KP Snacks, the UK arm of Germany’s Intersnack, is focused on growing its share of the country’s snack sector through a strategy focusing on the strength of its core brands, its retail customers and on growth areas of the market. Katy Askew spoke to Andy Riddle, sales director at KP Snacks, to find out more about how the group hopes to expand.
It has been five years since KP Snacks was acquired by Germany-based snack group Intersnack from the then United Biscuits and, after a period of integration, the company has now focused its attention on how to drive growth.
The combined business today has a retail sales value of just under GBP500m (US$653.5m), making it the country’s second-largest salty snack maker behind PepsiCo.
“Our business strategy has four pillars: growth of core brands; putting the customer at the heart of our business; engaged and motivated employees; and driving a more effective and efficient business in order to fund and provide the fuel for those other three aspirations,” sales director Andy Riddle tells just-food.
KP Snacks is focusing its innovation and marketing on supporting its core brands – Pom Bear, McCoy’s, Hula Hoops and KP Nuts. “We are taking the halo brand culture, using the scale and identity of the brand and maximising our investment, rather than proliferating our investment across lots of disparate options in products and brands and campaigns. We talk about four key brands that we see most of the growth coming from, that is where we will put most of our NPD and most of our advertising,” Riddle says.
In order to grow Hula Hoops and McCoy’s, KP Snacks is using innovation to broaden their appeal. With Hula Hoops, the company has in the last two years introduced baked and Puft varieties, which the company has targeted at more calorie-conscious consumers. “Hula Hoops Puft was a more permissible calorific conscious play. Baked is a slightly different area for Hula Hoops. And you will see Hula Hoops innovation that takes a stretch,” Riddle reveals.
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By GlobalDataLikewise, with the launch earlier this year of McCoy’s Chips, the business is attempting to appeal to a more diverse consumer and move on from the “man crisp” image it cultivated during the 1990s. McCoy’s Chips are also targeting a sharing eating occasion, a step away from the single-serve and multi-pack section of the market where the brand is strongest. “It takes [McCoy’s] into a different flavour territory, a different delivery territory, a different mission and occasion territory, and a different consumer. Ten years ago, the brand had positioned itself as a very male, macho, pub-focused brand and we have been stretching that over the last two or three years.”
Brand extension seems like an area from which the KP Nuts brand, which primarily sells peanuts, could also benefit. While Riddle suggests efforts to extend the brand are in the pipeline, he is coy on whether the business is considering launching different nut varieties. “We are looking to take the KP brand into different missions which I can’t reveal for now. We are looking at how do we stretch the KP brand. How do we take the KP brand into different consumption occasions?”
The focus for the KP brand is increasing per capita nut consumption in the UK, which lags levels seen in other European countries. In order to crack that nut, the company is working to address the seasonality of nut-eating in the country.
“With our core nut proposition, we tap into the sharing mission. We are going to tap into where do people graze, where do they get together, triggering in the consciousness ‘This is what you do at Christmas and this is why you do it. But you are experiencing that situation at other times of the year. Why don’t we connect the dots for you?'”
KP Snacks is also looking to tap into what Riddle calls “associated missions” to trigger nut consumption. “Our current product proposition is the grazing one, which tends to be with alcohol, that tends to be the association. We are talking to a couple of fellow suppliers and retailers about how we can bring those together. We have just done some trials in Co-op with [beer brand] Carling and we will see where that goes.”
For Pom Bear, a brand present in more than 30 markets, the task is different. In the UK, the company has focused on expanding distribution, availability and awareness. “We put the brand on television for the first time in May of last year and year-on-year sales driven by household penetration growth have been double-digit every month since… We hadn’t overtly connected the brand with the attributes of the product – it is free from everything [including gluten] but we hadn’t overtly communicated that. We needed to create a campaign that very explicitly advertised to mums about the benefits of this product as an option for their kids.”
Riddle is, however, also cognisant of the importance of what he terms KP Snacks “family brands”, including Skips, Discos, Brannigans and Space Raiders.
“They are scaleable. And they really resonate. One of the insights [from research commissioned by KP] is about an emotional attachment to brands and remembering your childhood. Consumers have real resonance with some of those brands. You will see our Skips, our Space Raiders, our NikNaks and our Wheat Crunchies are some of our biggest selling GBP1 price-marked packs in convenience. Brannigans is one of the fastest growing multipacks in the discounter channel. I am using my portfolio to invest in different platforms and play different tunes.”
While KP recognises the importance of product development to generate consumer excitement and grow sales, the group is only targeting 5% of its top-line growth to come from new products. Riddle suggests KP Snacks has listened and responded to what its customers – retailers – are telling it.
“The retailers are fed up of marketeers and sales guys talking about consumer panel testing and there is a big launch, tail… The churn complexity and resource deployment that puts into a retailer and a manufacturer is not something we want to entertain. We have an NPD and innovation funnel that is vast. We are being very selective about the ones we choose to bring to market. We are deploying the investment and brand strategy of launching under a halo brand with scale benefits that can bring. We want more from the core with a sprinkle of NPD. Basically cut the crap, cut the churn, focus on the core.”
KP Snacks has launched a”snack partners” programme, a forum encouraging retail “ambassadors” – primarily independent retailers and licensees or their wholesale suppliers – to share their experiences with the manufacturer.
“[The forum] is as big an insight source for us, an education for my broader business,” Riddle says. “When a factory general manager hears how important a case size of 12 is versus the case size of 48 he produces, which no back-office store room or cash flow can hold, it makes sense. The sales guys understand because they see it and hear it more often but you need to get that into the broader business.”
KP Snacks generates about 20% of its business through own-label products for retailers. Riddle argues it makes the company a more valuable partner to retailers. “It gives you a really significant point of difference to category growth. We are a true, category-growth partner, not a branded, steal-share partner.”
The company generates the majority of its sales in supermarkets through multipacks but is working to expand its presence in growing channels such as convenience and online.
“Part of my channel strategy is called out as ‘win in convenience’. I am pleased, never complacent, but pleased with what we are doing in that space… Win in convenience is on the next wheel of our strategy. I am dialling that up at the moment versus my focus on online,” Riddle says. “Online is a smaller one for me at the moment and will come through in year two, year three. But I am clearly conscious of where we are at and I will never lose sight of big box supermarkets. Right now, big-box supermarkets will absolutely be front and centre of mind. I think the death of big-box supermarkets is very overestimated.”
While multipack sales at supermarkets comprise 55-60% of KP Snacks’ sales, the company is working on expanding in the ‘sharing’ segment. “If you go into the supermarkets and look at the shelves there are very few brands that stretch multipacks and sharing successfully, in terms of the same brand proposition. We think a halo brand can and hence McCoy’s Chips… We think that is going to be significant in the sharing space. We will take the McCoy’s brand into sharing but in a different format from its current proposition.”
KP Snacks, meanwhile, appears to be in the early stages of preparing a push into foodservice. “It is a white-space opportunity for us that we will be looking to accelerate our presence in,” Riddle confirms. “We are present at the moment in pubs. We focused on pubs because of our product proposition…. We see [foodservice] as an opportunity. We know the market well. But it comes back to priorities.”
Asked when expansion in foodservice could move up the priority list, Riddle revealed the group has hired someone to analyse the channel. “You can get lost in the out-of-home space if you are not careful because it is so fragmented and diverse and there are different sectors of different scale. We are mapping our proposition and understanding where those sweet spots are. And, once we identify where the priorities are, rather than just shooting into a foodservice market which is hugely fragmented and very disparate, we will be well placed to go and help some people grow their businesses.”
Likewise, expanding KP Snacks’ brands into Intersnack’s distribution network in Europe could be an option in the future but, Riddle says, it is “all about life stage”.
“We have a little bit of export business through our Intersnack sister companies that is managed centrally but that hasn’t been a big platform for us. There are many opportunities: you have online, you have convenience, you have international expansion. It is about prioritising but also about being true to what you choose to do and doing it well. I wouldn’t want to build great relationships through our snack partner programme with convenience retailers here, then say ‘you are yesterday’s news’ and go chasing a new dream. If we do something, we commit to it and that is important.”
There are macroeconomic headwinds on the horizon for food companies operating in the UK. Brexit has sparked currency-led pressure on costs, while there are concerns about a possible downturn in consumer confidence.
KP Snacks has already felt the impact of inflation. “Like a very large percentage of manufacturers in the UK, Brexit put an inflationary pressure into our business. We have been in discussion with our retail partners since August of last year about what we knew was coming, saying we need to manage this jointly,” he says.
While price rises look set to form part of KP Snacks’ response, Riddle focuses on the internal levers it is pulling to offset higher costs. “We are having to drive efficiencies as every manufacturer in the UK will have to within our own business to see how we can mitigate the inflationary pressure,” he says. However, Riddle adds: “That will still leave a requirement to pass some inflationary pressure through the trade.”
Nevertheless, Riddle stresses the company is not, however, cutting to the bone and insists it and its privately-owned parent are investing.
“What we are not going to do is cut our consumer investment. We are putting GBP13m behind our consumer brands this year because long-term value creation has to be at the forefront of our and our customers’ minds. We have to help each other grow and prosper. We also have to do what is right for the consumer and the shopper in challenging times. We will continue to make sure we offer great value on great brands that people want to buy. You can’t think too short term. Some organisations are in ownership positions and have demands where they need to think very short term. We are in a slightly different position.”
