Cookies in the U.S
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Chapter 1: Executive Summary Cookies in the U.S. Chapter 1 Executive Summary Report Scope his report presents a detailed performance analysis of the U.S. market for cookies. The report identifies major players and brands and analyzes their performance in terms of sales and market share. Based on data available at the end of 2005, Tprojections for the period 2006-2010 have been provided. The report also analyzes key issues and trends affecting the overall market and discusses current and future implications. Methodology The information contained in this report was obtained from both primary and secondary research. Primary research entailed consultation with industry participants and an examination of the retail milieu. Secondary research entailed data gathering from relevant trade, business, and government sources, including company promotional literature and annual reports. In developing our market sales and share estimates, Packaged Facts has relied on Information Resource Inc., (IRI) data for supermarkets, drugstores, and mass merchandisers (excluding Wal-Mart), while also extrapolating for the broader retail universe based on information published in trade and consumer business magazines, and in other Packaged Facts reports. Figures provided on national consumer advertising expenditures are based on data compiled by TNS Media Intelligence, the leading provider of strategic advertising and marketing communications intelligence. Information on new product introductions is derived from reports in the trade press and online, as well as from Productscan Online. The analysis of consumer demographics primarily derives from the Simmons Market Research Bureau (New York, NY) Fall 2005 consumer survey, which is based on 28,724 respondents, who represent a statistically accurate cross-section of the U.S. adult population. The SMRB consumer survey includes demography on consumer brand preference. Note: This report covers the sale of products through channels covered by Information Resource Inc., (IRI) only and hence, market and brand share figures reflect the position of the August 2006 © MarketResearch.com, Inc. 1 Cookies in the U.S. Chapter 1: Executive Summary marketers/brands in those channels. However, in arriving at the estimate for the overall market and for market trends and competitive analysis, all major channels have been covered. 2 © MarketResearch.com, Inc. August 2006 Chapter 1: Executive Summary Cookies in the U.S. Market Size and Growth Overall Sales Decline to $5.56 Billion After peaking in 2001 at just over $6 billion in sales, the U.S. cookie market has seen steady declines through 2005, due to higher ingredient costs leading to increased prices, a growing market for alternative snack options, and increased consumer interest in healthy eating. Packaged Facts estimates that total cookie sales declined by 8.25% to $5.56 billion in 2005, from its peak of $6.06 billion in 2001. Figure 1-1 U.S. Retail Sales of Cookies, 2001 - 2005 (in billion $) 7 1 0.5 6.06 0 5.85 -0.23 6 5.73 5.57 5.56 -0.5 -1 5 -1.5 -1.99 -2 % Growth (in Billion $) -2.5 4 -2.81 -3 -3.46 -3.5 3 -4 2001 2002 2003 2004 2005 Sales % Growth Source: Packaged Facts August 2006 © MarketResearch.com, Inc. 3 Cookies in the U.S. Chapter 1: Executive Summary Top Marketers and Brands Market leader Nabisco (Kraft Foods) market share remained essentially flat, falling just .04% to 35.79%, though its flagship Oreo and Oreo Double Stuf brand saw marked improvement in sales over recent years. Keebler Food Co. lost substantial market share falling below the 10% barrier to 9.91%. Since 2002 the company has lost nearly 3 percentage points. Pepperidge Farm registered a marked increase in market share gaining 40 basis points to 7.54%. Sales of the many Milano varieties continue to be favorites among consumers, while its Distinctive and Pirouette lines have realized significant gains over the past few years. Smaller players Masterfoods USA and Grupo Gamesa both registered sizable gains. Table 1-1 IRI-Tracked Retail Sales of Top Cookie Marketers, 2005 (in million $) 2005 % Marketers ($ million) Share Kraft & Nabisco 1392.94 35.79 Keebler Company 385.88 9.91 Pepperidge Farm 293.49 7.54 Mckee Foods Corporation 236.52 6.08 Archway & Mothers Cookies 188.60 4.85 Murray Biscuit Company 159.53 4.10 Lofthouse Cookies *(Ralcorp Inc) 90.25 2.32 W & H Voortman Inc 58.86 1.51 Masterfoods USA 40.17 1.03 Grupo Gamesa S.A. 30.06 0.77 Note: Ralcorp Inc acquires Lofthouse Cookies. Archway & Mothers Cookies merged. Source: Packaged Facts Information Resources, Inc. InfoScan Review; Packaged Facts. The information supplied by IRI is based on data believed to be reliable but is neither all-inclusive nor guaranteed by IRI. Without limiting the generality of the foregoing, specific data points may vary considerably from other information sources. Any opinions expressed herein reflect the judgment of MarketResearch.com, Inc., at this date and are subject to change. Reproduction, resale, or other distribution of this document is expressly prohibited without the written permission of MarketResearch.com or IRI. This material is reprinted with permission. Oreo racked up sales of more than $250 million while Oreo Double Stuf up from $102 million to $$124 million. However, Chips Ahoy! suffered falling 5% to $168 million. Number four Little Debbie increased sales 2% to nearly 117 million but Archway suffered, losing 10% and earning less than $100 million in 2005. 4 © MarketResearch.com, Inc. August 2006 Chapter 1: Executive Summary Cookies in the U.S. Table 1-2 IRI-Tracked Retail Sales of Top Cookie Brands, 2005 (in million $) Brands Sales 2005 ($ million) Oreo Cookies 250.47 Chips Ahoy Cookies 168.11 Oreo Double Stuf Cookies 124.16 Little Debbie Cookies 116.64 Archway Cookies 99.80 Pepperidge Farm Milano Cookies 89.53 Pepperidge Farm Cookies 83.88 Lofthouse Cookies 80.66 Nabisco Nilla Cookies 76.40 Fig Newton Cookies 76.18 Note: 2005 sales through chain supermarkets, drugstores, and mass merchandisers other than Wal-Mart. Source: Information Resources, Inc. InfoScan Review; Packaged Facts. This material is reprinted with permission. August 2006 © MarketResearch.com, Inc. 5 Cookies in the U.S. Chapter 1: Executive Summary Trends and Factors to Growth Go Premium and Gourmet Though the total cookie market has been in decline, there are some sweet spots, particularly in premium, upscale, and gourmet cookie products. Marketers of so-called premium adult cookies have seen modest growth. For example, Pepperidge Farm was able to realize a CAGR of 3.3% during the 2001-2005 period, due in large part to the growth of its Distinctive and Pirouette lines, as well as the continued success of its popular Milano brand. Boutique marketers, such as Brent & Sam’s, have been successful as well due to increased consumer demand for gourmet foods. Though sales figures are not available, evidence of Brent and Sam’s success and growth is apparent through new product introductions and its increased presence on store shelves on gourmet food stores as well as mass-market retailers. Natural and Organic No Longer Niche As more and more consumers look to add natural and organic foods as key parts of their diet, organic food producers and marketers and retailers will seek to capitalize on a growing segment. Though overall sales of organic cookies were not available, the “health” of this product market is apparent by the sales growth of individual marketers. Newman’s Own Organics Cookies saw a 27.7% rise in sales from 2005-2005 and four-year compound annual growth rate (CAGR) of 36.7%. American Cereal Corp’s Country Choice Organic Cookies rose 22.1% in the same period and had a CAGR of 36.3%. Is a Truly Healthy Cookie Possible? Recent publicity surrounding trans fats — a key ingredient found in many cookies — has been something of a headache for cookie makers, but also an opportunity for innovation. The FDA’s mandate requiring all food packages to disclose trans fat information, had marketers scrambling to reformulate recipes to significantly lower if not eliminate the ingredient and to reintroduce it to consumers. With the transition to zero trans fats more or less complete, marketers must now turn their sights on the most recent public health focus, a focus with staying power, whole grains. 6 © MarketResearch.com, Inc. August 2006 Chapter 1: Executive Summary Cookies in the U.S. Line Extensions To find new sources of growth and fight declining sales in flagship brands, many marketers play it safe by turning to line extensions to prop up sales. In the last few years, Nabisco has introduced numerous, successful iterations of its popular cookie, the Oreo, while Pepperidge Farm has been very successful extending its Milano line into various forms and flavors. Targeting Key Consumer Groups It will be important for cookies marketers to target alternate demographic groups, such as Hispanics and Baby Boomers, as these two groups in particular are growing and especially as it becomes less politically correct to target children. The Evolution of Snacking According to IRI, one-third of Americans say they do not have time to eat as well as they would like to. Further, only two-thirds of the U.S. population regularly eats three meals daily, and more than one third regularly skip meals and instead eat convenience foods or snacks. This relatively unhealthy consumer behavior runs parallel with a contrary consumer interest in healthier eating, as more and more Americans see the effects of poor nutrition and rampant obesity. These two trends together represent major opportunities for cookie marketers who consider broadening the scope of what a cookie can offer, such as high protein, high fiber, natural/organic, fortified, lower-fat, lower-sugar, and lower-salt.