Snacking to prove more filling for TV

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After driving much of the food industry's merger and acquisition activity last year, snacking stands to drive more TV spending in the year ahead, as food marketers pile new entries into a $50 billion snack category whose boundaries grow almost by the day. * Such marketers as ConAgra Foods, Hershey Foods, Kellogg Co. and M&M/Mars have vowed to step up new-product activity as they target a snack category, whose boundaries are expanding to encompass meal replacement in some cases. Lehman Bros. analyst Andrew Lazar sees the food industry's TV spending on the rise for several reasons, including new management at such companies as Hershey and Campbell Soup Co. and a new realization that ad spending is unavoidable.

Several companies he follows, including Kellogg, Hershey and ConAgra, project double-digit increases in ad spending, though they're hoping to hold overall marketing spending flat as a percent of sales, taking money from promotion to fund advertising. Whether such good intentions can survive the realities of competition remains to be seen, but Mr. Lazar feels the conviction is real, which should bode well for upfront activity from the companies. "They'll attempt, as they've tried in the past, to raise advertising in lieu of trade spending," he says. "Overall, I would expect that to be even greater in snacking. It's a category that's growing and has become more competitive because of consolidation."


Snacking will be "the one bright area in an abysmal year for agencies, networks, and print and Internet media, where budgets are being cut [or] canceled," predicts Burt Flickinger, managing director of consultancy Reach Marketing. Although food companies he works with keep budgets confidential, he adds: "It's one of the few areas that will see healthy spending increases for the fall season ... at a time when other core categories, from auto to white goods to basic consumables, are cutting significantly."

Mr. Flickinger says Ken Wolfe, former chairman-CEO of Hershey Foods, already had been working with Omnicom Group's DDB Worldwide, New York, to develop new products to be positioned as snacks. Rick Lenny, named CEO to succeed Mr. Wolfe in February, brings extensive experience of his own in snacks, having formerly headed Nabisco Foods' cookie and cracker business. And while Mr. Lenny won't elaborate on Hershey's plans, he says the snack category is squarely in the company's sights.

Mr. Lenny sees "opportunities to provide benefit upgrades to core brands" through innovative packaging and "increasing advertising support behind those initiatives that add value to our brands."

He hints at moves beyond the company's core chocolate and candy categories into the broader snacking category. Industry analysts have expected Hershey would launch a foray into the granola/snack bar segment, the fastest growing area within snacks.


In another example of snack-segment-blurring, cereal giant Kellogg, which already makes NutriGrain bars, began testing a new brand called Krave in Great Lakes markets earlier this year. The snack bar is positioned as tasting like a candy bar but having the same nutrient profile as sports/energy bars.

Mr. Flickinger sees such moves, combined with Kellogg's acquisition of Keebler Foods Co. last year, giving Kellogg hope of recovering from the plateauing of breakfast cereal sales and its ill-fated acquisition, followed by spinoff, of Lender's Bagels in the 1990s.

"Keebler [products]-like Mars, Hershey and Nabisco-are becoming strong meal substitutes," he says.

Keebler, which was traditionally a scatter TV buyer, will be linked to Kellogg, traditionally a huge upfront TV spender, having poured $241 million across broadcast, spot, syndication and cable last year, according to Taylor Sofres Nelson's CMR.

Mars, too, is looking to bridge the gap from candy to meal-substitute snacks, possibly though bringing successful products from Europe and Asia to the U.S., Mr. Flickinger says. "The brilliance of that strategy is that candy and snacks are becoming substitutes for meals, especially for high school and college-age kids and time-starved working adults."

Americans increasingly are using snacking as a fourth meal, according to Mintel Consumer Intelligence, a researcher that found Americans now consume on average four meals a day, supplementing the traditional three with an afternoon snack.

The number of new snack bar items rose 71% to 426 in 2000, according to Marketing Intelligence Service, a new-product tracking company. Overall, the total number of new entries in snack segments-including salty snacks, meat snacks, chips, crackers and cookies-rose 28% to 2,376 in 2000, following a similarly robust 26% increase the year before.


"It's the hot area," says Tom Vierhile, general manager of Marketing Intelligence, noting some of the acquisitions of the last year, such as Kellogg's acquisition of Keebler and the purchase of Nabisco Foods by Philip Morris Cos.' Kraft Foods, were motivated by marketers' interest in tapping into snacking. Even PepsiCo's pending acquisition of Quaker Oats Co., while centered on the Gatorade drink brand, also brings Quaker's rice cakes and snacks business into the Frito-Lay fold, where it could see expansion.

"Some of the categories within [snacking] that are red hot are snack bars and meat snacks," Mr. Vierhile says. "What you're seeing, too, are things like hot snacks that kind of go into the meals category," he adds, such as H.J. Heinz Co.'s Hot Bites.

Even beverage marketers are toying with snacking, as Procter & Gamble Co. last year began test-marketing Spire, a citrus-dairy drink blend heavily fortified with nutrients and positioned as a "snack." Spire's future hinges on decisions by the new company jointly owned by P&G and Coca-Cola Co., which the companies are expected to form by June, pending regulatory approval.

"I think everybody is realizing that within that $50 billion snack market, the line between the segments is blurring quite a bit," Mr. Lenny says. "The arena presents expandable consumption provided we can bring news and excitement to consumers. ... Look at the macro trends-continuation of reduction in food prep, continuation of snacking and grazing. It's a large market. It's growing. It's on trend, but it requires a great deal of discipline, strategy and execution."

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