Biscuits: A snack for all occasions
Feb. 1, 2015
by Jack Skelly, food analyst, Euromonitor International
For food companies that are considering diversifying their product portfolios, they need look no further than biscuits. Biscuits are universally popular, with global sales reaching US$92.0 billion in 2014; in most regions, they outperformed the rest of the packaged food market in terms of value growth and, importantly, also outperformed value sales of confectionery with which they compete for sales. Despite being late to the party, Kellogg Company, Battle Creek, Michigan, US, has recently recognized the utility of biscuits to its business, having acquired Egyptian manufacturer Biscomisr. For a product as diverse as biscuits, the question is which strategy manufacturers should pursue.
Why do people buy biscuits?
Biscuits fit a variety of occasions and lifestyles. Once purchased exclusively as treats, the popularity of biscuits consumed at certain occasions rose rapidly over 2009-14. In Western Europe, Mondelez International’s Belvita brand has achieved astonishing value sales growth of 382% in the last five years. Belvita is angled as a breakfast product that is consumed while travelling to work, with its packaging boasting the biscuit’s high-fiber credentials. Belvita is a highly-successful example of a product spotting an eating occasion where the need for convenience had been neglected by rival companies. The product targets a gap in the market; it appeals to time-poor workers who are also health conscious.
Compare this with the success of chocolate coated biscuits and cookies. These products have also been performing well in Western markets; over 2009-14, combined sales increased by US$1.4 billion, which is larger than the entire chocolate confectionery category in Spain. Manufacturers have invested in new product developments and added value. Rather than appealing to consumers by using health claims, companies have moved in the opposite direction and embraced indulgence. Cookie manufacturers, for example, have increased the use of double or even triple chocolate recipes; another innovation has been cookies with gooey chocolate centers. In the UK, Burton’s Foods’s Maryland brand has achieved success with this approach. These hedonistic biscuits are considered a treat that should be consumed at home, and the higher quality of these products also leads to higher unit prices.
Like Belvita, chocolate biscuits are suited to certain occasions, such as after dinner as a dessert. By becoming synonymous with certain eating times, consumers are becoming more consciously aware of choosing chocolate biscuits over, for example, chocolate confectionery. Indeed, there is much crossover between biscuits and chocolate; companies such as Mondelez, Deerfield, Illinois, US, manufacture chocolate biscuits using Cadbury’s or Milka chocolate while Mars manufactures M&Ms cookies. This strategy secures additional sales for these companies.
Indulgence is also a strong trend in Asia Pacific, where cookies rose at a 10% value CAGR between 2009 and 2014. On-the-go indulgence is favored in this region, with packaging sizes of 0-100g outperforming growth in sales of larger packs in China and Japan. Assessing the broader biscuits category in Asia Pacific, it is worth noting how well brands are performing; sales of Mondelez’s Oreo brand have increased by US$590 million over the last five years. Branded biscuits should continue to perform well over the next five years as well.
Strong branding necessary for success
With so many factors contributing to growth, biscuit operators should have plenty of optimism for the next five years. Yet despite the diversity of reasons there are three core ingredients needed to ensure impressive growth of companies such as Mondelez and Burton’s, Birmingham, UK. Firstly, occasion eating is important, as this communicates a clear position for products. For example, Belvita has been successful due to its positioning as a breakfast biscuit, and the health claims on the packaging. Secondly, strong branding is important, especially in developing markets, as trust is stronger for branded goods than private label counterparts. While it is an advantage to own a strong pre-existing brand, such as Oreo, the success of Belvita demonstrates that a strong brand can be created in a short space of time, with the right promotional strategy behind it.
While baked goods such as breakfast cereals and bread are struggling to balance growth around the world, biscuits are some of the highest performing products in all markets. Investing in biscuit manufacturing could be a lucrative move. With Mondelez achieving such a strong position in the global market — and with Yildiz, Istanbul, Turkey, and Kellogg looking to expand aggressively — companies considering entering biscuits may regret dawdling on their decision. In addition, the strategies of Mondelez and Mars, which have spun-off their leading chocolate confectionery brands into chocolate biscuits, could signify a new direction for chocolate confectionery manufacturers. Biscuits is a “white space,” i.e. an opportunity to generate additional revenue.