get into the act

Mars has also teamed up with United Biscuits in the UK to develop its Galaxy and Milky Way brands into individually wrapped cake brands, while Cadbury Schweppes offers its Fudge brand as a cake, and builds on the equity of the Dairy Milk brand for its Mini-Rolls. Ferrero also uses the Kinder brand in cakes.

Nestlé, on the other hand, prefers brand extension into chilled desserts, making use of its substantial dairy expertise. This is one of the few sectors where Nestlé piped Mars to the post in terms of product development, having launched Milkybar and Rolo desserts long before Mars’s tie-up with Eden Vale to develop Galaxy, Milky Way and Bounty.

Snack bars compete on health grounds…

Snack bars typically compete with chocolate countlines (chocolate bars) by positioning themselves as a tasty, but healthy alternative. This is the case across all sectors including granola bars, which focus on health and naturalness; energy bars, which focus on functionality; and breakfast bars, which play on the link with breakfast cereals. This is also the case with other snack bars, including sesame seed bars in Eastern Europe, and fruit bars in the UK and the US.

Even though snack bars are increasingly covered in sugar and chocolate in order to make them tastier, the inclusion of wheat flakes, nuts and other cereal ingredients contributes to their healthier image. Conversely, bar the specialist slimming or sports products, these bars are no longer viewed as too “saintly” to be enjoyed as a snack.

…and as meal replacements

Euromonitor reports that the healthy growth of breakfast bars has highlighted trends in developed markets of eating on the go or at the desk at work, often skipping a proper breakfast and lunch and stocking up on snacks instead. Once the province of countlines, biscuits or savoury snacks, cereal manufacturers have launched a range of breakfast bars carrying the branding of their most popular cereals such as Special K, or promoting a range of bars specifically for people too busy to stop and eat breakfast, such as Nutri-Grain (both Kellogg Co).

While these bars somewhat limit themselves by targeting a particular mealtime/time of the day for consumption, manufacturers such as Cadbury clearly think this is a good way to boost sales, having launched a “Brunch Bar”.

Although still small, sales are forecast to see healthy growth over the forecast period, with energy bars particularly set to benefit from health and wellness trends.