AWMA tracks unprecedented total snack category growth by Kit Dietz
FasMart’s balanced approach in the snack category has resulted in back-to-back years of unprecedented increases in total snack category sales and gross margins. In 2004, FasMart enjoyed total snack category sales growth of 18.5 percent and gross margin improvement of 22.3 percent. These results were achieved by simply placing a warehouse-delivered multi-vendor snacks end-cap (WD Snacks MVE) in their stores. 100 percent of the sales and margin growth was attributed to increased sales of warehouse-delivered snacks, both on the WD Snacks MVE and within the snack aisle. These WD snacks sales and margin increases were incremental, with no cannibalization of direct store delivery (DSD) snacks sales.
In 2005, FasMart grew total snack category sales 33.0 percent and gross margin by 38.2 percent, based on the comparative results from the study I conducted on behalf of the ware-house- delivered snacks (WDS) Committee. The research measured total snack category performance and the performance of WD snacks and DSD snacks within the category.
Snack Category Sales & Gross Margin Contribution Includes all rebate, allowance & placement monie
Source: AWMA/WDSC/FasMart YTD Oct 2005, Dietz Consulting LLC
The WDS Committee has focused its efforts on providing customer solutions to promote the benefits of warehouse-delivered snacks by helping convenience retailers meet consumer demand in the store, while maximizing total snack category performance and driving higher margin sales. The Snacks MVE is the catalyst for the committee’s success. It’s simple and it makes so much sense—merchandising a great variety of major snack brands that consumers want on one shared end-cap, and placing the Snack MVE in optimal impulse locations in the store to drive sales at 40 to 50 percent + gross margin.
The strong retail performance results of WD Snacks MVE placements have piqued the interest of retailers and wholesalers throughout the United States and now in Canada. The WDS Committee meeting held at the National Association of Convenience Stores convention was attended by Marc Fortin, chairman of the National Association of Convenience Store Distributors (NACDA), Canada. Marc attended the meeting to learn more about the WDS Committee’s MVE programs and how to leverage our successes for his Canadian distributor members and their retailers. To date, 52 AWMA member distributors have developed a Snacks MVE program and the interest continues to grow. There are now over 16,000 Snacks MVEs placed in chain and independent convenience stores across the United States.
Why a WD Snacks MVE? According to Brad Chivington, senior vice-president of sales & marketing at FasMart, there were several reasons for embracing the WD Snacks MVE concept. "We have long recognized that an opportunity existed to capitalize on the great brands of WD Snack manufacturers, but lacked the pro-grams and support to tackle it on our own," he says. When FasMart supplier The McLane Company approached the c-store chain with a Snack MVE solution, they jumped on the opportunity.
Snack Sales & Gross Margin
Source: AWMA/WDSC/FasMart/Jun-Aug Comp 2004 vs. 2005, Dietz Consulting LLC
Snack Category Adjusted Gross Margin Includes all rebate, allowance & placement monies
Source: AWMA/WDSC/FasMart YTD Oct 2005, Dietz Consulting LLC
"With consumer trends toward snacking, and store size and available space issues, we needed an integrated multi-vendor program to merchandise the best brands that consumers want, from multiple manufacturers in each of the snack category segments," Chivington said. "The WD Snack MVE was a great solution for us; offering brand strength and a single merchandising vehicle that produced exceptional incremental sales growth at higher margins."
FasMart’s total snack category sales growth of 18.5 percent and gross margin improvement of 22.3 percent in 2004 was achieved by simply placing a Snack MVE in their stores. Due to contractual obligations with DSD suppliers for prime space in the front of the store, the Snack MVE was placed in the back of the store near the cold vault. The FasMart marketing team closely monitored item movement, sales and gross margin of the products on the Snack MVE. The outstanding growth of WD Snacks caused FasMart to re-think their merchandising approach for the entire snack category.
Total snack category assessment In the planning phase, FasMart set out to re-define the role of WD and DSD snacks to drive sales and improve margins in their stores. In order to make the best category decisions, they started with the consumer. What brands in each of the category segments were the power brands with the greatest consumer recognition? The next step was to review unit movement and gross margins by SKU for WD and DSD snacks in all of the snack segments. The gross margin assessment included all rebates, allowances and placement monies. Power brands that consumers prefer and higher margin snacks would be merchandised in the prime selling locations inside the store.
Snack Segments
Source: AWMA/WDSC, Dietz Consulting LLC
The Warehouse-Delivered Snacks Committee has long emphasized the importance of gaining the proper balance between WD and DSD snacks in order to drive the category, and that is exactly what FasMart was out to accomplish. Both WD and DSD snacks played an important role in their snack category plans, which were developed to sup-port sales and gross margin improvement in each of the snack category segments.
Within the snack segments, national brand DSD snacks were to play an important role in the potato chip and corn chip segments. The national branded chips were supplemented by strong regional brands by market. The cracker segment offers both DSD and WD brands.
In all of the other snack category segments—canister chips, cookies, snack nuts, snacks mixed, meat snacks and sweet snacks—WD snacks pro-vided better consumer brand recognition at substantially higher margins. This led to the elimination of many of the duplicate lower margin DSD SKUs in each of the snack segments.
FasMart 2005 snack category performance FasMart’s bold new approach in the snack category proved to be right on target, delivering exceptional category sales growth of 33 percent and gross margin improvement of 38.2 percent in 2005. The snack category adjusted gross margin chart demonstrates the significant margin generated by WD snacks compared to all DSD snack suppliers. At FasMart, WD snacks now represent 30.2 per-cent of total category sales and 37.1 percent of the category margin. WD snacks generate 260 percent more gross margin at FasMart than the leading national brand DSD snack supplier.
Achieving results To achieve these results it requires retailers to assess the category and re-define the role of WD and DSD snacks in the store. Retailers must be committed to WD snacks programs that will deliver more retail profits and structure DSD contracts to sup-port front of store placement of the WD Snacks MVE. They must partner with manufacturers and distributors to keep the planogram fresh by reviewing assortment on an ongoing basis, and plan snack promotions that continuously draw the consumer’s attention to the Snack MVE and the snack aisle in order to create excitement that fuels category sales.
Do you have a Snack MVE pro-gram? If not, the AWMA WDS Committee provides information and support to help you develop your own Snack MVE program. The success of the Snack MVE program is a unique opportunity that provides benefit to manufacturers, distributors and retailers. With the profit challenges we face in convenience retail and wholesale, this profit driving solution is for everyone.
For information on developing your own Snack MVE program, please contact Bob Pignato, AWMA vice president of marketing, membership and industry affairs, at (703) 208-1642 or email at robertp@awmanet.org.
Kit Dietz is president of Dietz Consulting LLC, Huron, OH. FasMart’s Snack MVE
For more information on warehouse delivered snacks and the Joint Industry Warehouse-Delivered Snack Committee, contact Bob Pignato at 800-482-2962, ext. 642 or robertp@awmanet.org.
