Flamegrilled Aberdeen Angus. Red Leicester & Carmelised Onion. Parmesan, Asparagus & Truffle. These may sound like dinner meals but in fact they are just some of the many intricate flavours the crisps category is flooding with. Even for the classic vinegar flavour, the descriptions are hymns of gastronomic hyperbole: “Modena Balsamic”, “Chardonnay Wine”, “Somerset Cider” and “Aspall Cyder”. Not only their names but also their packaging is becoming more sophisticated and gourmet-inspired. Tyrells Hand Cooked English Crisps is perhaps the most well-known brand in Europe but there are many more out there, increasingly emphasising their hand-cooked potatoes and the place of origin the salt or vinegar is sourced from (eg Anglesey Sea Salt). Recently, PepsiCo has expanded into gourmet snacks through the launch of Market Deli – premium priced thick-cut crisps made from selected potato varieties bearing no sign of the company logo on the pack bar a small statement reading “from the Makers of Walkers”. Is this emerging craft movement a fad or likely to be the next big thing in savoury snacks?
Limited market share but promising growth in the West
Currently, craft snacks remain limited to the Western hemisphere, which is home to the world’s biggest snacking nations. The UK is perhaps the obvious example. However, Australia, New Zealand, the US and the Netherlands are also showing signs of the craft movement, with several niche brands mushrooming with innovative textures, flavours and ingredients. These gourmet brands are also growing well above the market average. Tyrells has grown at a 15% CAGR over 2009-2014 in the UK significantly outpacing the overall crisps’ CAGR of 5%. Similarly, in the Netherlands, the brand has reached US$4 million in sales in less than two years of its launch, growing at an impressive 22% over 2013-2014, well above that of crisps at a 3%. In Australia, Red Rock Deli from PepsiCo has outperformed the company’s flagship brand Lay’s over 2009-2014 in CAGR terms (5% vs 1%), though over the last two years sales have been falling.
The growing trend towards stealth reduction in terms of healthier ingredients and production methods in the West is likely to benefit the gourmet movement in the short term. Western Europe and North America represent the best opportunities for manufacturers given that they are home to the world’s most avid chip consumers, led by the US, Ireland, Norway, Netherlands and the UK. Mexico can also be a potential target market for the gourmet movement, given the recent tax on high-calorie food and the rapid movement towards craft beer.
Following in the footsteps of craft beer
The rapidly expanding craft beer movement is starting to exert an influence on the development of gourmet snacks, which are typically consumed with beer. Borrowing from the craft beer market, crisps are becoming more sophisticated, with premium ingredients that emphasise heritage and provinciality. Particularly in the US and the UK but also in Mexico and Russia, a growing number of beer companies are craft-branding their current line or coming up with new craft lines by acquiring small-batch brewers. The definition of craft beer remains debated, but regardless, they are tapping in the same trend drivers. Some of the most recent examples include Immortal IPA from Elysian Brewing in the US which was acquired by A-B InBev earlier this year and Guinness Dublin Porter from Diageo which capitalises on Dublin’s brewing heritage in order to impart a sense of tradition and authenticity. This has an obvious impact on retail sales. Over 2009-2014, dark beer and premium lager, where craft beer is typically found, have outperformed beer overall globally, and particularly so in Latin America, North America and Australasia. In Western Europe, growth in dark beer was undermined due to a strong decline in mass market brands which dominate the category. The craft movement in beer has in turn facilitated a similar movement in crisps, particularly in the UK, where on-trade establishments have been switching from serving mainstream brands like Carlsberg beer and Walkers crisps to serving small-batch products like Brooklyn Lager with Tyrells.
%CAGR of Premium and Dark Beer vs Beer 2009-2014
Source: Euromonitor International
There was a time when crisps were just crisps. However, with the craft movement taking off both in food and beverages, this seems to be coming to an end. Not only local manufacturers, but also multinationals like PepsiCo and Intersnack are decking their latest packets in pictures of flame grilled Spanish chorizos, sweet roasted red peppers or fresh Mediterranean herbs. Gourmet snacks is a still niche, with sales negligible at a global level, but quickly picking up in the West in accordance with the craft movement in beer, which is facilitating this. Increasingly, consumers seem to be willing to pay more for premium gourmet crisps which they perceive to be healthier than cheaper or standard varieties. However, it remains to be seen whether it will be fad in the West or grow fast enough to trickle down to the East.