Snacks are having a moment and food makers cashing in

February 26, 2016

Samantha Bomkamp
Chicago Tribune
February 22, 2016
http://www.chicagotribune.com/business/ct-snacking-boom-0223-biz-20160219-story.html

The market for snacks, sold at Walgreens and other retailers, is growing rapidly, analysts say, and manufacturers are working to cash in on the popularity. (E. Jason Wambsgans / Chicago Tribune)

The market for snacks, sold at Walgreens and other retailers, is growing rapidly, analysts say, and manufacturers are working to cash in on the popularity. (E. Jason Wambsgans / Chicago Tribune)

Three squares are so passe. Snacking is having a moment, and — you’re driving it.

You could be a 25-year-old Instagram-loving foodie, who shares daily updates of your homemade mini-meals and trendy restaurant tapas. Or a 33-year-old budding entrepreneur, who opts for smoothies and meal replacement bars because you don’t have time to shop, but have no time for junk food, either. Or a 41-year-old father, who indulges in a daily Starbucks run with co-workers. Or a 65-year-old retiree who isn’t up to preparing dinner anymore and opts for a bowl of popcorn or ice cream instead.

Consumers are driving food industry players — manufacturers and restaurants — to introduce items that satisfy a rapidly growing appetite for smaller meals that can be consumed on the run, even though it may not be the healthiest way to10 eat. Whether the fear of calories posted on restaurant menu boards is causing us to order smaller meals or hectic schedules are driving us to this new kind of eating, major food companies have caught on in a big way.

“The tradition of a piece of fruit or a handful of nuts as a snack — those are still there, but overall the definition of a snack has dramatically changed,” said Technomic President Darren Tristano.

Snacks spell big opportunity for food companies because they tend to be more expensive than traditional meal components. And one look around a grocery store shows that retailers like their potential too, as snacks get more prominent space on shelves, with some healthier fare being stocked in the produce department.

At cereal powerhouse Kellogg, whose brands include Pringles, Cheez-It, Keebler and TownHouse crackers, snacks have gone from 20 percent of its business in 2000 to almost 50 percent today.

This year, the company expects brands that have been struggling, like Kashi and Special K, to lead the growth. Both saw strong sales in the early 2000s, but fell out of favor when consumers steered away from “diet food,” Kellogg CEO John Bryant said on a conference call last week.

The brands have been revamped, and boxes include buzzwords like “nourish” instead of “diet,” and Kellogg is focusing the brands on hand-held forms, instead of just cereal by the bowl. “The expectation of consumers in the snack market has changed,” he said.

But Kellogg also expects brands like Pringles and Cheez-Its will be strong, and it is hurrying to develop more single-serve packages for its snacks so they become a grab-and-go item in a convenience or drug store.

At Hormel, whose meat brands including Jenni-O and Spam, it’s Wholly Guacamole that’s stealing the show, particularly in single-serve containers, according to CEO Jeff Ettinger. Hormel also recently introduced Skippy PB Bites with either a crunchy peanut butter or pretzel core.

Oak Brook-based TreeHouse Foods used to count beverages as its biggest category, but a 2014 acquisition propelled its snacks category to No. 1, and it now says it’s the largest private-label trail mix maker in the U.S.

Even health care companies are entering the snack market.

Abbott Laboratories, maker of Pedialyte, Ensure and Similac formula, earlier this month launched a line of snack bars called Curate aimed at adults seeking healthier alternatives to chips or cookies.

And last month, Chicago-based Hillshire Brands introduced a line of snacks aimed squarely at the young Instagram-addicted foodie, launched at a VIP event in New York with a former “Top Chef” contestant and Bravo’s Andy Cohen. The snacks include chicken bites with sauces like mango habanero and spicy chipotle and “small plates” of salame, cheese and crackers.

“Consumers are shifting away from this traditional snacking definition to include a more expanded variety of options to satisfy a more sophisticated food palate,” said Jeff Caswell, vice president and general manager of Hillshire Snacking. “This evolving definition is being spearheaded by millennials. … They have a passion for food exploration and like to try new flavors and push boundaries.”

He said sales of the new line have exceeded expectations.

Millennials, the largest segment of the U.S. population, are driving the snacking industry to create more fresh, healthy and protein-packed options, but other generations are partaking as well. People tend to snack more as they age, in part because older adults don’t have young families to cook for, said Darren Seifer, an NPD Group food and beverage analyst. The biggest snackers are those 55 to 64, NPD’s research shows.

But more snacking doesn’t always mean hitting the vending machine for a bag of M&Ms. Americans are eating fewer sweet snacks, choosing to save them for an evening indulgence, Seifer said. Their consumption fell about 5 percent in the past decade, compared with savory snacks like chips and beef jerky, which grew by 7 percent in the same period. Meanwhile, so-called “better-for-you” snacks like yogurt and cottage cheese cups have grown 25 percent.

“We start off the day with the best of intentions and then about 8 p.m., after you put the kids to bed, we’re allowing ourselves a bit of indulgence,” he said.

Deerfield-based Oreo maker Mondelez has seen both sides of America’s snacking obsession. Spurred by slowing sales of sweet snacks, it introduced Oreo thins to cater to those who want a healthier version. Mondelez, which also makes Ritz crackers, Cadbury chocolate, Sour Patch Kids and Honey Maid graham crackers, says it’s also focusing on smaller sizes for its brands to cater to snackers.

The company already derives 85 percent of its sales from snacks, up 10 percent from a year ago, and it sees a great deal of growth potential this year.

“Why do we like snacks so much? Quite simply, because of their growth potential. Snacking is a $1.2 trillion market, and it’s growing everywhere around the world,” said Mondelez CEO Irene Rosenfeld at a conference last week.

Smaller, more frequent meals may appeal to many Americans, but they’re not necessarily the healthiest option.

“Snacking or frequent eating tends to be less satisfying to your brain,” said Georgie Fear, a registered dietician and author of “Lean Habits For Lifelong Weight Loss.” “It’s hard to feel like we’ve eaten if we’ve just unwrapped a bar.”

In general, frequent snacks lead to “more dishes, more calories, and they’ve also hampered people’s decision-making abilities” because people can use snacks as an emotional crutch, Fear added.

There is a place for healthy snacking, Fear said, but she recommends sticking to options like whole fruit and yogurt. “Many people have gone out of their way to shift to smaller, more frequent meals. And then they (get more information) and think, ‘I’ve been washing that much Tupperware and it’s working against me?’ “


Is Chipotle really America’s ’emotionally abusive boyfriend?’

February 25, 2016

Grace E. Cutler
FoxNews.com
February 18, 2016
http://www.foxnews.com/leisure/2016/02/18/chipotle-survival-part-joke/

 

Chipotle has been the brunt of jokes and hit by lawsuits, but some experts are predicting positive growth figures as early as the end of the year. (AP)

Chipotle has been the brunt of jokes and hit by lawsuits, but some experts are predicting positive growth figures as early as the end of the year. (AP)

On Sunday, TV host and comedian John Oliver skewered Chipotle over its food safety problems.

The host of HBO’s “Last Week Tonight,” called Chipotle “America’s preferred over-the-counter laxative.”

He ran down a list of Chipotle’s problems over the past months, including E. Coli, salmonella and norovirus outbreaks. He also had a mock promo showing mice scurrying over food and cited a fake report about a live bird living in a Florida Chipotle as recently as January.

About America’s continued love of the chain, Oliver quips:

“They know it’s bad and they want it even more: Chipotle is now officially America’s emotionally abusive boyfriend.”

“That’s harsh,” Darren Tristano, president of Technomic, a Chicago-based food research firm said about Oliver’s comment. “They shouldn’t be left off the hook, but they deserve the chance to really get back on track.”

Over the weeks, Chipotle has been the target of jokes and critics alike –and rightly so.

The Food and Drug Administration reports 55 people were infected with E. Coli alone across the U.S., which resulted in 21 reported hospitalizations. The chain is now the focus of a criminal investigation by the FDA and it has been slapped with a slew of lawsuits. The latest one –this week–is from a shareholder suing Chipotle, alleging the fast food chain made false and misleading statements about its business to investors.

Chipotle isn’t the only food supplier to have a major outbreak of food-poisoning. In the 1993, Jack in the Box had an E.Coli crisis stemming from undercooked beef patties. More recently, Blue Bell ice cream experienced a listeria outbreak, which forced the tubs off of store shelves. Both companies were able to fix their problems and turn their image around.

But Chipotle’s marketing has centered on the idea that it makes a high quality food. These outbreaks, and Chipotle’s problems in tracing the source, puts that question.

As way help its tarnished image, Chipotle earlier this month closed more than 2,000 locations to get employees up to speed on changes to its food safety measures. It also announced a $10 million investment in local farmers that supply ingredients to the food company. To help build some media buzz around these efforts, chains gave away free burritos.

The give-away was “clearly part of a much larger plan to rebuild trust with the customers,” Bruce Hennes, managing partner of Hennes Communications, a crisis communications firm based in Cleveland, told the Cleveland Plain Dealer.

Just how long it will take for the company turn around public opinion is still unclear, but some experts are predicting positive growth figures as early as the end of the year.

Is that’s hard to believe? Tristano says not really, given the “overwhelming” loyalty they have with some customer groups, especially the 18-35 male demographic.

“Our research indicates that American consumers are very forgiving with restaurant brands they are loyal to and have developed both an affinity and frequency with,” said Tristano.

So is Chipotle America’s “emotionally abusive boyfriend?” Sounds like for some, it’s more like a relationship on the mend.


The chips are down for Chipotle, but not for long

February 11, 2016

by Todd Wasserman
Campaign
http://www.campaignlive.com/article/chips-down-chipotle-not-long/1383083

In 2013, Chipotle released a haunting animated video featuring a scarecrow that observes the horrors of automated farming. Set to Fiona Apple’s rendition of “Pure Imagination,” the ad went on to win CAA Marketing a Grand Prix at Cannes the following year.

Before the Cannes judges weighed in, though, Funny or Die did with a damning parody changing the tune to “Pure Manipulation” and offering a cynical analysis of Chipotle’s marketing. “We can say what we want. In our world of pure imagination,” went the lyrics. “Just pretend we’re your friends. It’s what we want you to believe.”

Funny or Die’s blistering critique did little to hurt Chipotle’s appeal. Instead, several incidents of food-borne illnesses over the past few months have exposed the chasm between the chain’s brand promise and the realities of running a large-scale restaurant operation. It’s safe to say, at least, that Chipotle won’t be trumpeting its “food with integrity” mantra for a while or criticizing rivals for their factory farming practices.

Because of its healthy financials and sheer size — the company’s market cap is around $14 billion — few expect Chipotle to go the way of Chi-Chi’s, another Mexican chain that closed its doors in 2004 after it unknowingly perpetuated a hepatitis A outbreak that killed four people.

That prognosis for Chipotle, however, assumes that the worst of the crisis is over. Going forward, Chipotle will source more of its food from major suppliers, mooting a prime differentiator from other fast-food chains. The company is also planning to launch a new branding and PR campaign to woo back its Millennial base. Already, a burrito giveaway designed to appease customers after the chain closed its doors briefly Monday for companywide safety meeting has overshadowed concerns about food-borne illnesses, at least on social media. (Reps from Chipotle and agency GSD&M could not be reached for comment.)  Experts predict that Chipotle will likely end up in the clear.

The damage so far
Almost 500 people have gotten sick from Chipotle food since last June, 20 of whom were ill enough to be hospitalized. One such customer, Chris Collins of Portland, Ore., experienced bloody stools and excruciating pain after ingesting E. coli 026 from one of Chipotle’s chicken bowls. At one point, his doctors feared kidney failure. Though that never came to pass, Collins was still weak and “emotionally shaky” in December, according to a cover story in Bloomberg Businessweek.

Such stories have hurt Chipotle’s bottom line and brand image. In early February, the chain said sales at established restaurants fell by a third in January. That news followed a 15% drop in the fourth quarter of 2015. At this writing, the company’s stock price was down about 42% from its 52-week high.

On the brand side, Chipotle’s image has gone from positive to negative. YouGov’s BrandIndex, which surveys 5,000 consumers online every day, rates brands on a buzz score that ranges from -100 to +100, with zero being a neutral position. For most of 2015, Chipotle’s buzz score was around +10, but in January, that sunk to -29 and was at -27 at this writing.

“Chipotle has been playing catch up on this crisis from the start,” says Ted Marzilli, CEO of BrandIndex. “The brand was slow to respond to the initial incident. [It has] just not been able to get out ahead of this crisis, and fairly or unfairly, is paying the price in both public perception and decreased sales.”

The six-month rule
Despite the challenges though, few people see this as a fatal blow to the chain. In a research note to clients, Wells Fargo analyst Jeff Farmer cited previous incidents of food-borne illnesses at other national chains to demonstrate same-store sale declines can be cut in half six months after the incidents occur (assuming that there are no more incidents). Farmer added that same-store sales of such affected companies can also rise 12-15 months after the incident.

In an interview with Campaign, Darren Tristano, president of Technomic, food industry consultancy, cited the same rule. “Our research indicates that in six months, most consumers forget about these food-poisoning issues that come up,” he said.

The Blue Bell Effect
In Chipotle’s case, that’s a pretty safe bet. Jonathan Bernstein, a crisis PR expert, says that Chipotle has built up so much good will with its branding efforts that it can withstand this major PR setback. He compared Chipotle to Blue Bell, the ice cream brand that is so beloved by its fans that many were able to overlook a recent outbreak of listeria linked to the brand.

“Customers’ loyalty to a brand can make a huge difference in overcoming even food illness-related crises and people really stuck with Blue Bell a long time after many would have done the same — given a choice of other ice creams,” he said. “With Chipotle, they created such good will before these problems that although that’s been eroded, it’s not terminal at this point.”

Rebeca Arbona, executive director at Interbrand, unconsciously echoing Funny or Die’s critique, noted that brand loyalty is based on a relationship that mimics real friendship. “You have many impressions and interactions,” she said. “That works in your brain like knowing a person. If you know a person really well and you like them, you’re going to forgive them a lot.” Arbona said that she was surprised, for instance, that Toyota not only weathered its 2009-2010 slew of recalls — issues that were linked to the deaths of some consumers — but has nearly doubled its brand value since then.

That said, Tristano said that it’s likely that some customers will never return to Chipotle. Most will though. “Younger customers will return,” he said. “They tend to be more trusting and more brand loyal. If we look at this, it is clearly a setback for a brand that has had nothing but success in the industry.” The fact that this happened to a brand whose credo is “food with integrity” is ironic, Tristano said, but won’t prompt the masses to label it hypocritical.

Fixing the brand
As Marzilli noted, Chipotle didn’t deal with the crisis effectively at first. Though the company closed 43 restaurants in the Northwest after the E. coli outbreak that affected Chris Collins became public, some 234 customers and employees contracted norovirus at a Simi Valley, Calif., location in August. That same month, some 64 people in Minnesota fell ill from salmonella-tainted tomatoes.

It wasn’t until Dec. 10 that Chipotle CEO and founder Steve Ells appeared on the “Today” show to apologize to customers who had gotten sick from eating at the chain. On the operations side, Chipotle hiredMansour Samadpour, head of IEH Laboratories & Consulting Group in Seattle, to overhaul the company’s food safety efforts. Among the changes: More food will be prepared at commissaries, rather than on site, undercutting Chipotle’s “food with integrity” mantra since often the food won’t be local and fresh. Food will also be given high-resolution DNA-based tests, a measure that will weed out smaller suppliers who can’t afford that expense. On the PR side, Arbona said closing all the stores for a few hours was a good move. “It was a symbolic act,” she said. “They were hitting reset.”

Allen Adamson, a branding consultant, said that Chipotle will have to ditch its previous brand communication, which struck a lighthearted tone and presented a somewhat holier-than-thou image related to food quality. “You want to see the CEO on screen talking about what they’re doing, not an actor saying ‘Trust us,’ ” Adamson said.

Bernstein said Chipotle should focus on transparency, training its personnel in the new food safety protocol and setting realistic expectations “that they’ll do their best to prevent illness, but particularly with norovirus, it’s not always possible.”

What might be fatal, aside from more outbreaks, is any communication that smacks of arrogance. As we’ve seen in recent years, consumers will overlook safety issues, even ones that result in deaths, as long as the company doesn’t talk down to them. As a counter example, Arthur Andersen, the financial consultant, was drummed out of existence after it got caught up in the Enron scandal in 2002. While that was a huge blow, execs at the company exacerbated the damage by behaving arrogantly during a Justice Department grilling. “They got tried in the court of public opinion,” Bernstein said.

Chipotle is unlikely to make the same mistake. “Ultimately it comes down to humility,” Bernstein said. “If they can express sufficient humility, people will forgive them.”

Read more at http://www.campaignlive.com/article/chips-down-chipotle-not-long/1383083#AVGB4yq6reisiIhh.99


Long John Silver’s plans reboot just in time for Lenten fish fries

January 26, 2016

Christmas comes in February for seafood restaurant chain Long John Silver’s, which is launching a reboot of the iconic brand in 2016.

Pittsburgh is front and center for the new Long John Silver’s because of the region’s large Catholic population, the third largest nationwide, according to CEO James O’Reilly. Lent, the 40-day season of penance and avoiding meat at meals, starts Feb. 10, bringing with it boom sales for the privately held, Louisville, Ky.-based company.

“There will always be ups and downs in the restaurant industry, but it’s all about delivering consistency to customers,” the 49-year-old Mr. O’Reilly said. “The time of Lent for us is what Christmas is to retailers.”

Pittsburgh and the surrounding five counties have between 500,000 and 600,000 Catholics, according to Pittsburgh Catholic editor William Cone. The newspaper is preparing to publish its annual list of parish fish fries Jan. 29 in preparation for the start of Lent.

“It’s probably one of our most popular issues,” Mr. Cone said. “People wait for it all year.”

Mr. O’Reilly was in Monroeville Thursday for a daylong meeting with about 50 operators of its 17 corporately owned stores in the Pittsburgh area and some franchisees from outside the region. He planned to discuss the staffing increases at the restaurants — 300 new jobs are planned — and improvements to stores and parking lots.

One thing that won’t change much is Long John Silver’s menu, which has been criticized in recent years as unhealthy for its fat and sodium content. National Public Radio once called Long John Silver’s food a “heart attack on a hook,” but some meals have since been discontinued, as was the use of trans fats.

Baked fish options have always been available from the chain and one dinner has just 600 calories, Mr. O’Reilly said. What’s more, consumers can build meals with even lower calorie counts.

Having healthier options is key, said Darren Tristano, president of Chicago-based marketing research outfit Technomic Inc. But consumers aren’t thinking of healthy eating when eating out.

“Quite frankly, consumers are looking for fried food,” he said. “Indulgence away from home is what they’re looking for and it’s also often very affordable.”

Mr. O’Reilly, who came to Long John Silver’s in March 2015 from hamburger chain Sonic Corp., takes over the reins at a difficult time as consumers have been shunning traditional fast food in favor of restaurants selling healthier fare. Long John Silver’s, which has about 1,300 stores nationwide, also has had changes in leadership.

Mr. O’Reilly replaced Mike Kern, who served as CEO for three years. Mr. Kern was part of investor group LJS Partners LLC that bought the restaurant chain from Yum! Brands Inc. in 2011. The company was founded in 1969 and did not disclose sales figures or the cost of the store upgrades, which are being carried out nationally as well.

Consumers will continue to seek out Long John Silver’s food, partly because there are few other places that focus on fried fish, said Warren Solochek, president of the food service practice at Port Washington, N.Y.-based NPD Group Inc. New paint, lighting and other planned store improvements aside, the challenge for Mr. O’Reilly will be to keep the restaurant name in the consumer’s mind.

“What are they going to do to be top of mind?” Mr. Solochek said. “And he may have a plan to do that.”