Tuesday, September 6, 2011

Frozen & Dairy Buyer: Dynamic Dips

Dynamic Dips
March 9, 2011

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The dips and spreads segment is heading South — of the border, that is. According to Chicago-based market research firm SymphonyIRI Group, supermarket dollar sales of refrigerated flavored spreads, a subcategory dominated by hummus, jumped 18.8% to $84.41 million during the 12 weeks ended Jan. 23, 2011. And while dips edged up only 1.4% to $119.52 million, three top-ten brands with “Mexican flair” — Wholly Guacamole (+13.1%), Yucatan (+9.2%) and Gordo’s (+16.9%) posted strong gains. The subcategory saw a decline in volume sold with merchandising support.

“Refrigerated dips may have lost some customers and market share to healthier dips like hummus,” says vp of sales Dominick Frocione of Ward Hill, Mass.-based Cedar’s Mediterranean Foods (www.cedarsfoods. com). But the recent introduction of better-for-you Greek yogurt-based dips by several players may spark new growth.

Opinions vary about where to merchandise the new dips. For example, reports Emily Alfano, senior marketing manager at Carrollton, Texas-based Future Foods (www.futurefoodbrands.com), Kroger merchandises the company’s recently repackaged Santa Barbara Bay brand Greek yogurt-based dips in the deli, where its high-end dips have always been. But new customer H-E-B plans to stock them in the dairy. While it’s too soon to compare the two approaches, Alfano thinks shoppers at many retailers may be more likely to look for these products next to Greek yogurt in the dairy section, which also has higher traffic than the deli.

But John McGuckin, exec vp of sales at Astoria, N.Y.-based Sabra Dipping Co. (www.sabra.com), which will roll out its new line of Greek yogurt-based dips to the East Coast April 15, favors the deli. “SymphonyIRI figures show that 65% of total dip dollars come through the deli. That’s where consumers look for those types of products,” he says, adding that Sabra plans to merchandise its new fresh salsa line in the deli section as well (the company recently acquired fresh salsa manufacturer California Creative Foods, maker of the Chachi’s and Santa Barbara brands).

Frocione prefers that his products be sold in the deli, but cautions that some retailers take too-high margins in that department, which hurts trial.

Some manufacturers are reducing package sizes to keep prices down. For example, Future Foods recently downsized its core lineup, including its Greek yogurt-based dips, from 12 to 9 ounces to keep shelf prices below $4.

Columbus, Ohio-based T. Marzetti (www.marzetti.com) sells its new Otria Greek Yogurt Veggie Dips in the produce department. According to senior marketing manager for produce dips Mary Beth Cowardin, placement of the product among fresh fruit and vegetables highlights its better-for-you nutritional profile and encourages consumers to view it more as a healthy, everyday snack rather just than just a party or special occasion dip.

While dips appear to be getting the real estate they need, “Hummus is way under-spaced,” leading to out of stocks up to 40% in some places, says McGuckin. “And when it’s promoted for an event like the Super Bowl, retailers can easily be out of stock in a day.”

But more space doesn’t necessarily mean more SKUs. McGuckin notes that “It’s about SKU optimization, not SKU proliferation. The category is growing so fast that some retailers think they need lots of SKUs, but what they really need is more space for the top-selling SKUs,” he continues. “There are some stores, particularly in New England, that carry all kinds of SKUs, but the good ones sell out quickly and consumers are left with brands and flavors they’re not interested in, which leads to disappointment” — not to mention spoilage.

But don’t consumers want variety? Of course, answers McGuckin, pointing to Sabra’s ever-expanding lineup, including two new flavors, Basil Pesto and Buffalo. He points out, however, that 70% of the brand’s sales are represented by just five flavors.

But sales figures don’t tell the whole story. Frocione warns against focusing entirely on syndicated data rather than innovation and differentiation new products can bring.

A little more variety could do wonders in the refrigerated dip category, which is plagued by unnecessary duplication, says Alfano, who reports visiting a store that stocked six different French Onion Dips, three of which were the chain’s own brands.

Shoppers are always on the lookout for new flavors, particularly those they’ve sampled in restaurants, agrees Elizabeth Underhill, marketing manager for H.P. Hood’s Heluva Good refrigerated dip brand (www.heluvagood. com).To meet demand for something new and create a little excitement, she continues, the Lynnfield, Mass.-based company added two varieties last year: White Cheddar & Bacon and Garlic & Parmesan. And it plans to introduce a limited edition Buffalo Wing Dip later this month.

Cross-promoting dips and spreads with items that go with them helps build sales and expand the customer base, manufacturers agree. McGuckin reports that “We’ve done a lot of tie-ins with Stacy’s (pita chips), but those are the same consumers who already buy our product.” With household penetration still below 11%, he adds, “We’re really not yet reaching mainstream U.S. consumers.” As a result, he continues, “We think the next step is more tie-ins with ‘conventional’ Frito-Lay snacks (PepsiCo and Frito-Lay own a 50% stake in Sabra).” Retailers can also tie dips and spreads to products that can expand their usage. Consumers are always looking for new serving ideas, whether putting dip a sandwich or burger, on a baked potato or atop a bowl of chili,” says Underhill. Cross-merchandising or promoting it with one of those products is a great way to give consumers new serving suggestions.

Another key, says Cowardin, is to promote the category year-round, not just during the holidays. “Retailers may increase sales by recognizing opportunities to promote dips and spreads throughout the year — as a midday snack with pita chips or as an addition to tried-and-true dinner recipes like pasta salad.”

McGuckin notes, however, that hummus doesn’t need a lot of promotional help. If given enough space, “It sells very well off the shelf. Just because it’s a hot category doesn’t necessarily mean you have to promote like you would, say, soda during the Super Bowl.”

Supermarket dollar sales of prepared salads, fruit and coleslaw slid 8.7% during the 12 weeks ended Jan. 23, 2011, according to Chicago-based market research firm SymphonyIRI Group. Del Monte’s Fruit Naturals and Sun Fresh brands posted double-digit losses, but five of the remaining eight top-ten brands saw gains.

There has been strong and growing interest in regional flavor profiles, reports Teresa Carter, category manager for salads and dips at Beaverton, Ore.- based Reser’s Fine Foods (www.resers. com). As a result, Reser’s is debuting three Amish potato salad varieties to its East Coast customers. To gain trial, she suggests including the newcomers in pay-one-price meal deals that combine low-margin items like rotisserie chicken with higher-margin prepared salads — also a great way to boost sales during non-peak selling seasons.

“Consumers are willing to buy (prepared) salads…virtually year round,” she explains, “but retailers don’t strategically promote or stock the category year round,” leading to missed opportunities. She urges retailers to watch the promotional calendar to have enough product on hand during peak periods.

Carter also suggests carrying a national brand along with a private label to highlight the value associated with the store brand and offer comparison shoppers a choice. Such strategy also allows retailers to alternate promotional activity in order to better manage margins. “Retailers that stock two brands are more successful than those that offer only private label,” she concludes.

To help meet demand for betterfor- you products, Medina, Ohio-based Sandridge Food Corp. (www.sandridge. com) is launching a line of prepared salads that promise “no preservatives” or “no preservatives added.” The salads are produced using a high pressure processing (HPP) system that uses cold water under high pressure to kill bacteria, eliminating the need for chemical preservatives.

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