In Focus
EXECUTIVE INSIGHTS | Kevin Santos, Australia

Will the snacking scene become a new battleground for QSRs?

QSR Media talks to Subway, Muffin Break and Chatime for their latest take on the daypart.

Convenience, ease of service, and growing sentiment for healthier options are just a few of the factors to consider when planning to grow in the snacking category, a trio of top chains told QSR Media in separate interviews.

“We believe snacking will continue to be a key battleground for QSRs, driven by price-pointed deals,” Subway Australia country director Geoff Cockerill said. “Consumer habits are continuing to evolve with more people moving from a traditional meal occasion to grazing on food throughout the day. These behaviours have been supported with the adoption and normalisation of third-party delivery in outer-metro areas.”

Last year saw the sandwich chain, also the country’s largest QSR by store count, launch its first-ever snacks range that features their Meatball Mozza Pot, Chipotle Quesadilla and Ham, Cheese and Tomato Jaffle. Seeing it perform well, Cockerill says they will continue to focus on new product development for their snacking menu, with more options set to launch in the range this year.

“What we’ve seen since launching is snacking peak at mid-morning and mid-to-late afternoon, although, interestingly we’ve also had strong uptake with guests adding snacks to their favourite sub, salad or wrap as a side during lunch and dinner. Our iconic cookies have long been a favourite addition to any meal, but the addition of new toasties and a jaffle have proven successful with our Australian guests for standalone snacks,” he said.

On their end, Chatime saw late afternoons as their busiest time but says they are seeing more customers visit throughout the day for a treat. Lower sugar options, he said, are experiencing increased demand and stressed the value of offering a frictionless experience, referencing the bubble tea brand’s younger customer base.

“Consumers are looking for a connection with their retailer whether it is in food, drinks or fashion they are wanting their retailer to provide an experience. This is shown in the popularity in our new flavours and how they interact with us on our social media channels,” chief executive Carlos Antonius said.

“Time is the new currency and customers are increasingly looking for retailers to create a frictionless experience and save them time. We are seeing that with the increase in customers ordering online using our Chatime app, ordering for delivery via our delivery partners or using our self-service kiosks in T-brewer[ies].”

Going forward, Antonius said Chatime will increase its focus on tailoring to what customers want, likely anchored by the brand’s long-standing strategy of personalised engagements through their channels.

“We are also developing our new products taking inspiration from around the globe to keep at the forefront of customer trends and innovative drink flavours,” he said.

Muffin Break, meanwhile, sees its customers visiting at varying times during the day, with their standard muffins remaining their most popular option despite a “testing” 2020.

“For example, [we see] retail staff in the morning or early afternoon, students in the afternoon, seniors around mid-morning or late afternoon or mum’s catch ups around mid-morning or lunch time. Our muffins and 4/6 packs are most popular during the afternoon, specifically during grocery runs or after school,” a spokesperson for the brand said.

Over the past 12 to 18 months, the Foodco-owned brand observed a surge in interest for their lower carb, gluten free or vegan muffin ranges.

“Whilst it hasn’t directly affected our general snacking option popularity, it has certainly allowed us to cater to a wider range of people,” the spokesperson added.

“We received an overwhelming amount of customer feedback directly from our customers regarding a Vegan range of products. Where a customer might have previously purchased a normal muffin, now, they are opting for a lower carb or vegan option. Additionally, with the increase in interest in leading a vegan lifestyle, this has seen an increased demand for vegan products.”

In late 2020, Muffin Break offered an entire vegetarian or vegan range of lunch & snack products at select stores. Their Vegan Pie was rolled out Australia-wide as well. For this year, they expect to push through with more decadent and health conscious options to its stores for all customers.

“We will also have a strong focus on Australian made – ensuring we are sourcing locally grown and produced ingredients,” the brand said. “In terms of the industry, we also expect there to be a stronger focus on the customer as a whole as customer behaviour and expectations have evolved over the past year.”

Snack demand expected to rise this year
According to IbisWorld, Australians exhibited reduced demand for snack food throughout 2020, particularly during lockdown periods.

Potato, corn and other chip manufacturing Industries suffered a decline in revenue due to the closure of hospitality establishments, along with the reduction in social interactions during lockdown periods.

“While some Australians turned to comfort foods during lockdown, others placed greater emphasis on their health, leading to healthier dietary choices and lower demand for snack foods,” senior industry analyst Suzy Oo said.

This year, Oo expects demand for snack foods is expected to rise as the economy recovers from COVID-19. Demand, however, is expected to remain weak compared to 2019 highs, citing revenue in the convenience stores industry to decline by 3.0% in 2020-21.

“Real household discretionary income is expected to decline by 7.8% in 2020-21, hindering demand for snack foods. Meanwhile, access to preserved foods is becoming easier for consumers, due to the expansion of convenience and grocery stores, including 7-Eleven, onto online food delivery platforms like Uber Eats,” she said.

For QSR firms seeking to create snack products, Oo cited a few factors that will be critical for success. These include having reliable contracts with suppliers of raw materials such as flour, corn, wheat and sugar to reduce supply volatility; economies of scale, to exert downward pressure on unit production costs and preserve profit margins; and economies of scope, including the ability to quickly adapt new products to match changing consumer tastes.

Healthier snacks required
Oo also stressed that health consciousness is rising in importance for consumers when it comes to setting dietary habits, including the consumption of snack foods.

“The level of obesity in Australia’s adult population is projected to continue rising over the next five years, prompting many consumers to make healthier food choices. Successful producers will likely be able to adapt to consumer preferences for low-sugar, organic, Australian-made, and ethical snack food products, with a greater emphasis on high nutritional value,” she explained.

Those best positioned in this category in the coming years, Oo said, are the operators that can adapt to specific dietary requirements, such as gluten and lactose intolerance.

“A shift towards minimally processed food options will also revive consumer interest in generic snacks like dried fruits and nuts, and kale chips, primarily driven by associations of highly processed foods with overeating and weight gain, resulting in an increased risk of obesity and type 2 diabetes.”

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