The grand entrance of Kraft Foods and Quaker Oats Co. onto the nutrition/energy bar scene marks the end of what had been a fragmented category dominated by small players.
The eponymous brands from PowerBar and Balance Bar Co. have comprised roughly half the category that has reached $500 million in just a few short years, and mainstream marketers now want a piece of the action. Kraft last week announced the acquisition of Balance Bar's $100 million franchise, while Quaker next month will try again to extend its Gatorade sports beverage brand into nutrition bars.
"There has been very little growth in the food industry and, be it functional, natural or nutraceutical, those are the areas where we've seen some consumer attention," said Dave Nelson, an analyst at Credit Suisse First Boston. "The market is fragmenting along ethnic, income and lifestyle lines; and mainstream companies aren't there, so now they're looking at niche categories to address that."
This is Kraft's second recent acquisition in good-for-you foods, following this month's announcement that it is purchasing soy-based meat alternative marketer Boca Burger. For food giants such as Kraft, buying proven brands in the burgeoning natural and organic sector is one way to see success in the hard-to-crack functional foods arena.
A PROVEN COMMODITY
"Some companies have tried to develop functional foods internally that haven't worked, but with Balance Bar, consumers have already spoken with their dollars and said this is a winner to the tune of $100 million," said Dave Owens, senior VP-strategy for Kraft Foods North America.
Kraft plans to leverage its global distribution system to extend the reach of Balance Bar, which first caught the marketer's attention with its double-digit sales growth rates and increasing inclusion in kids' lunch boxes. Balance Bar should be available at grocery and convenience store checkouts--wherever Altoids, marketed by Kraft's Callard & Bowser-Suchard unit, is sold, Mr. Owens said.
Though marketing plans won't be developed until Kraft completes the acquisition in February, the mass marketer likely will raise the advertising stakes beyond the $8 million in measured media Competitive Media Reporting said Balance Bar spent in 1999, to spread the word about the brand's new ubiquity.
Kraft has not said whether it will move the Balance Bar business, currently at Suissa Miller, Los Angeles, to one of its core agencies. Its agency roster includes Ogilvy & Mather, New York; and FCB Worldwide, Leo Burnett USA and J. Walter Thompson USA, all Chicago.
Undeterred by its failed Gator Bar, an energy bar conceived and developed by its beverage division in the mid '90s, Quaker now is marrying the athletic insights of that division with the snack know-how of its foods' unit to introduce the new Gatorade Energy Bar. The product, marketed in chocolate, peanut butter and mixed berry varieties, will be introduced in West Coast markets where Quaker is currently marketing two new fortified beverages under the Gatorade umbrella: Torq energy drink and Propel bottled water. The energy bars will be supported with a yet-to-be-determined media budget from FCB Worldwide, Chicago. That agency also handles the new Gatorade beverages.
As mass marketers crowd onto the energy bar bandwagon, PowerBar, at least for now, is declaring its continued independence.
"We see our greatest strength as our authenticity, the fact that the company was started by a marathon runner and is true to nutrition and performance," a spokeswoman said. The leader in the category, with sales of $142 million in 1999, PowerBar has had its share of offers but has clung to its plan to go public in the near future.
Kraft's purchase of its closest competitor and Quaker's entry certainly "marks the staying power of the category," the PowerBar spokeswoman said, but PowerBar has seen mass marketers fail before. Besides Quaker's earlier attempt, M&M/Mars dropped out of the race with its VO2 Max Bar about two years ago--strangely enough, because consumers complained that the candy company's entry didn't taste good.
Copyright January 2000, Crain Communications Inc.