Analysts React to Starbucks-La Boulange Deal

June 29, 2012

Restaurant industry experts have mixed thoughts on whether the pending acquisition is the right move for Starbucks

June 6, 2012 | By Lisa Jennings

Industry experts have mixed opinions on Starbucks’ decision to purchase La Boulange.

Wall Street analysts and industry observers on Tuesday had a mixed reaction to Starbucks’ $100 million acquisition of the La Boulange bakery brand, with some praising the potential for revenue growth and others concerned that the coffeehouse giant is losing its focus on coffee.

Starbucks on Monday announced an agreement to acquire Bay Bread LLC and its 19-unit La Boulange bakery café chain based in San Francisco. The move will allow Starbucks to boost food offerings in its coffeehouse stores, as well as grow the La Boulange chain and, eventually, offer branded products in grocery and other retail channels.

One immediate goal of the move is to build food attachment in Starbucks stores with the addition of what company officials described as higher-quality croissants, French pastries, breads and muffins offered by La Boulange. Only one-third of Starbucks transactions currently include food.

Darren Tristano, executive vice president of market research firm Technomic Inc., said the La Boulange brand “fits very nicely with Starbucks’ positioning as a gourmet coffee provider” and the French bakery products are likely to appeal to the coffeehouse chain’s audience.

Tristano said La Boulange’s menu is similar to that of upscale sandwich chain Le Pain Quotidien.

“It’s organic, it’s select meats, and it’s local,” he explained. “It’s very on trend for what consumers are looking for.”

Starbucks could also use the move to incorporate more dishes beyond morning pastries since La Boulange offers items such as sandwiches and quiches. “So there will be more for breakfast, but it will also flow through the day,” Tristano said.

Jeffrey Bernstein, an analyst with Barclays in New York, however, issued a report Tuesday expressing “overarching concerns of distraction from the core coffee platform and/or damage to the existing customer experience.”

Still, over the long term, Bernstein conceded that Starbucks’ pursuit of a bakery platform was a “logical next step” that could increase food sales and drive incremental traffic and daypart growth for the coffeehouse chain.

Starbucks officials declined to offer details on La Boulange’s performance, but founder Pascal Rigo stated previously that revenue has grown at least 10 percent per year since it opened, with 2011 revenue between $60 million and $90 million, according to analyst Andy Barish at Jefferies & Co. Inc.

Barish estimated La Boulange locations average unit volumes around $3 million to $4 million, with remaining sales coming from wholesale distribution to hotels, restaurants and grocery stores.

Prior to the announcement, Rigo had also been planning growth, according to Barish. Another 25 locations were planned by the end of 2012, which would grow La Boulange throughout Southern California.

Starbucks said a 2-cent dilution to earnings is expected this year, with moderate dilution in 2013 as La Boulange food offerings are rolled out beyond the Bay area Starbucks locations.

Barish noted that Starbucks did not give specifics on anticipated pricing for La Boulange menu items in coffeehouse locations. However, he noted that La Boulange prices in the Bay area are relatively high and said he “would expect some premium to the current food program given Starbucks avowed commitment to preserving La Boulange’s freshness and quality.”

Perhaps most beneficial over the long term is the potential for consumer packaged goods, or CPG, growth for the La Boulange brand, said Barish.

“Given the company’s success with VIA and K-Cups, we think this aspect of the acquisition is especially interesting and could be highly incremental in the long term given the potential margin profile,” he wrote.

Bernstein of Barclays, however, was more cautious in response to the CPG potential for La Boulange.

“As for expansion of the existing retail platform and pursuit of the CPG opportunity, we hope Starbucks will learn to crawl before walk, with true visibility limited,” he wrote.

Others were decidedly middle-of-the-road.

David Tarantino of Baird Equity Research, for example, said, “We see strategic value related to potential to upgrade food offerings in Starbucks stores, but we think the possible benefits of this acquisition are roughly balanced with the short-term risks related to acquisition costs and increased operating complexity.”

Most said it remains to be seen whether Starbucks will take food market share from archrival McDonald’s, or bakery-café specialists like Panera Bread or Au Bon Pain.

“It’s not an immediate threat,” said Dave Jenkins, a partner in consulting firm CustomersDNA. “It will be a long road to show whether [Starbucks food offerings] will develop a following.”

Jenkins, however, said Starbucks’ move was necessary to continue growth.

“For them to grow, they either had to get people to spend more at breakfast or to move into other dayparts,” he said.

While Starbucks has long been established as a consumer favorite for coffee, food has not been the coffeehouse chain’s forte, Jenkins noted. As with all quick-service breakfast players, pricing and portability will play a key role.

“How will this be really different from the bakery products they’re selling now?” Jenkins said. “It’s almost like they’re buying a test lab.”


Is Chicago Tougher on Restaurant Imports Than Other Cities?

June 28, 2012

By Kate MacArthur, May 26, 2012

You hear it every time a restaurant imported from somewhere else closes here: Transplants can’t cut it in Chicago. The recent closings of BLT American Brasserie last month, after only five months in business, and China Grill in January rekindled the argument.

But industry experts say there’s nothing special about Chicago. It’s tough—but not impossible—for a restaurant to set up in any new town. Failures by outsiders simply tend to be magnified.

When 10 local restaurants close, “we just chalk it up to a bad economy, a bad location,” says Phil Mott, assistant professor of hospitality management at Kendall College in Chicago. “On the other hand, if somebody from out of town closes, it’s because they’re from out of town. It’s hard to open a restaurant anywhere, much less take it on the road.”

Chicago is no more parochial than any other city when it comes to restaurants, says H.G. Parsa, professor of hospitality at Central Florida University in Orlando, who has studied restaurant failures. “I would totally disagree that Chicago is hard. Chicago is different,” he says. If a restaurant can provide the food that Chicagoans want, it “can make it. But don’t force your New York and L.A. habits on Chicago.”

All discussion of Chicago’s chilly attitude to transplants goes back to Wolfgang Puck’s Spago Chicago, which closed in 2003 after seven years.

As recently as October, the Gourmet Live blog named it the biggest celebrity chef restaurant flop. The author mused whether the city “proved too tough a nut to crack” and whether Los Angeles-based Spago’s vegetable-driven menu was “too delicate” for Chicagoans’ hearty appetites. Others blamed Mr. Puck’s rare visits to the outpost. Former General Manager Amanda Puck (Mr. Puck’s former sister-in-law) declines to comment.

By contrast, Roy Yamaguchi’s namesake Hawaiian fusion restaurant has endured for a decade in River North with little presence by the Iron Chef. New York-based French Vietnamese fine-dining house Le Colonial has lasted for 16 years in the Gold Coast. The typical fine-dining restaurant lasts 10 to 15 years, according to Mr. Parsa.

With its ever-improving restaurant reputation, Chicago issues a siren call to outsiders hungry to expand. Roka Akor landed here last year from London and is one of Crain’s picks for best new restaurants. New York’s Magnolia Bakery in the Block 37 Shops is regularly packed. New York celebrity chef Mario Batali and Joe Bastianich are scouting for a Chicago version of their Eataly restaurant and market.

Restaurateurs and experts say the key to success is hiring a manager or chef who is known to the customer base and who understands the regional palate and customs.

“You’ve got to do research on where to locate, who’s your competition, what are the local preferences from consumers and what are the local flavor trends,” says Darren Tristano, executive vice president of Chicago-based restaurant consultant Technomic Inc. Understanding and appealing to the natives will help get around Chicagoan’s “second city” complex, says Chuck Hamburg, partner at Chicago-based restaurant consultant Creative Hospitality Associates and an associate professor of hospitality at Roosevelt University.

He praises Ian Schrager for tapping Chicago-based Rockit Ranch Productions Inc. to consult on the Pump Room Bar, which reopened at Mr. Schrager’s Public Hotel Chicago in October.

“He didn’t try to come in as ‘I’m the great Ian Schrager from Studio 54,’ “ Mr. Hamburg says. “He ingratiated himself with the city.”


Tender Greens to Put Down More Roots in San Diego Area

June 27, 2012

Lou Hirsh, 14 May 2012, San Diego Business Journal

Operators of the health-focused restaurant chain Tender Greens are looking to expand the brand’s presence in San Diego, after getting a taste of success with their first local restaurant in Point Loma.

TYP Restaurant Group Inc. of Culver City, which debuted the concept at Liberty Station in 2008, next plans to open this summer at Westfield UTC, in the University Towne Center neighborhood. It is finalizing arrangements for an early 2013 opening in downtown San Diego, in the area around Broadway and First Avenue, according to Pete Balistreri, co-owner and executive chef at the Point Loma eatery.

Balistreri said the chef-driven concept aims to be a fast-casual version of a high-end restaurant, with individual items priced at $11 or less. The menu emphasizes salads, soups and sandwiches, made with locally and regionally sourced produce, meats and other ingredients.

Local Beers

“We locally source everything when we can,” Balistreri said. “Our beer is all from craft brewers in San Diego.”

Tender Greens’ suppliers include four San Diego County agricultural growers, as well as local seafood vendors, all of which also supply the region’s top high-end restaurants, he said.

The privately held TYP, which does not disclose revenue figures, first opened Tender Greens in 2006 in Culver City and has since added six more locations, mostly in Southern California. In addition to the two coming San Diego openings, it will debut this fall at Irvine Spectrum and is planning to have a total of 30 operating by 2016, including sites in the Denver and Seattle markets.

Balistreri said the company currently employs about 50 locally, which will expand to 150 with the debut of the downtown restaurant next year.

Two of the company’s co-founders – Erik Oberholtzer and Matt Lyman, who started Tender Greens with David Dressler – are themselves veteran chefs. Most locations, including those in San Diego, are co-owned by career chefs with backgrounds in fine dining.

For instance, San Diego native Balistreri, 29, has worked at several high-end restaurants in San Francisco and Santa Monica, most recently serving as banquet chef at The Lodge at Torrey Pines.

The 3,500-square-foot UTC location of Tender Greens, expected to open by July, will be led by his younger cousin, executive chef Peter Balistreri, who has trained as a sous chef under his more experienced relative.

The Westfield Group mall, which is currently in the midst of a $180 million renovation set for completion next year, will get at least one other fast-rising chain competing for the hearts of health-oriented diners.

475 Is the Magic Number

Florida-based Darden Restaurants Inc. plans to open its first local location of Seasons 52, an upscale fresh-grill and wine bar restaurant, in spring 2013 at Westfield UTC. The full-service concept features a meat and seafood menu that changes four times a year, and no items have more than 475 calories, according to Darden.

Darren Tristano, executive vice president of restaurant industry consulting firm Technomic Inc., said the growth of concepts like Tender Greens and Seasons 52 represent successful efforts to appeal to an upscale demographic that has held up well for industry sales, even during the recession.

However, he noted it does take a certain level of “culinary expertise” to make healthy items palatable to a large audience, and the upscale chains are catering to those willing to pay more for higher-quality meals that fit their dietary priorities.

While overall restaurant industry revenue rose 2.5 percent in 2011, the fast-casual category – which also includes players such as Panera Bread and Chipotle Mexican Grill – grew 3.1 percent, according to Technomic.

After nearly three years of sales contraction, the U.S. restaurant industry is now in a slow growth mode and is on track to see sales rise 3 percent in 2012 compared with a year ago, the research firm predicts.

Copyright San Diego Business Journal May 14, 2012


Big Food Companies Rush to Rejig Recipes

June 26, 2012

Consumers increasingly demand meals that are not only healthier, but more ‘natural’

by Chris Sorensen on Wednesday, May 9, 2012 4:

With their soft, mashed potato insides and crispy exteriors stamped in the shape of a happy face, McCain Foods’ frozen Smiles are marketed as a fun-to-eat children’s snack. They’re not supposed to explode. And yet, that’s what happened inside the Canadian food giant’s laboratory in Florenceville-Bristol, N.B., as researchers attempted to “reformulate” the Smile’s long list of unpronounceable ingredients, part of a company-wide strategy to make its packaged foods more natural and wholesome.

Tony Locke, McCain’s director of product development, says the trouble began while trying to ditch mono- and di-glycerides, emulsifiers that help retain moisture in some packaged foods. Emboldened by previous success with frozen pizza pockets, Locke’s team added a mixture of yeast, wheat gluten and flaxseed to the Smiles. “It was working very well in the lab,” says Locke, referring to what was the 40th attempt to rejig the recipe. “But then when we went to scale it up, we actually had these little Smiles going down the line in the plant and coming out of the fryer and exploding. They would literally come out of the oil and burst.”

And that, in the form of a combustible little potato snack, is the huge and complex challenge faced by food companies as consumers increasingly demand meals that are not only healthier, but more “natural” and therefore, it’s reasoned, better for you. With the public spooked by everything from processed foods (too much salt, too many additives) to hormone-raised beef, food producers are suddenly bending over backwards to portray themselves as purveyors of local, fresh ingredients, and their suppliers as earthy, family-run outfits, as opposed to giant factory farms. The phrases “all-natural,” “naturally raised” and “cage-free” are everywhere.

The latest big name to jump into the fray is Burger King. The fast-food giant recently promised to serve only “cage-free” pork and eggs at all of its 7,200 U.S. restaurants by 2017, marking the first time a big fast-food chain has made such a definitive pledge. McDonald’s, meanwhile, has said it will work with its pork suppliers to phase out restrictive gestation crates used to house sows while they raise their piglets. And Tim Hortons is facing calls to go completely cage-free from the Humane Society of the United States, which holds a small number of shares and is proposing a shareholder vote at the company’s annual meeting next week. The ethical treatment of animals is one argument driving the changes, but so too is the assertion that happier livestock translates into healthier food.

As for packaged foods, McCain is just one of several companies that’s now focused on simple, easy-to-understand ingredients. Others include General Mills, with its Pillsbury Simply line of cookies, and Häagen-Dazs’s Five ice cream (with just five ingredients).

But while the sudden shift in focus may seem like a welcome change, critics say it is as much about marketing as it is science. And it has left food producers faced with the prospect of spending billions to overhaul their operations, even though the new and improved approaches may, in reality, do little to improve the nutritional value of the food we eat. Everyone likes the idea of food that’s “natural” and ethical, but, it must be asked, are they willing to pay the price?

For many big food companies, the pressure to change their ways intensified earlier this year. In February, Chipotle Mexican Grill (once owned by McDonald’s) aired an animated ad during the Grammy Awards that became an Internet phenomenon, with some six million YouTube views. The spot depicted the evolution of factory farming over the years, starting with a farmer and his wife standing in a field with a pig and ending with hundreds of pigs being deposited by machines onto conveyor belts, where they were stuffed with pills, stamped into cubes and loaded into the back of trucks.

Then, in March, a long-simmering debate about “pink slime” (beef scraps ground into a slurry, treated with ammonia and used as hamburger filler) went from being a favourite whipping boy of celebrity chef Jamie Oliver to a mainstream public issue. By the end of the month, everyone from McDonald’s to Safeway said they would no longer buy beef made with the stuff, while one of the product’s major producers, Beef Products Inc., had to shut down several of its factories, and another ground beef processor, AFA Foods, filed for bankruptcy due to lack of demand.

It’s against this backdrop that Burger King, under pressure from the humane society and shifting consumer sentiment, made its decision to promise to use only cage-free eggs and pork in the U.S. within five years (there are no immediate plans to do the same in Canada). Other companies that have offered similar promises include McDonald’s, Wendy’s, Subway, Costco and food giant Unilever, which makes Hellman’s mayonnaise. “We’re going to continue to consume beef, pork, chicken, fish, but we want to feel better about the practices,” says Darren Tristano, the executive vice-president of Technomic, a food industry consulting firm in Chicago.

The idea that getting rid of cages is more “natural” comes as news to many producers. Florian Possberg, 61, has been raising hogs in Humboldt, Sask., near Saskatoon, since 1975. Possberg started out raising sows in communal pens and then eventually switched to the more restrictive gestation crates in the 1980s. Research at the time suggested it was better for the animals and consumers, decreasing the risk of disease and injury. “Sows are pretty aggressive when they live in groups,” says Possberg, a director of the Canadian Pork Council. He adds that roughly half of the 5,400 sows on his farms are housed in gestation crates, while the rest are in groups, estimating that it would cost more than $1 million to switch over the rest of the operation.

It’s a similar story with egg farmers, who, several decades ago, moved to caged systems because it was viewed as cleaner and helped prevent the birds from attacking and eating each other. But animal welfare groups claim the use of small “battery” cages that each house several laying hens are too cramped, preventing the birds from engaging in natural behaviours such as scratching, nesting or flapping their wings. With pressure mounting south of the border, the United Egg Producers reached a deal last year with the U.S. humane society to promote the use of so-called “enriched” cages, which are bigger and offer extras like perches and nesting areas. The two groups are also calling for Congress to pass laws requiring new standards in a bid to avoid a costly patchwork of state regulations, and also to ensure individual operators who make the switch aren’t put at a “competitive disadvantage.” Translation: if everyone has to absorb the same costs, they can more easily be passed on to consumers via higher prices.

In Canada, both pork and egg producers are looking to the National Farm Animal Care Council for guidance. The seven-year-old group devises codes of practice for the industry with input from producers, scientists, government and animal welfare groups. It’s in the process of updating several of its codes, including those for hogs and poultry, although results aren’t expected for a few years. “It takes a long time,” says Jackie Wepruk, the council’s general manager, of the typically Canadian consensus-oriented approach. “But if you look south of the border, you’ll see the divisive way animal welfare is being tackled there. Most decisions are being made in a knee-jerk, reactionary sort of way.”

But Peter Clarke, chairman of the Egg Farmers of Canada, says the industry may have to move more quickly depending on what happens in the U.S. “The major food purchasers won’t accept significantly different practices on one side of the border or the other,” he says, adding the cost of such an industry-wide switch would be significant.

Whether it’s instant noodles or the oft-mocked Twinkie, most products that come in a bag or a box have historically been marketed based on their convenience, not provenance, and come loaded with artificial colours, flavours and other additives—all designed to maintain taste while boosting shelf life.

At McCain, the decision to reformulate its entire lineup of products (more than 80 since 2010) to include only “real” or natural ingredients represented the biggest-ever undertaking for the company’s research and development team, according to Locke. The move was based on extensive customer research that suggested consumers were growing wary of additives that were synthetic-sounding. Nor was the challenge strictly limited to McCain’s own operations. “We might buy a seasoning mix from a primary supplier, but of course they’re getting all of the components to assemble the mix from another group of suppliers,” Locke says. “So it was a complicated effort.”

All of the tinkering has translated into big business for another sector of the food industry: flavour companies. Though many consumers don’t realize it, many ingredients now viewed as undesirable—salt, sugar and other additives—do a lot of heavy lifting when it comes to taste. Once they’re taken out, new flavours must be added to maintain a product’s appeal. And not just any flavouring solution will do. Bob Eilerman, the head of science and technology at Switzerland’s Givaudan, one of the biggest flavour and fragrance companies in the world, estimates that more than 50 per cent of Givaudan’s customers now want “natural” flavourings, as opposed to artificial ones, even though there’s not much difference (other than cost). “Natural has good connotations behind it,” says Eilerman. “But at the end of the day, it’s all about chemicals. Whether it’s a strawberry flavour that came from crushed strawberries or from one of our laboratories, the chemical composition that we’re trying to create is very similar.”

It raises the question of whether the current fixation on natural and ethical is ultimately worth the price. McCain seems to think so. Calla Farn, a company spokesperson, says sales of some reformulated McCain products have enjoyed gains of up to 10 per cent. As for the cost, Farn admits that the new-and-improved products are more expensive to make, but says the company “worked hard to identify savings in other areas to ensure our products remained cost-neutral.”

Not all companies may be so lucky. In the case of cage-free eggs, Tristano estimates that the cost will go up by 25 cents to 40 cents per dozen, which threatens to squeeze the margins on a simple breakfast sandwich. That’s because fast-food operators typically have a much tougher time passing on rising commodity prices than do grocery stores because of intense competition. “It’s about three cents an egg on a product that sells for $2 or $3, so it doesn’t seem like a lot,” he says. “But when you can only increase prices by about two per cent and you’re getting hit by a per cent and a half just to have cage-free, that’s a big deal.”

Ultimately, a bigger risk to the industry may come from the public’s new heightened expectations from food companies. As they change the way food is made, there is every likelihood consumers will turn their attention to some other unappetizing aspect of the mass-production process. “Once you move forward, there’s no turning back,” warns Tristano. “And let’s be honest: if we really cared that much, we’d all be vegetarians.”


A Snack Retrospective

June 25, 2012

Here’s a glance at some of the breakthroughs, events, products and happenings that took place in the snack food industry within Snack Food & Wholesale Bakery’s 100-year existence and even a ‘tidbit’ before.

By Lauren R. Hartman, April 23, 2012

 According to the website, ideafinder.com, we consume more than 4.3 billion lb. of snack food a year, which could be why snacks may soon end up becoming America’s favorite meal. What an interesting time for Snack Food & Wholesale Bakery to celebrate its centennial anniversary. Coincidentally, the Snack Food Association (SFA), Arlington, Va., an international association that has manufacturing members, including snack manufacturers and suppliers to the snack industry in more than 50 countries around the world, is celebrating its 75th anniversary in 2012. We congratulate the SFA on an incredible job. The association has provided us with myriad details about the past of snacks. With the amount of space available here, we can only briefly describe a few of the numerous events, milestones, breakthroughs and other happenings in snacks, that have experienced an incredible ride through the last 100 years and beyond.   

We can’t really describe what has taken place over the last 100 years in snacks without going back a bit farther in time. A global industry today, the snack food business, with all its pop, flavor, chewiness and of course, crunch, has billions of fans who might not have ever paid attention had fate not intervened nearly 160 years ago in the resort area of Saratoga Springs, New York, and 75 years ago in Cleveland.

Inventions and accidental discoveries

If you can’t eat just one potato chip, blame it on chef George Crum. He reportedly created the salty snack in 1853 at Moon’s Lake House near Saratoga Springs, New York. Fed up with Commodore Cornelius Vanderbilt, a frequent customer, who continuously sent his fried potatoes back, complaining that they were soggy and not crunchy enough, Crum sliced some potatoes as thin as possible, fried them in hot grease, then doused them with salt. Bingo.

Vanderbilt loved them, and “Saratoga Chips” quickly became a popular item at the lodge and throughout New England. Eventually, the chips were mass-produced for home consumption, but since they were stored in barrels or tins, they quickly went stale. Then, in the 1920s, Laura Scudder of Anaheim, Calif., invented an airtight bag by ironing two pieces of waxed paper together, which kept the chips fresh longer. Today, potato chips are packaged in metalized polyester or foil bags or paperboard containers. The chips come in a variety of flavors, including sour cream and onion, barbecue, salt and vinegar and even some that taste like hot dog relish.

In the 1890s, William Tappenden, an entrepreneur in Cleveland, decided to make a business out of cooking and distributing potato chips. Tappenden mastered the art of cooking paper-thin chips on his kitchen stove and soon started delivering them to local grocery stores in a horse-drawn carriage. Business picked up, so he turned his barn into a potato chip factory.  Competitors across the country quickly copied Tappenden’s concept, and the snack food industry was born.

What’s more, around 1886, Charles Cretors of Chicago, developed a gasoline-powered popping machine, which also doubled as a peanut roaster, paving the way for popcorn to become a viable snack product. C. Cretors is still thriving today. Still located in Chicago, the multi-billion-dollar concession business is widely credited as being the catalyst for creating modern concessions with its popcorn machine patent. “Today, we are the leading designers and manufacturer of concession, foodservice and food processing equipment,” the company states. As Charles Cretor said, “We invented the popcorn machine, then just kept going.”

In 1906, three years after the Wright Brothers’ first flight at Kitty Hawk, North Carolina, Amedeo Obici, a young Italian immigrant, cofounded Planters Peanuts, and developed a process for commercially roasting shelled peanuts. Little did Obici know, but his small business would one day blossom into one of the world’s grandest nut companies.

Cracker barrels

On November 11, 1901, the Biscuit & Cracker Manufacturers’ Association (B&CMA) was established in Cincinnati, during the era of the nostalgic cracker barrel. The time was aptly characterized by B&CMA’s “Biscuit Boy” logo and trademark. The B&CMA continues today as an international trade organization that represents the entire scope of companies involved in the manufacturing of biscuits and crackers as well as suppliers to the baking industry. Its mission is to bring unparalleled educational training programs and networking opportunities to its members.

A great deal has changed at Lance (now Snyder’s-Lance, Inc.) over the years since Phillip Lance began selling roasted peanuts for a nickel bag in Charlotte, N.C., in 1913. What began as 500 lb. of unwanted peanuts and Lance’s dream has bloomed and evolved into a multi-million-dollar national company that produces 16 varieties of sandwich crackers that are baked fresh with peanut butter and real cheese fillings, or nuts, cookies, popcorn, cakes and many other snack foods. Likewise, Snyder’s of Hanover, Hanover, Pa., got its start in 1909 when Harry V. Warehime, founder of the Hanover Canning Co., and Snyder’s parent company until 1980, began producing Olde Tyme Pretzels.

Years later in the 1920’s, Eda and Edward Snyder II began frying potato chips in a kettle at their home during the summer and peddled the snack door-to-door and to fairs and farmers’ markets. Their son, William V. and his wife Helen, made angel food cakes in their basement for local stores, and in 1924, the families combined their home businesses and Snyder’s Bakery was born.

And who can forget Ritz Crackers? The premium snack cracker brand was introduced by NabisCo in 1934, according to the website, foodtimeline.org. It says that based on records of the U.S. Patent and Trademark Office, the National Biscuit Company (Nabisco) introduced this stylish cracker, but it actually got its start in 1801. That was when retired sea captain John Bent adapted a hardtack recipe.

Bent took a hardened “biscuit” (an English term for cracker) and added leavening agents until it became flat and crisp. Bent’s family baked the biscuits while he traveled the countryside, selling crackers from his wagon. The basic cracker recipe was refined four years later by the Kennedy Biscuit Works, which used spongy dough for a lighter consistency. In 1898, Kennedy Biscuit Works and dozens of other bakeries across America joined forces to form the National Biscuit Company. NabsiCo perfected the recipe in 1934, according to reports. The result was a smooth, flaky cracker hinting of butter.

Unlike other crackers that were pale and square, these creations were golden and rounded, with serrated edges. A company-wide cracker naming contest yielded the name Ritz, presumably after the posh Ritz-Carlton Hotel. Nabisco’s North Philadelphia bakery began producing them and they were introduced at markets in Philadelphia and Baltimore. By 1935 Ritz was distributed nationally. Some of Ritz’s appeal lies in its relatively low price and mass production by Nabisco, the only baking manufacturer with the facilities to distribute nationwide at that time. Nabisco was able to price a box of Ritz crackers at an affordable 19 cents. The circular shaped/buttery-tasting crackers today come in many varieties, such as whole wheat, low-sodium, brown sugar cinnamon variety, garlic butter and many more.

Cheez-It  cheesy snack food crackers manufactured by the Kellogg Co., Battle Creek, Mich.,  through its Sunshine Biscuits Division, are roughly 1-in.-sq. crackers made with wheat flour, vegetable oil, sharp yellow cheese, salt, and spices. First sold by Green & Green Co., Dayton, Ohio, in the 1920s, the crackers and business were later bought by The Sunshine Biscuit Co., (founded in 1902 as the Loose-Wiles Biscuit Co.). A big hit, the sales-leading crackers attracted the Keebler Co., which acquired Sunshine in 1996, and then Kellogg bought Keebler in 2001. Cheez-It crackers are still sold under the Sunshine label. Maker of the famous creme sandwich cookie, Hydrox, Sunshine’s product line in the 1960s was so large, the company would say, “you can enjoy a different Sunshine product every day of the year.” 

Power of the potato

But while crackers had an honorable place in history, potato chips came on just as strong. People loved them. The SFA says that the many original snack entrepreneurs included Daniel Mikesells of Dayton, Ohio, who started Mike-Sells, Scudder, Bill and Sallie Utz of Utz Quality Foods in Hanover, Pa., the Arnold family of Bristol, Tenn., which started Moore’s Potato Chips and Earl Wise, Sr. of Berwick, Pa.

All of the many chip makers or inventors had fascinating stories to tell about starting a potato chip business. Most often, things were developed by accident or came to be because of mistakes that worked. For example, in 1921, Earl Wise, Sr., who ran a small deli in Berwick, Pa, made a discovery that was really plain old luck. Wise had an abundant supply of potatoes, which he feared would rapidly rot. His sister suggested that he turn them into potato chips, which he did in his mother’ kitchen, and then sold at the deli and to other merchants. Wise’s products eventually became a dominant brand on the East Coast.

Only four years after Wise made his first potato chip, he opened his first production plant, a 32×75-ft. concrete building that he continued to expand over the next two decades until 1944. That was when the plant was destroyed in a fire that brought production to a halt. After eight months, a new state-of-the-art production facility was built and expanded for the remainder of the decade.

Utz Quality Foods also got started in 1921, in the kitchen of Bill and Salie Utz’s home in Hanover, Pa. Bill and Salie originally sold chips at small grocery stores and farmer’s markets and the company used a slogan, “Farmer’s Market Fresh,” in its ads for many years. The company still maintains a small-town image every chance it gets. It churned out 50 lb. of potato chips an hour. The company was incorporated in 1947 and two years later, purchased a 5-acre tract of land to build a 67,000-sq.-ft. production facility. Utz also installed two 600-lb./hour potato cookers and was on its way to continued growth and expansion.

“We want people to know that it’s a family-owned, long-term operation from a little town in Pennsylvania that puts out high quality products in limited distribution,” said Tom Dempsey, vice president of sales and marketing back in 1994 for a cover story at the time with Snack Food & Wholesale Bakery. Today, Mike and Jane Rice represent Utz’s third generation of family leadership. Mike’s grandparents are Bill and Salie Utz.

By the middle 1930s, potato chip plants were scattered all over the country. All of them were small or regional businesses. And many soon added other snacks to their lineup, including pretzels, popcorn and peanuts, all of which had emerged commercially since George Crum’s invention.

Preliminary on pretzels

Most details about the origin of another of America’s favorite snack foods—pretzels—is loosely based on myths and folklore rather than documented facts. According to foodtimeline.org, hard-baked bread and flour goods actually originated in ancient times, when biscuits (which means “twice baked”) helped fuel the Romans. Food historians and Catholic scholars generally agree that, from early times, pretzels held a special place in Lent. The word “pretzel” is from German, and is believed to refer to the Latin word pretium for “reward.” Others trace the roots to the Latin word, brachium, meaning arm, according to the Encyclopedia of American Food and Drink.

Julius Sturgis established America’s first commercial pretzel bakery in 1861. He operated a bread bakery in Lititz, Pa., and legend has it that a wanderer who had hitched a ride on a train that ran behind the bakery followed the smell of freshly baked bread, looking for a job and something to eat. Julius couldn’t offer the man a job, but extended his hospitality and invited the man to sit down at the family dinner table. In exchange for the kindness, the man gave Julius a pretzel recipe.

The Julius Sturgis Pretzel Bakery says that specific details are sketchy, and it’s not sure how the story came about, but what is known is that after 11 years as a baker, Sturgis stopped making bread and established the first commercial pretzel bakery in America. Chocolate-covered pretzels proliferated in the 20th century. Early dipping items featured nuts (peanuts, pecans), fruits (pineapple, strawberries, cherries) and biscuits/biscotti. Display ads in the early 1930s for Benzel’s Large Chocolate Coated Pretzels indicate that a dozen cost only 10 cents.

Other pretzel pioneers include Jacob Bachman, Reading, Pa., founder of the Eichler bakery (later Anderson bakeries) in Lancaster, Pa., The Wege Co., Hanover, Pa. and Reading Pretzel Machinery Co., which launched the first automatic pretzel twisting machine in 1933, four years after a continuous cooker was developed for the potato chip market. Before this time, commercial pretzel production was often performed on a cracker-cutting machine.

Make way for a new crunch

In 1930’s, snacks included the four p’s—potato chips, popcorn, pretzels and peanuts. Then a different kind of chips came on the scene: Corn chips. The crunchy, salty, thick chips were commercially introduced by I.J. Filler, a traveling salesman who developed the idea for corn chips while eating at a small Mexican restaurant in San Antonio. Filler received a patent for corn chips in 1933.

A year earlier, 26-year-old Elmer Doolin also walked into a small restaurant in San Antonio, and purchased a nickel sandwich and a five-cent plain package of ribbon-shaped corn chips. He liked the taste and looked up the manufacturer, who turned out to be a homesick man from Mexico. The story goes that Doolin borrowed $100 and bought the man’s recipe, rights to his 19 retail accounts and his production equipment: A hand-held potato ricer. Frito’s were born. By 1935, Doolin was in Dallas and was becoming the king of corn chips, but he recognized the power of potato chips, and also introduced them into his growing enterprise.

About the time Doolin was discovering the corn chip, Herman Lay lost his job with Sunshine Biscuit Co. in Atlanta and took a job as a route salesman’s helper, selling peanut butter sandwiches. When the company’s founder died, Lay, who had become a distributor, bought the company and established a bonafide snack food enterprise, including potato chips. Frito-Lay was on its way. That’s when H.W. Lay & Co. became one of the largest snack food companies in the Southeast, and merged in 1961 with the Frito Co. to become Frito-Lay, Inc. LAY’S brand potato chips are still what Frito-Lay North America presently says is America’s favorite potato chip. Today, Frito-Lay brands account for 59% of the U.S. snack chip industry.

The Dallas-based company presently has more than 45,000 Frito-Lay employees in the United States and Canada, dozens of brands, including Cheetos, Sun Chips, Santitas, Ruffles, Rold Gold and more.

Cracker Jack, a snack consisting of strong molasses-flavored candy-coated popcorn and peanuts, was purchased by Borden in 1964 after a bidding war between Borden and Frito-Lay. Borden then sold the brand to Frito-Lay in 1997. Cracker Jack, known for being packaged with a prize inside its box, was first produced by Frederick “Fritz” William Rueckheim and his brother Louis, for sale at the first Chicago World’s Fair in 1893. At the time, the mixture was simply called, “Candied Popcorn and Peanuts.”

Rueckheim devised a way to keep the popcorn kernels separate in 1896. As each batch was mixed in a cement-mixer-like drum, a small quantity of oil was added—the amount is a trade secret. In 1908, the song “Take Me Out to the Ball Game,”  written by lyricist Jack Norworth and set to music by Albert Von Tilzer, gave Cracker Jack free publicity when it was released with the line, “buy me some peanuts and Cracker Jack!”

Cultivating the chip business

According to the SFA, the young snack industry was growing rapidly, but the business was fragmented with no overall focus. Harvey F. Noss, a Cleveland advertising salesman whose family owned a local potato chip, ice cream cone and pretzel manufacturing company called Num Num Foods, changed that.

With Crum and Tappenden being two of the three principal players responsible for the creation of the snack food industry, the third was Noss, says the SFA. Noss persuaded other Ohio-area chip manufacturers to join forces in a loose-knot organization called the Ohio Chip Association. The group developed a radio advertising campaign and other promotions to sell potato chips. But Noss thought about what a national organization of chip manufacturers could do for the future of the rapidly growing industry as far as public relations, marketing and other services were concerned.

Noss and his colleagues expanded their regional organization into the National Potato Chip Institute (NPCI), which would later become the SFA. They held the group’s first meeting in Cleveland, with Noss as the first president. Noss eventually became the association’s paid leader, and the NPCI developed programs to educate consumers and retailers about potato chips, developed quality standards for manufacturers, adopted a package quality assurance seal for members and a series of literature that discussed the nutritional value of potato chips. 

That same year, the SNAXPO show got its start, and has been putting the power of exhibitors to work for all attendees ever since. The show has become the world’s largest, most comprehensive event devoted exclusively to the international snack food industry, bringing together owners, executives and buyers from every segment of the market. The SFA notes that SNAXPO 2012 exhibition and conference in Phoenix welcomed some 1,500 domestic and international snack food management professionals.

The Heinz 57 of the Southwest

With World War II looming, and rations of various products like sugar on the horizon, there came numerous government restrictions, including controls on private and contract haulers and limits on production of shortening and oil. The fear that the potato chip industry might have to cease production for the duration of the war was also a reality, as the product wasn’t considered “essential.”

The SFA points out that a special committee led by Noss put together a list of reasons why potato chips were essential, and went to Washington D.C. to sell the idea to the bureaucrats. By the time he headed home, the potato chip industry was not only deemed “essential,” the NPCI’s members were allowed to obtain enough raw materials, gasoline and tires to continue producing. When the war ended in August, 1945, the industry geared up for a big push, but there were still lingering technical problems.

Hand cooking was giving way to continuous fryers, though manufacturers were still packaging chips and other snack products by hand. Daniel Woodman, working as a consultant to Herman Lay, developed the first pre-formed bagmaking machine and soon, the snack industry was well on the way to automating its packaging functions.

By 1947, David Pace, founder of Pace Foods, San Antonio, Texas, began bottling syrups and sauces in the back of a liquor store. “He had a laundry list of products,” recalls Rod Sands, president of Pace Foods in 1994, when SF&WB covered the company in a feature story. “He had queso, jams jellies and different kinds of hot sauce. He wanted to be the Heinz 57 of the Southwest.”

In the early 1970s, Pace analyzed his business, which was still in a startup mode, and saw that his Picante sauce provided about 80% of sales, and he actually discontinued all other products. Sands found this a bold move. “I find it remarkable,” he was quoted in our pages as saying. “That’s hard to do when you’re in a startup mode.” But going forward as a specialist in Mexican sauces, it proved to be the right idea for David Pace. The company today uses more than 25 million lb of fresh jalapenos each year and the same recipe David Pace created more than 60 years ago.

Like Pace, James Stauffer Herr wanted to pursue his own idea of the American dream. He left his father’s farm and with $1,750, purchased a small potato chip company in Lancaster, Pa. In 1947, the business moved into a vacated tobacco shed on the Herr family farm. As he learned more about the business, Jim Herr developed new and better cooking processes and a delicious snack food became even better. As demand for Herr’s potato chips grew, so did the company. A few years later, Jim Herr located a 3,600-sq.-ft. bakery facility available for rent in the small town of West Willow, Pa. The bakery, along with an adjacent house, became workplace and home for Jim and his wife Mim. The company would eventually become one of the nation’s leading regional chip players.

Packaging plays key role

On the packaging side of things, Cellu-Craft, Inc., founded in 1937, in Brooklyn, N.Y.,  as a small printer of packaging materials, and has logged many milestones over the years, according to the SFA’s book, 50 Years: A Foundation for the Future. By 1974, the company expanded twice, tripled its volume and continued to expand through acquisitions and organic growth. The firm purchased the assets of Vision-Wrap Co. in 1978, which increased production capacity substantially.

Aseeco Corp. developed sanitary bulk material handling machinery and conveying systems some years later, including a sanitary bucket elevator conveyor call the Aseeco-Lift, which quickly became a standard of the food industry. Curwood Co. also grew from a three-person packaging film producer with just one extruder/laminator to a comprehensive flexible barrier packaging resource, providing various snack food packaging materials. The company became a wholly-owned subsidiary of the Bemis Co. in 1965 and remains so today, but is now a world leader in high-barrier packaging materials and systems for food, beverage, household, industrial and personal care industries.

TV and snacks go hand in hand

What really exploded the growth of potato chips and other snacks and put them on the national map was television. In 1950, Americans owned 1.5 million TV sets. The figure continued to grow until most households had multiple sets in the mid to late 1960s. The impact on the industry was amazing. Folks sat around the tube, watching the fights, football and Milton Berle, munching snacks.

Two new snack products were introduced in the early 1950s: Cheese flavored, extruded corn puffs; and pork rinds. There were now six major salted snack products available to retail customers.

Bellville Marking Corp. started business in 1959 as an ink and printing products supplier. The company invented reciprocating ink coders with a patented ink cartridge for vertical form-and-fill packaging machines that could print dates and prices on film for snack packages.

Cornnuts was a family business selling a toasted corn nugget-like product to local bars and taverns around Oakland Calif., in the late 1940s. The crunchy, nutty-tasting snack, which is fiber-filled kerns of corn, had really caught on. Through World War II, shipments of imported Cuzco corn, from which the company used to make its product were cut off, and it discovered a small kernel corn to use instead at that time. Supplies of the larger imported corn were re-established in the mid-1950s, but by that time, company geneticists created an oversized, domestic corn hybrid, that was four times larger than ordinary domestic corn kernels. Since 1969, the Cornnuts’ crop has been grown in California and Ohio, and the product is sold in supermarkets, vending machines and bars across the United States and many other countries.

The 1950s was a golden era for in the snack food industry. A population explosion was taking place in America—there were 18 million more people than in 1940, says SFA. And they had an undeniable appetite for snacks. Though potato chips were still the best seller, pretzels were expanding, popcorn sales in theaters and small outlets were at an all-time high, and there was a bigger market for packaged popped corn and caramel corn.

Meanwhile, as the Frito Co. acquired several large regional players, Herman Lay was busy building plants throughout the Southeast and buying up pretzel and potato chip plants as far West as Los Angeles. In 1961, the industry was stunned when The Frito Co. and H.W. Lay Company merged to create what was a $135-million corporation that forever changed the face of snack foods. However, Elmer Doolin never lived to see the accomplishment, having died in 1959, at the age of 56.

Swinging Sixties changes

SFA notes that by the middle of the 1960s, snack sales had reached nearly $750 million in America. In 1961, at a historic meeting in Frankfurt, Germany, the European Regional was formed as a part of what now had become the Potato Chip Institute International or PCII. By 1964, the European regional had 88 members. Incredibly, Noss was also invited to Russia, behind the Iron Curtain, to talk about potato chips. In 1978, the Regional would become an independent group called the European Chip and Snack Association, which is now called the European Snack Association (ESA).

In 1964, Herr’s made a major packaging move that helped revolutionize sales. For years, its chips were sold in wax paper bags for 5, 10 and 15 cents each, depending on the size. A twin-pack (two bags inside a larger cellophane package) was also available at about 49 cents.

Another new product would quickly push sales past the billion-dollar mark. One day in 1964, Arch West., marketing vice president for Frito-Lay, toured some retail outlets in Southern California. At one store, he noticed a number of greasy kraft paper bags on a Frito-Lay rack. Inside the bags he found little pieces of toasted tortillas. His first reaction was that if people were buying those, maybe Frito-Lay should be making it.

West decided to go to Alex Moralis of Alex Foods, a tortilla maker whose company made tortillas for Frito-Lay’s Disneyland restaurant. West wanted to determine whether tortilla chips could be produced on automatic equipment. Moralis said yes, and several months later Frito-Lay gave birth to the Doritos brand of tortilla chips in the west and southwest, to tremendous response. Doritos were rolled out nationally in 1966, and virtually every snack manufacturer jumped on the bandwagon. Very quickly, tortilla chips became America’s second favorite snack.

A year earlier, PepsiCo International merged with the growing Frito-Lay Co. to create a beverage-snack giant, and the snack industry was blooming all over Europe and many other countries. Harvey Noss visited European snack companies frequently, the SFA reports, looking for new members to the association.

The ‘pop’ of popcorn

Orville Redenbacher, who began growing popping corn at 12 years old, saved enough money to go to college with his first popcorn business. By the 1940s, he was raising popcorn for the supermarket trade, and in 1965, he and business partner Charles Bowman, perfected a hybrid popcorn that was light and fluffy, had minimal hulls and left few unpopped kernels. The tasty product also achieved a 44:1 volume ratio of popped to unpopped kernels. Four years later, Redenbacher launched his first popcorn brand, Red Bow, and was on his way to popcorn fame.

He put the “lighter” and “fluffier” challenge to the test in TV commercials in 1976 and the product and Redenbacher became a sales success. His famous slogan, “You’ll like it better or my name isn’t Orville Redenbacher,” was a winner, and the product quickly made him a popcorn king and legend. ConAgra Foods bought the Orville Redenbacher brand in 1983 and later launched various line extensions, such as SmartPop 94% fat-free, Cheddar Cheese and Spicy Nacho, which popped up hot and fresh in the microwave. Redenbacher passed away in 1995, but his innovative popcorn legacy lives on.   

Gas lines, ecology, snack explosion

By the 1970s, America faced a serious oil shortage. Gasoline prices soared and packaging of potato chips was evolving from glassine and paper bags to foil bags. Paperboard boxes and canisters were becoming increasingly expensive. Foil prevented light penetration and did a better job of keeping chips fresh over a longer period. But the switch was rather difficult and expensive for some companies, and the additional cost for foil was significant. Companies like Herr’s were convinced that consumers would prefer a product that stayed fresher longer.

In addition, Jack and Rosemary Shearers bought a snack food distributorship in 1974. A fourth generation of Shearers, sons Bob and Tom joined the family food business and expanded their route sales fleet. By 1979, the Shearers wanted to offer  customers a more complete line of snacks. Unable to find products that met their high standards, the family began its own snack food manufacturing operation, and made their first “hand-cooked” kettle potato chips in a small rented facility on Harrisburg Avenue in Canton, Ohio. The Shearers hand-cooked the chips, packaged them in 1-lb. plastic bags and sold them under the Kettle-Cook’d  label. Customers were excited by the new product and quickly added it to their shelves. In fact, kettle chips have became so popular that new product introductions occur to this day.

Yet early in the 1970s, the SFA says that the snack food industry faced two threats—the first real challenges it experienced since World War II.  Potato chips, now a billion-dollar category, were being characterized by the nutrition community as “junk food.” PCII mounted a spirited campaign, hiring nutritional consultants to fight back. One key phrase in the campaign pointed out that “there were no junk foods, only junk diets.” Potato chips and other salted snacks had a place in a responsible diet. But the decade was a time when “health food” became a trend, and “growing or baking your own” was catching on. By the end of the decade, with the association’s influence, a large percentage of snack food products contained a nutritional profile on packages.

Government involvement

With mounting government legislation and regulation affecting the food industry, the SFA says that it moved its headquarters from the Cleveland area in the late 1970s and set up shop in suburban Washington D.C. to be closer to the action.

The second threat was also due to the industry’s growth. As the snack industry ballooned, so did retail food marketing. Traditional small food markets were morphing into larger and larger supermarkets that eventually grew to be 60,000 sq. ft. and more. Snack food sections of stores became cavernous, often stretching the width or length of a store. Convenience stores were beginning to scatter across cities and nearly every neighborhood. Then there was the advent of mass market retailers like Walmart and Kmart (and later, Target), which began to cannibalize business from many of the established product categories, such as toys, small appliances, clothing and others, including snack foods.

But a controversial breakthrough came from Proctor and Gamble and General Mills, both of which introduced chip-like products made from dehydrated potato flakes. P&G called its product Pringles,and General Mills called its Chippos.The SFA says the problem was that they also described their products potato chips, and potato chip manufacturers “took great umbrage.”

Many chip makers apparently feared that the uniform new chips would carve into the regular chip market. In a lawsuit filed on behalf of the industry, a federal court ruled that the new products could be called potato chips as long as a disclaimer was prominently displayed on the package that they were made from dehydrated potato flakes. Proctor and Gamble eventually built Pringles into a major brand and became an important member of the association. 

Instant information

The bar code was adopted for packaging in supermarkets and drugstore chains, giving retailers and snack food manufacturers instant information on product movement. More computerized  management systems were being developed to help the industry handle more and more information and facilitate their operations. The SFA says it helped to spread the word on how these new developments could help make  operations more efficient and profitable.

Waste disposal and inflation were creating mounting problems in the early 1980s, and states were enforcing environmental laws and stricter waste disposal legislation. Recycling was a term heard more in the later part of the decade. Interest rates were at 13- and 15% and oil prices were escalating. Yet the SFA celebrated its 50th anniversary in 1987, and both the multi-billion-dollar industry and the association were strong. Manufacturers, packagers and consumers were still hopeful for the future. But in the course of a decade, the world would be rocked by revolutionary developments that changed the landscape of snack food marketing and the retail food business.

The snack food industry also consisted of one national full-line company, Frito-Lay, and many strong regional companies across the country early in the decade. The SFA says that two of them decided to challenge Frito-Lay as the dominant national snack food company. One was Borden’s, a multi-faceted food and dairy company, which purchased Wise Foods in 1964 from the Earl Wise family.

The other was Anheuser-Busch of St. Louis, the “King of Beers.” Borden bought numerous regional snack food companies in the 1980s, boosting its snack food volume to more than $1.5 billion. Anheuser-Busch, on the other hand, with its beer distribution business as its flagship, began building a snack business, literally from the ground up, and eventually reached national status with its Eagle Brand Snacks. The SFA says that the three-way battle between Anheuser-Busch, Borden and Frito-Lay and regional chippers in the middle played right into the hands of retailers, many of which benefitted by selling snack food aisle shelf space by the facing to the highest bidder.

But the war didn’t last. By 1993, Borden couldn’t find a buyer for a national “super” brand it was trying to create, and it began disassembling its national network. Thus, most of the companies it acquired earlier eventually disappeared from the landscape. Anheuser-Busch left the snack whirlwind in 1996, after spending millions overall, and ended up selling its four plants to Frito-Lay. In the meantime, the Food and Drug Administration issued a requirement for nutritional labeling to be applied to most foods regulated by the agency, including snacks. The SFA reports that it helped educate its members about the ins and outs of the new regulations and that’s why snack companies had few troubles meeting the May, 1993 deadline. The act also set a January 1, 2006, deadline for trans fatty acid labeling.

Thinking outside the ‘big box’

Walmart was beginning to emerge from Bentonville, Ark., as Sam Walton continued to nurture his stores until there were nearly 1,200 of them by its 25th anniversary in 1987, with sales of $15.9 billion.

By the early 1990’s, Walmart was ready to move across the country as America’s largest food retailer, and later focused on the world.

By 1994, the industry was undergoing tremendous changes. The three Rs—reduce, reuse, recycle—were created for packaging. More new flexible snack food packaging structures were developed. The industry was going more global, as evidenced by the tremendous increase in Latin American exhibitors at the SNAXPO show that year. It was also becoming less family-oriented and more corporately controlled. This is according to SF&WB editor at the time, Wendy Kimbrell.

With the influx of Hispanics coming to the United States, it wasn’t surprising that Frito-Lay came up with a baked, low-fat version of Tostitos tortilla chips in 1994. Original Tostitos were introduced in 1979 and were distributed nationally starting in 1981. Made from all-white corn, Tostitos were meant for dipping in salsa and other dips. Sales grew quickly, and in 1985, the brand was Frito-Lay’s fifth-largest, according to Wikipedia, generating annual sales of $200 million at that time. Tostitos became a long-term success and is even more popular today.

Proctor & Gamble created a fat-free substitute called Olestra,which was approved as a food additive by the FDA. In 1998, Frito-Lay introduced no-fat WOWchips.

In 2004, the New York Yankees baseball team replaced Cracker Jack with the milder, sweet butter toffee flavored Crunch ‘n Munch at home games. After a public outcry, the club immediately switched back to Cracker Jack, according to Wikipedia.

Walmart’s impact on the country and on retailers was relentless. It used to be that the marketing people worked with consumers to find out what they wanted, designed products, advertised them and people bought them. Walmart changed all that. Walmart also changed who made the decisions in the supply chain to American consumers. Later, in 2009, Frito-Lay’s development of SunChips brand multigrain snacks coincided with Walmart’s sustainability mandates. The product was rolled out in compostable packaging bit by bit between 2009 an 2010, with a fully compostable bag out on Earth Day, 2010. Frito-Lay dropped the biodegradable bag within 18 months after it was the target of viral social network attention because of how noisy it was.

Snacks still to come

But with all of the trials and tribulations in the business, it’s very safe to say that snacks are not going away any time soon. In fact, it’s quite the opposite. Today, sales of iconic brands such as Procter & Gamble’s Pringles chips, to Kellogg Co., are more and more common. The Pringles business was sold for a whopping  $2.695 billion. Kellogg established a strong U.S.-based snacks business when it purchased the Keebler line more than a decade ago. Pringles will fit in well with its core strengths in brand building and innovation. Kellogg also now owns high-quality snacks such as Cheez-It crackers.

What’s more, snacking a few times a day or more is a growing phenomenon. Restaurants and others are capitalizing on expanding snacking occasions by offering quick, portable, smaller-portioned, low-priced food in a myriad of ways to keep gaining market share of snack purchases.

Restaurants now claim 22% of consumers’ snacking occasions, up from 17% in 2010, according to food industry consultant, Technomic, Chicago. “Recent consumer research indicates that snacking is becoming a larger part of consumers’ daily lives,” says Technomic executive vice president Darren Tristano.

Technomic’s recently released “Snacking Occasion Consumer Trend” report finds that more than a third (37%) of consumers have broadened their definition of snacks to include more types of foods, beverages and restaurant fare. Impulse purchases of snacks are up from two years ago. The study also reports that 62% of purchasers said most of the snacks they bought for away-from-home consumption were impulse purchases. More than 33% of consumers expect to eat more healthful snacks in the coming year, indicating greater importance for operators to offer and promote better-for-you snacks.

In March, PepsiCo said that its potato chips have gone global. The company’s Banner Sunpotato chip brands generated more than a whopping $10 billion in annual global retail sales anchored by Lay’s, the world’s largest food brand (Banner Sunalso includes brands such as Walkers, Smith’sand Sabritas). The Banner Sunlogo, which appears on its packaging, has grown into a symbol for quality potato chips around the world, the Purchase, N.Y. company says. Lay’sand Walkersare among PepsiCo’s portfolio of $22-billion food and beverage brands, a number that has doubled since 2000, further illustrating the strength of the company’s worldwide food and beverage business, and proof positive that snacks are a powerful market segment now and for many, many years to come.

Despite the ongoing economic difficulties the country has faced since 2008, new product activity in the global snack food industry appear to surge on, unabated. Figures reported by Innova Market Insights in March showed a strong double-digit increase in 2011. Savory and salt snacks accounted for just below two-thirds of the total, with snack nuts and seeds taking up the remainder. The amount of snack manufacturers in the national footprint of producers is shrinking, but the volume of snacks produced and consumed continues to set records.

Snyder’s of Hanover has quickly climbed the ranks to be the nation’s top pretzel producer. Wise eventually wound up in the hands of Palladium Capital Partners of New York in 2000.

The SFA says that a lot of credit for the tremendous growth and success of the industry is due to the entrepreneurial spirit of the snack manufacturers. But a great deal of credit must also be given to vendors in the industry, who have worked hard and diligently to bring technological breakthroughs to the table that have helped improve the quality, productivity, accuracy and shelf life of many snack foods. We hope they all celebrate our 100 years with us.


What’s Behind the Flavour Dichotomy?

June 22, 2012

U.K. consumers say they want back-to-basics flavours on one hand, new and adventurous tastes on the other.

Still impacted by the lingering economic recession, today’s U.K. consumers are hesitant about spending, causing restaurant-goers to be more demanding than ever as they actively seek the best overall value. Technomic research shows that flavour is more important than ever before, driving customer traffic, shaping the overall dining experience and helping operators differentiate themselves.

Consumers indicate that they are increasingly driven to try unique flavours. Nearly three out of 10 consumers overall, and two-fifths of consumers aged 18–34, say they are more likely to try new flavours than they were a year ago, according to the latest Flavour Consumer Trend Report. Additionally, 39% of consumers express a preference for restaurants that offer unique or original flavours, up from only 35% of those polled in 2010. On the other hand, our research also highlights the impressive staying power of tried-and-true flavour profiles.

Together these findings signal the need for operators and suppliers to stay on top of flavour trends to reinvigorate classic offerings with innovative twists.

In Search of Flavour

Consumers seek out value, convenience and an overall satisfactory experience when choosing to dine out, but the taste and flavour of the food is arguably the most important factor of all. Differentiated flavour profiles fuel cravings, rouse consumer interest in the menu and most importantly, can help drive repeat restaurant visits.

When asked to describe their attitude towards trying new flavours, two-thirds of consumers (66%) indicate that they like to try new flavours from time to time—the same percentage of consumers in 2010. These consumers likely have a desire to try different flavours occasionally, but also enjoy ordering foods with familiar flavour profiles.

One-quarter of consumers (24%) say they actively seek out new flavours on a regular basis. Comparison data shows that consumers are slightly more likely to often seek out new flavours today than one year ago, perhaps due to a wider availability of ethnic or unique foods.

Base: 1,000 (2010 and 2011) consumers aged 18+
Source: Technomic Inc. Flavour Consumer Trend Report

While men and women are just as likely to actively seek out new flavours on a regular basis, data suggests that females may be more willing to try new flavours. More females (69%) than males (62%) report that they like trying new flavours from time to time. In contrast, twice as many males (14%) as females (7%) report that they prefer sticking to their favourite flavours and rarely try new ones.

Because the majority of consumers enjoy trying new flavours occasionally but do not actively seek them out, operators will want to consider low-risk menu strategies that allow for flavour innovation without ostracising those who are looking for classic flavours. For example, putting an innovative twist on an established favourite is a great way for operators to experiment with new and unique flavours without putting themselves at risk. And operators can explore new flavour profiles with limited-time-only and seasonal offerings. This strategy allows them to easily add and subtract items without making changes to the core menu.

Ethnic Flavours Can Fill the Bill

Although consumers most strongly prefer what is familiar to them, they are increasingly interested in expanding their palates. A quarter of consumers (26%) are more interested in trying ethnic flavours and cuisines now than they were one year ago. This is up slightly from 2010, when just 24% of consumers agreed.

Consumers aged 25–34 are the most likely to indicate a greater interest in ethnic flavours and cuisines compared to a year ago. Further, this group of consumers represent the largest increased interest in ethnic options (33% in 2010 versus 40% in 2011). Consumers aged 45+ also show a slightly greater interest in ethnic options today than in 2010.

Base: 1,000 (2010 and 2011) consumers aged 18+
Consumers indicated their opinion on a scale of 1–6 where 6 = extremely important and 1 = not important at all
Source: Technomic Inc. Flavour Consumer Trend Report

Unique Flavours as a Traffic Driver

Two out of five consumers report that new or innovative flavours influence their decision of which restaurant to visit. This sentiment is especially pronounced among consumers aged 25–34. About half of consumers in this age group say they would be more likely to visit a restaurant that offers new or innovative flavours.

Flavour innovation is slightly more important for operators today than in 2010, when just 35% of consumers agreed that they were more likely to visit restaurants that offer new or innovative flavours. Consumers aged 25–34 are especially more likely to visit a restaurant offering innovative flavours today than a year ago, with a 15% jump over the past year. Operators looking to appeal to this demographic may want to examine their menu to make sure they offer new and unique flavours.

Base: 1,000 (2010 and 2011) consumers aged 18+
Consumers indicated their opinion on a scale of 1–6 where 6 = agree completely and 1 = disagree completely
Source: Technomic Inc. Flavour Consumer Trend Report

The study also found that three out of 10 consumers say they are willing to pay more for a restaurant meal featuring new or unique flavours. Furthermore, this percentage has increased since 2010, when just 28% of consumers agreed that they would be willing to pay more for these restaurant offerings.

For some operators, this signals room to experiment with new and unique flavours. While adding unique flavours to the menu could lead to increased costs, in terms of skill, labour or rare ingredients, these costs may be offset if the flavour is well accepted and the menu item can be offered at a premium price point.

Back to Basic British

Despite consumers’ love for new flavours, national pride has driven up the demand for classic British food and drink, from artisan English food preparations to U.K. wines, beer and cider.

Aside from the revelry of the Jubilee and Olympics, another factor is fuelling this craving for the nostalgic: the global economic downturn. As belts tighten, there’s a return to the simple things, such as foods that evoke home cooking and a comfortable feeling. The comfort-food trend features strong British influences that are reflected in ingredients from meats to produce.

This love of all things British has many restaurant chefs returning to a “back to basics” approach to cooking. This retro sensibility includes a focus on local foods, subtle flavours and natural, artisan preparations that bring out familiar tastes.

Watch for continued exploration of foods and flavours derived from local farms and regional purveyors. Linked to freshness (and thus better flavour) in the minds of consumers, local and seasonal ingredients on the menu can convey a strong message of quality for classic foods. Flavour combinations will be simple, veering away from innovative or unique spice blends, seasonings and sauces to emphasise the traditional and subtle instead.

Look for chefs to also increase their promotion of traditional bread-making, butter-churning, cheese-making, butchery, charcuterie and other hands-on, artisanal preparation techniques. According to Foodwatching.com, some chefs may even own farms or elsewhere grow their own produce, in order to tout the quality and robust flavour of the ingredients that they use to create British favourites like fish and chips and pies.

On the other hand, a literal interpretation of the classics isn’t the flavour route that some chefs are taking; instead, they’re reinventing traditional British foods. For example, Chef Gary Rhodes showcases his love for British cuisine at his namesake restaurants. Rhodes has devoted his career to reinvigorating public interest in British foods by putting new upscale twists on traditional dishes.

Rhodes Twenty Four restaurant in London puts a spin on the conventional, and offers steamed mutton and onion suet pudding with crushed swede; pressed duck foie gras and pheasant terrine with quince and thyme jelly; and free-range English duck with caramelised turnips, buttered curly kale and duck prune gravy. Desserts include warm treacle tart with orange-curd ice cream and warm date pudding with toffee sauce and sticky-toffee ice cream.

Key Takeaway

Emphasising traditional flavours on the menu is a solid trend, but so is consumers’ continuous curiosity to try new foods. To delight those consumers, operators should work to develop flavours that stand out and mark menu differentiation. The bottom line is that inventive flavours—in combination with preparation styles—can create a craving for a particular food item, which in turn draws customers who cannot duplicate the flavour profile in their own kitchen or find in any other restaurant.


Targeting your Demographic

June 21, 2012

May 3, 2012 | By NRN Staff

An NRN special report on the changing profiles and needs of different generations

To explore the ways purchasing decisions vary across different groups, Nation’s Restaurant News canvassed six experts in the fields of consumer behavior, branding, foodservice and demographic trends for their insights into the mind of today’s consumer.

On the assumption that food quality and value were universally important, we removed those from the survey, revealing the less tangible elements of the dining experience that make restaurant brands resonate with diners.

The experts were asked to use their professional opinions to consider seven attributes through the perspective of 10 different consumer groups. For each of the 10 groups they ranked the following attributes in descending order of importance to that group: atmosphere in the restaurant, authenticity of the brand, convenience, healthfulness of the food, personal connection with the brand, service style and social responsibility of the brand.

Survey sources
• Robert Hardy; founding partner, Bellwether Food Group; Topsfield, Mass.
• Dave Jenkins; partner, CustomersDNA; Inverness, Ill.
• Dennis Lombardi; executive vice president, WD Partners; Columbus, Ohio
• Bonnie Riggs; restaurant industry analyst, The NPD Group; Port Washington, N.Y.
• Gary Stibel; chief executive, New England Consulting Group; Westport, Conn.
• Darren Tristano; executive vice president, Technomic; Chicago

Convenience reigned, with the panel citing that as most important for six groups. Atmosphere also was a key driver, ranking in the top five for all of the demographic groups.

Beyond those aspects, the nuances of each demographic group begin to emerge. As a rule, younger consumers — Under 18, Millennials and Gen Xers — were said to care more about a brand’s authenticity. In fact, that quality was said to be most important among the Under 18 group. Older consumers and those with families were more likely to be drawn to brands that offered a service style suited to their needs and brands that offered healthful cuisine.

Still, personal connection with a brand emerged as a universally desired trait, underscoring the idea that today’s restaurant consumers want more than just to fill their bellies. They seek a deeper relationship with brands that can seamlessly blend into their lifestyles and offer experiences uniquely tailored to their needs.