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R G V J G W COOKIES, CRACKERS & BARS
BY MARTIN SCHULTZ

A TRANSFORMING TREND
Price competition and nutrition demands have combined to change the fortunes of the cookie, cracker and bar categories.
impressive gains. Private label cookies took more than 6 percent of the category, almost 3 percent of the cracker segment, a huge 28.3 percent of the breadstick market and high percentages too of the breakfast and granola bar categories. Compared to 2005, the cookie, cracker and bar segment had obviously retooled its engine to improve its market performance the following year Certainly the industry had a strong incentive to achieve better results, especially when realizing that as the Mintel report indicated, some 80 percent of respondents confirmed that at least one member of the household eats cookies. One of the biggest influences on the cookie, cracker and bar segment is price. "Price is always a factor," acknowledges Anna Sebastian, director of marketing at York, Pa.based Stauffer's. "You can never take price out of the equation," she says. Consumers will resist paying more for a product they perceive as having a certain value. Stauffer's is best known for its animal crackers. Producing some 250 tons of crackers and cookies daily, including ginger snaps, oyster crackers, cheddar crackers and sugar wafers, the company brands and private labels its products for distribution around the country. "We have about 1 percent of the market," Sebastian notes, but this percentage is growing, despite the intensity of the competition. Imports are a big factor. "We are always looking over our shoulder at the import situation. It is always an issue." When the American Heart Association announced that coronary heart disease had become the leading cause of death and the Food and Drug Administration (FDA) published estimates of the average consumption of trans-fat for U.S. consumers (2.6 percent of all calories consumed), the move toward eliminating trans-fat became a tidal wave.

With consumers showing growing concern over trans-fat, cookie manufacturers had no alternative but to reformulate products.
U.S. producers of food-based oils began a frantic search for trans-fat substitutes that still provided the necessary functionalities (high cooking temperature, flavor quality, shelf stability), ln time they produced low-trans-fat alternatives, low-saturated blends, and new types of oils with zero trans-fats. Cookie manufacturers were soon experinienting with low trans-fat oils, liquid oils and new types of emulsifiers. None was a perfect substitute and many caused sticker shock among their customers, including the cookie and cracker manufacturers who rely on large volume and tow unit price to maintain their market appeal. But with consumers showing growing concern over trans-fat, cookie manufacturers had no alternative but to reformulate products to show a trans-fat reduced or trans-fat free entry on the package label. One result of this transformation was the way the pricing structure underwent a subtle change of its own. "We've noticed that the premium

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hat a difference a year can make. Go back 15 months to the end of 2005, and manufacturers of cookies, crackers and bars were heaving a massive sigh of relief that 2005 had finally departed. Tiie whole segment had been under intense attack. Industry watchers inside and out were wringing their hands. Chicagobased Mintel International, for example, noted in a report that the cookie market was being challenged on several fronts. Packaged Facts, a market research organization headquartered in Rockville, Md., contended that the U.S. cookie market was eroding, with total sales volume declining by just more than 8 percent since 2001. The natvire and severity of the decline derived from a combination of causes. These included higher prices, the rise of a strong alternative
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snack product market and a growing trend among consumers for more nutritional products. Fast-forward 15 months and we find a much-changed picture. While the total cookie, cracker and bar segment actually declined slightly in 2006 by 0.05 percent, a number of individual categories surged by large percentages, according to figures released in March 2007 by Chicago-based Information Resources Inc. (IRI). In terms of dollar sales, the cookie category totaled $3.9 billion, according to IRI. Unit sales, at 1.8 billion, were down 3.4 percent. But cookie sales volume was down .05 percent, crackers rose by more than 6 percent, breadsticks by 7.6 percent, snack bars by 6 percent and granola bars by 17.4 percent. The private label component of the category also managed some

NUTRITIONAL UPGRADE
Almost no category of cooked or baked food product has been immune from the impact of the trans-fat issue — so too with cookies and crackers. The barrage of news about removing trans-fat from the cooking process has reached the ears and wallets of consumers, who now combine trans-fat issues with a general concern with nutrition.

JULY 2 0 0 7

WWW.PRIVATELABELBUYER.CO

COOKIES, CRACKERS & BARS

Category Review

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includes such concerns as whether the product is natural or organic, contains whole grains, has a "home-made" feel, and includes real fruit. None of this is to leave out the essential component — flavor. Take the fortified or functional feature. Although this is a niche segment of the cookie and cracker category at the moment, it is destined to grow rapidly. Euromonitor International, based in Chicago, sees it as a $1.2-billion niche worldwide, with growth of 16 percent projected into the foreseeable future. The fortified portion of the U.S. cookie segment occupies about 2 percent of the total. It includes cookie ingredient inclusions of vitamins and, for

Many industry observers note that consumers have begun to demand a move to the next level of nutritional cookie consumption.
example, calcium, which has strong appeal among the female demographic. Other fortifying ingredients drawing serious attention are the cholesterol-lowering agents derived from plant sterols and the widely publicized omega-3 ingredients. While these and a few other nutritional ingredients have found their way into cookies and crackers and helped to increase sales, both segments face intense competition from snack bars, especially those promoted as being "healthy-foryou." In fact, fortified snack bars represent four-tenths of the snack bar market. And market research has shown that among adult consumers, some degree of functionality included in a bar's formulation is now taken for granted. Not surprisingly, age differences account for differences in attitude toward specific properties in the baked goods category. For those under the age of 55, for example, 38 percent prefer low-cholesterol

COOKIES, CRACKERS AND BARS PERFORMANCE
private label cookie category is growing," SebasHan says. "Our sandwich creams, which are now trans-fat free, have shown a steady rise, even though they are premiumpriced." Consumers, it seems, are becoming more willing to pay more for nutritionally improved cookie and cracker products. This transformation extends beyond the trans-fat issue. Mintel International, for example, anticipates that there will be an increase in cookie and cracker products that contain zero artificial colors, flavorings or preservatives. For both brand and private label manufacturers, the opportunities exist to respond to consumer demands for ctx^kies, crackers and bars that exhibit higher protein and fiber, fortified with essential vitamins and other nutrients, are gluten-free and ha\'e lower or zero levels of saturated fats, sugar and sodium. For example, sales of low-fat versions of crackers are up almost 25 percent, according to IRI. Many industry observers note that consumers have begun to demand a move to the next level of nutritional cookie consumption. Not only are consumers demanding that less-healthful ingredients and processes be removed, they also want (and expect to pay more) for products that have positive nutritional benefits. The list of requirements is lengthening and now

CATEGORY

DOLLAR SALES (IN MILLIONS)

% CHANGE VS. YR.AGO

DOLLAR I UNIT SALES SHARE I (IN MILLIONS)

% CHANGE I AVG. PRICE VS. YR. AGO I PER UNIT

COOKIES TOTAL PRIVATE LABEL • • • • P * $456.8 TOTAL CATEGORY $3,929.9 CRACKERS
TOTAL PRIVATE LABEL ^ • • • * * ^ ""' $553.? TOTAL CATEGORY , . ^ « ^ $.3,612*8

6.2% -0.05% 2.8%

11.6 100.0% 6.5%

214.0 ,761.8

2.0% -3.4%

$2.13 $2.23

SALTINE CRACKERS
PRIVATE LABEL TOTAL SUBGATEGORY

$76.7 $345.5 $4.7 $37.7 $253.7 $41.2 $14.2 $336.5
$106.3 $1,978.0
$36.1 $565.3 $68.4 $745.9 $1.2 $118.6

1.7% 0.5% 28.3% 7.6% 0.7% 0.02% 6.3% -0.06% 11.9% 6.1% 18.0%

22.2%

68.6 194.6 2.3 17.5 23.9 95.5
9.3 194.7 50.5 881.7

0.3% -3.9% 28.3% 0.8% -3.4% -1.7%
-1.5% -5.3%

$1.12 $1.78 $2.07 $2.16 $1.73 $2.66 $1.53 $1.73 $2.10 $2.24 $2.1^

BREADSTICKS
PRIVATE LABEL TOTAL SUBCATEGORY 12.4% 100.0% 16.3% 100.0%

GRAHAM CRACKERS
PRIVATE LABEL TOTAL SUBGATEGORY

CRACKERS WITH FILLINGS
PRIVATE LABEL TOTAL SUBCATEGORY

4.2% 100.0% 5.4% 100.0% 6.4%

SNACK BARS/GRANOLA BARS
PRIVATE LABEL TOTAL CATEGORY
PRIVATE LABEL TOTAL S U B C A T E G O R Y

10.6% 3.0% 15.2%

BREAKFAST CEREAL/SNACK BARS

GRANOLA BARS
PRIVATE LABEL '~~ TOTAL SUBGATEGORY "9.9% 17,4% -4.6% -6.7% "9.2% 100.0% 1.0% 100.0% 32.6 299.3

10.0% 14.2% -3.2% -9.6%

RICE SNACK SQUARES
PRIVATE LABEL TOTAL SUBCATEGORY

0.7 51.0

Source: InlormaHon Resources Inc. Total supermarkel. drug and mass merchandiser sales for the 52 weeks ending March 25,2007, excluding Wal-Mart.

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Category Review COOKIES, CRACKERS & BARS
continued from page 23

labeling. The Department of Agriculture doesn't fully accept that flax seed is a whole grain. Another ingredient that enliances fiber content is barley, which consumers in the U.S. are unfamiliar with as a whole grain that could be a healthenhancing ingredient in cookies. For example, barley's relatively little known cholesterol-lowering

The issue for manufacturers is how far along the classification continuum they can go as the costs go up. Sourcing every ingredient to create a 100 percent natural or, even more expensive, organic cookie, is still something of a brave undertaking. Add in the other qualities that enhance the cookie's attributes, such whole-grain.

One of the most dramatic transformations of the cookie, cracker and bar segment has been the growing impact of the natural and organic movement.
properties could, if properly promoted, push its incorporation into cookies into the top league of fimctional ingredients. freshness, real fruit perhaps and with a "home-made" texture and the price has potentially reached line-of-credit proportions. Yet as with the "real coffee" and "real ice cream" trends, consumers can be persuaded to purchase a cookie that combines an intense flavor and healthinvigorating properties, and that feels like grandma made it. This is an opportunity for private label manufacturers who want to carve a niche in a market that is ready for a transformation. PLB
For more information on baked goods, go to our Web site and click on our sister publication Snack Food & Wholesale Bakery. www.priwatelabelbiiyer.eom

NATURAL VS. ORGANIC NET WT 12 OZ (340 g)
One of the most dramatic transformations of the cookie, cracker and bar segment has been the growing impact of the natural and organic movement. Despite some confusion in the public mind over the definitions, most observers contend that the two classifications are here to stay. Cost is not a factor. Consumers have been persuaded that cookies and crackers that incorporate natural or organic ingredients are worth the additional cost.

cookies, 43 percent desire fresh over processed, and 39 percent demand !ow sugar. For the over-55s, the percentages rise dramatically for corresponding attribiites (58 percent for low choTesterol, 57 percent for fresh products and 54 percent for tow sugar).

WHOLE-GRAIN IMPACT
It is not often that mainstream consumers induce a revolution, but that is more or less the case with the "better-for-you" trend that has thrust the whole-grain movement onto center stage. This metamorphosis came about partly because of the U.S. Department of Agriculture's recommendation that adult Americans consume three portions of whole grains each day. Today, some 46 percent of consumers seek whole grains in their cookies, crackers and bars, says IRl. Whole grains achieve a plethora of health-in vigorahng benefits. They are responsible for flushing out of the body cholesterol and carcinogenic substances. They build bulk, stabilize intestinal activity, provide essential nutrients, help to reduce a food product's glycemic load and enhance the level of prebiotics in the Intestine.

Coinciding with a general demand for more nutritious food products, the whole grain trend has successfully penetrated a growing range of products, including constructing a successful path to the baked goods aisle. For example, a new high-maize, whole-grain com flour has become available that enhances the fiber content and taste of whole grain cookies. The result has been a surge of sales in the whole-grain cookie segment, with a 1,300 percent increase in 2005, according to ACNielsen, Growing numbers of consumers tell market research organizations that they would eat even more whole-grain baked products (including crackers and bars), but resist the impulse because of the taste (which is often bitter), the texture (generally rough) and the darker color (as opposed to the lighter tone that comes from the more refined wheats). Another issue preventing consumers from rapidly increasing their whole-grain baked goods purchases is sourcing. Some ingredients such as flax have met with official resistance from the FDA over

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