New treats keep snack pack leaders out in front of growing threat from quick-service competitors

Nation's Restaurant News,  June 25, 2007  by Dina Berta

• E-mail
• Print
• Link

From ice cream at Krispy Kreme and cherry-flavored slush drinks at Dunkin' Donuts to orange cake at Starbucks Coffee and fruit smoothies at Baskin-Robbins, leading chains in the snack category have capitalized on consumers' penchants to treat themselves between meals with new and indulgent but relatively inexpensive treats.

"We're always looking for new ways and new things to snack on," says Harry Balzer, vice president of The NPD Group, a consumer market research firm in Port Washington, N.Y. "A snack is also the cheapest meal you buy."

Americans snack as much as they did 10 or 20 years ago, Balzer notes, but what has changed is the number of places offering opportunities to indulge in treats. Consumers also are snacking more in restaurants than at home.

"There are facilities, like Starbucks, that are open and available that weren't 20 years ago, where you can come on in, sit down and enjoy yourself," Balzer says.

Snack segment leaders jockey for positions in a tight competitive field that includes not only treat-focused and coffee brands, but also mainstream quick-service restaurants that are expanding hours and menu offerings. To stay out in front, snack Chains employ strategies to keep menu items fresh and convenient.

Seattle-based Starbucks Coffee Co., already the beverage giant with some 13,000 units worldwide, has been quietly expanding its food options and becoming a force with which snack restaurants must contend. Currently more than 1,700 Starbucks coffeehouses in the United States and Canada offer warm breakfast and lunch sandwiches, says company spokeswoman Lisa Passe. For the summer the chain is feature a reduced fat orange creme coffee cake.

By the end of the year, Starbucks plans to have eliminated the use of artificial trans fat in its foods and beverages in North America, and it is switching from whole milk to 2-percent-fat milk for all espresso-based drinks.

Starbucks will remove partially hydrogenated oils from its products, while retaining high-quality natural ingredients, says Denny Marie Post, the chain's senior vice president for global food and beverage.

While consumers have been requesting healthier fare, operators acknowledge they still want indulgent treats, so Starbucks has been offering things like warm cookies to accompany caffe lattes and satisfy afternoon urges.

"We've always carried food that complements our coffee," Passe says.

The decision to buy a snack is highly discretionary and incidental, says NPD's Balzer.

"One of the driving forces beyond taste is how convenient are you to me?" Balzer says. "It's not where are you located, but how many locations are available to me? How close is it?"

Convenience is definitely a driving factor, says Walter Irwin, senior director of brand marketing for Canton, Mass.-based Dunkin' Donuts, franchisor of more than 7,200 coffee and doughnut outlets.

"Consumers are on the go," Irwin says. "They are not sit-down-meal eaters. We developed not only products but the packaging and marketing elements to support their eating habits."

Last year Dunkin' Donuts introduced French toast in a portable package to make it easy to eat on the go, Irwin says. The chain's line of portable flat-bread breakfast sandwiches has been selling well after the breakfast rush. Dunkin' Donuts is focusing on such items and other specialty beverages to beef up its afternoon sales.

"The larger percent of our business has been in the morning," Irwin says. "We see greater opportunity to develop more relevant products in the p.m."

The 57-year-old chain built its business on early morning coffee seekers, and beverages still account for the majority of Dunkin' Donuts has been rolling out more drink options for afternoon customers, such as the White Hot Chocolate or the Latte Lite, a reduced-calorie espresso drink. The chain recently added a new flavor to its line of "Coolatta" slush drinks. Dunkin' Donuts partnered with SoBe Beverages, an operating unit of Pepsi-Cola North America, to create the cherry and citrus-flavored SoBe Energy drink.

"Dunkin' Donuts is committed to developing innovative, on-trend menu choices that address the latest trends and needs of our customers," says Robert Rodriguez, brand president of Dunkin' Donuts"

According to NPD, both the frozenand energy categories are growing--up 5 percent and more than 20 per-respectively, as of March 2007.

In 2006, coffee and ice cream consumption also rose from the previous year, Balzer says.

"These are not things that are unfamiliar," he says. "What we're seeing are new ways to give us the same old thing, so we don't have to go out on a limb with the new things we try."

Ice cream was the leading snack for consumers last year, Balzer says, followed by chips and salty snacks, candy, doughnuts and sweet rolls, cookies, and pretzels. Carbonated soft drinks remained the leading beverage, but coffee consumption was up 11 percent, an all-time high, Balzer says.