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Professional’s Favorite Meat Snacks The Ideal Complement to Professional’s Favorite Cashews

Professional’s Favorite Meat Snacks The Ideal Complement to Professional’s Favorite Cashews. Presented By Knauss Snack Food Company. Purpose. Purpose of the presentation is threefold:

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Professional’s Favorite Meat Snacks The Ideal Complement to Professional’s Favorite Cashews

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  1. Professional’s Favorite Meat Snacks The Ideal Complement to Professional’s Favorite Cashews Presented By Knauss Snack Food Company

  2. Purpose • Purpose of the presentation is threefold: • To illustrate why Meat Snacks is the ideal category as an extension to the successful launch of Professional’s Favorite Cashews. • To demonstrate why Knauss Snack Food Company should be your supplier and partner in capitalizing on the Professional’s Favorite Meat Snacks opportunity. • To review the key elements of a Corporate Brand Meat Snacks program customized for Advance Auto Parts.

  3. Agenda • The following agenda has been developed to fulfill this purpose . . . • Meat Snacks Category Overview • Reasons for Professional’s Favorite Meat Snacks Program • Qualifications of Knauss Snack Food Company as Your Partner and Supplier • Key Elements of Corporate Brand Meat Snacks Program Customized for Advance Auto Parts

  4. Meat Snacks Category Overview

  5. Meat Snacks Category Overview • Size/Trends • The Meat Snacks Category is large ($2.1 billion) and growing . . . • Dollar sales have more than quadrupled in the past ten years – more than doubled since 1997. • One of the fastest growing segments in the Shelf-Stable Snacks Category. Meat Snack Retail Dollar Sales (millions) Source: Snack Food Association, Information Resources, Inc. (all classes of trade), A.C. Nielsen.

  6. Meat Snacks Category Overview • Size/Trends • With $2.1 billion in retail sales, Meat Snacks is now the third largest segment in the Salted Snacks Category . . . Meat Snacks is larger than . . . • Snack Nuts ($1.9 billion) • Microwave Popcorn ($1.3 billion) • Pretzels ($1.3 billion) • Cheese Snacks ($1.1 billion) Meat Snacks is only surpassed in size by Potato Chips ($6 billion) and Tortilla/Tostada Chips ($4.5 billion).

  7. Meat Snacks Category Overview • Reasons For Category Growth • More active, healthier lifestyles have created a growing demand for snacks like beef jerky that are good tasting, nutritious andconvenient. • The increase in low-fat and carb-crazed dieters (i.e., Atkin’s Diet, South Beach, “Dr. Phil” McGraw’s diet, Zone diet etc.). • Retail availability has expanded into all classes of trade. • Ongoing introductions of new products and line extensions (new flavors, meat ingredients and forms). • Increased category advertising, primarily on the part of GoodMark Foods, Inc. in support of Slim Jim products.

  8. Meat Snacks Category Overview • Meat Snack Sales By Outlet Type • Meat snacks are sold everywhere – from truck stops to office supply stores to health stores. • Convenience Stores represent the primary outlet with a 45.4% share; however, other classes of trade are gaining in importance. Meat Snacks by Outlet Type -% Dollar Share Source: Snack Food Association, Information Resources, Inc.

  9. Meat Snacks Category Overview Shares by Category Segments According to Mintel (leading supplier of consumer intelligence), Beef Jerky is the largest segment in the Meat Snacks Category with a 44.0% share of dollar sales, followed by Meat Sticks with a 33.5% share. % Total Beef Jerky Dollar Sales All Other 22.5% Natural Beef Jerky 44.0% Meat Sticks 33.5% Source: Mintel – 2002 Sales (all classes of trade)

  10. Meat Snacks Category Overview • Beef Jerky Segment Trends • Based on supermarket trends, the Beef Jerky segment (+14%) has been the driving force behind the category’s growth, because it provides what “on-the-go” lifestyles are searching for – taste, nutrition (low carbs) and convenience. • Meat Sticks and A/O are also growing. Meat Snack Segments – Dollar Sales Vs. Y/A Source: Information Resources, Inc. – 52-Weeks Ending 11/02/03

  11. Meat Snacks Category Overview • Shares by Flavor • The Original, Teriyaki and Peppered flavors make up 76.1% of total Beef Jerky sales in supermarkets. • The remaining flavors (e.g., Hickory Smoked, Jalapeño, Sweet and Hot, etc.) comprise the remaining share. • % Total Beef Jerky Dollar Sales All Other 33.5% Original & Regular 34.9% Teriyaki 23.7% Peppered 17.5% Source: Information Resources, Inc. – 52-Weeks Ending 11/02/04

  12. Supermarkets – Leading Beef Jerky Brands • In the Beef Jerky Segment, four brands comprise almost 90% of total retail sales. • OBERTO is the leader with a 42.7% share, with Pemmican a distant second with a 20.5% share. Beef Jerky Leading Brands • % Share Meat Snacks Category Overview Source: Information Resources, Inc. – 52-Weeks Ending 11/02/03

  13. Supermarkets – Leading Beef Jerky Brands OBERTO’s dominant share is strictly a function of its retail distribution advantage over other beef jerky brands, achieved through its alliance with Frito-Lay . . . Beef Jerky Leading Brands % ACV Distribution Meat Snacks Category Overview Source: Information Resources, Inc. – 52-Weeks Ending 11/02/04

  14. Major Reasons for • Professional’s Favorite Meat Snacks

  15. Reasons for A Corporate Brand Meat Snacks Program • Major reasons why Advance Auto parts should institute a Corporate Brand Meat Snacks program, under the Professional’s Favorite brandname, include . . . • Category is large and expanding . . . Growing popularity of high protein/low carb foods will fuel this growth for the long-run. • Professional’s Favorite Cashews program has been highly successful. • The customer profile of Advance Auto Parts mirrors the profile of the heavy user of meat snacks. • Provides an effective means for Advance Auto Parts to strengthen the equity of the Professional’s Favorite brand program within the large and growing snacks category. • Corporate Brand Meat Snacks is growing within the supermarket class of trade - Wal-Mart, Weis Markets, Meijer Supermarkets, ALDI, Giant Eagle, Save-A-Lot and other major grocery store chains have corporate brand programs in place or in progress.

  16. Qualifications of • Knauss Snack Food Company

  17. 1. Three Manufacturing Facilities • Knauss Snack Food Company has three manufacturing facilities . . . • This is important in the event that there is ever a need for one producing factory to serve as a back-up to another. • Martinsville, VA • Our new facility in Martinsville, VA is our • primary producing factory of Corporate • Brand Meat Snacks. • Dedicated exclusively to Meat Snacks • Provides necessary capacity to become the premier supplier of Corporate Brand Meat Snacks • State-of-the-art equipment • 100,000 square feet 200 Knauss Drive Martinsville, VA 24112 Quakertown, PA Facilities • Other producing factories include our Quakertown facilities: • 625 East Broad Street 10 West Paletown Road • Quakertown, PA 18951 Quakertown, PA 18951

  18. 2. Two Shipping Locations We have two shipping locations . . . • 200 Knauss Drive Martinsville, VA 24112 • 118 Hellertown Road Quakertown, PA 18951 We have a distribution network in place that ensures that customer orders can be delivered in a timely and cost effective manner with relatively (a) short lead times and (b) small minimum orders.

  19. 3. Full-Line Meat Snacks Supplier • We produce and market a full-line of Meat Snacks under the Bull’s brand name. • Any of our items can be made available for the Professional’s Favorite brand name.

  20. 4. Extensive Corporate Brand Experience After just 1½ years following implementation of our Corporate Brand Meat Snacks program, we now have five major Corporate Brand retail customers, and others in progress . . .

  21. 4. Extensive Corporate Brand Experience In addition to producing Dried Beef under the Knauss brand name, Knauss Foods has demonstrated success in supplying Corporate Brand Dried Beef to grocery retailers . . .

  22. 4. Extensive Corporate Brand Experience We also partner with and supply Corporate Brand Meat Snacks for several well-known manufacturers, including, but not limited to, the following . . . MARTIN'S POTATO CHIPS

  23. 4. Extensive Corporate Brand Experience Knauss Foods also supplies Corporate Brand Dried Beef to manufacturers, including . . .

  24. 4. Extensive Corporate Brand Experience Knauss Foods also supplies Corporate Brand Dried Beef to manufacturers, including . . .

  25. 5. Superior Product Quality A consumer panel test showed that Knauss Corporate Brand Beef Jerky is as good or better than three leading national brands and a major store brand competitor (Mirab). • Test conducted by independent testing firm - North Cliff Consultants, Inc., Cincinnati, OH in December, 2002. • Brands tested included Knauss Corporate Brand, Pemmican, Jack Link’s, Oberto and Mirab Corporate Brand. • Original flavor tested (top selling flavor in beef jerky category). • Panel was screened to include only beef jerky consumers. • Sequential Monadic study design – Knauss Store Brand Beef Jerky tested against each brand (all brands tested blindly). • Key attributes tested included appearance, overall liking, flavor and texture. • Panelists required to give an overall preference of Knauss Corporate Brand Beef Jerky versus the other brands on a one-to-one basis.

  26. 5. Superior Product Quality Consumer Panel Test Results – Knauss Versus Jack Link’s Knauss Corporate Brand Beef Jerky was significantly preferred over Jack Link’s. • Knauss received significantly higher scores on overall liking, flavor and texture – appearance ratings were not significantly different. * 9-Point Scale – 9 Means “Like Extremely”, 1 Means “Dislike Extremely”

  27. 5. Superior Product Quality Consumer Panel Test Results – Knauss Versus Oberto Knauss Corporate Brand Beef Jerky was significantly preferred over Oberto. • Knauss received significantly higher scores onall attributes - overall liking, appearance, flavor and texture. * 9-Point Scale – 9 Means “Like Extremely”, 1 Means “Dislike Extremely”

  28. Consumer Panel Test Results – Knauss Versus Pemmican Knauss Corporate Brand Beef Jerky was preferred over Pemmican, but the preference was not statistically significant. Knauss received a significantly higher score on flavor – texture, appearance, and overall liking ratings were not significantly different. 5. Superior Product Quality * 9-Point Scale – 9 Means “Like Extremely”, 1 Means “Dislike Extremely”

  29. Consumer Panel Test Results – Knauss Versus Mirab Knauss Corporate Brand Beef Jerky was significantly preferred over Mirab Corporate Brand. Knauss received a significantly higher score on overall liking, appearance and flavor – texture rating not significantly different. 5. Superior Product Quality * 9-Point Scale – 9 Means “Like Extremely”, 1 Means “Dislike Extremely”

  30. Value Pricing Knauss Snack Food Company will provide pricing on Professional’s Favorite Meat Snacks that will support retail prices significantly below the leading national brands. Knauss Snack Food Company will offer Advance Auto Parts a price on Corporate Brand Beef Jerky that will yield a 34 to 50% price differential versus the leading national brands, while providing attractive gross margins. 6. Value Pricing

  31. 7. Menu of Merchandising Solutions • Knauss Snack Food Company offers a menu of merchandising tools to support the introduction and ongoing management of Professional’s Favorite Meat Snacks . . . • These tools are designed to: • Build awareness and promote trial of Professional’s Favorite Meat Snacks. • Capitalize on the huge impulse sales potential of Meat Snacks. • Maximize the sales and profits of Professional’s Favorite Meat Snacks per square foot of store space.

  32. 7. Menu of Merchandising Solutions • These high impact and space efficient merchandising tools include . . . • Beef Jerky Beef Jerky • Pre-Packed Pre-Packed Meat Sticks Pre-Assembled Display Boxes Shipper Pre-Packed Shipper Clip Strips

  33. 8. “Best in Class” Customer Service • 99% Customer Service Level • Providing high quality products and consistently meeting the service requirements of our customers have been at the coreof our business since 1902. • We will partner with Advance Auto Parts in developing a production plan to meet anticipated sales. • We have an infrastructure in place to ensure customer orders are delivered in full/on time and accurately invoiced.

  34. Customized Plan for Professional’s Favorite Meat Snacks

  35. Customized Plan • Variety Assortment • It is recommended that the Professional’s Favorite Meat Snacks line consist of • the following varieties: • 4 oz. Beef Jerky in the Original, Teriyaki and Peppered Flavors Rationale: The 4 oz. size represents over 90% of total beef jerky sales, while these three flavors represent nearly 80% of total sales. • 0.90 oz. Beef Sticks in Original flavor Rationale: Number 1. selling variety of all Meat Snacks (including Beef Jerky) in the supermarket class of trade in terms of unit sales (Number 3. in dollar sales).* • 15 Count 5 oz. Original Meat Sticks in a canister Rationale: Generates a higher ring and is the Number 3. selling variety in the Meat Snacks Category in dollar sales (Number 4. in unit sales).* *Source: Information Resources, Inc. – 52-Weeks Ending 11/02/04

  36. Customized Plan • Variety Assortment (continued) • Other varieties for consideration include: • 4 oz. Sweet Barbecue Beef Jerky • 2 oz. Beef Jerky in Original, Teriyaki, Peppered and Sweet Barbecue flavors • 0.90 oz. Meat Sticks in Mild and Hot ‘n Spicy flavors • 15 count 5 oz. Canister of Meat Sticks in Mild and Hot ‘n Spicy flavors

  37. Pricing We are offering the following delivered base prices on Professional’s Favorite Meat Snacks . . . Professional’s Favorite Meat Snacks Delivered Base Prices Customized Plan

  38. Pricing(continued) These delivered prices can support attractive retail prices for customers of Advanced Auto Parts at attractive profit margins . . . Professional’s Favorite Meat Snacks Proposed Retail Pricing and Profitability Customized Plan

  39. Pricing (continued) These delivered prices permit a substantial retail price advantage versus the national brands currently stocked by Advance Auto Parts, with the added benefit of superior product quality . . . Customized Plan

  40. Summary • In closing . . . • 1. The size, growth and emerging consumer demographic of the Meat Snacks category represents a major growth opportunity for a Professional’s Favorite Meat Snacks program. • 2. Knauss Snack Food Company is the right supplier to partner with to exploit this opportunity, because of: • Our location – we are neighbors. • Our excellent product quality and competitive pricing. • Our efficient and effective distribution infrastructure. • Our menu of merchandising solutions. • Our corporate brand marketing expertise. • Our strong commitment to become the premier supplier of corporate brand meat snacks. THANK YOU!

  41. Appendix IRI Retail Sales Scan Data

  42. Meat Snacks IRI Data Three Meat Stick varieties are among the top twenty selling (dollar sales) Meat Snack items . . . Top Twenty Meat Snack Items Retail Dollar Sales Source: Information Resources, Inc. – 52-Weeks Ending 11/02/04

  43. Meat Snacks IRI Data Seven Meat Stick varieties rank among the top twenty Meat Snack items in unit sales, with Spicy .97 oz. being first . . . Top Twenty Meat Snack Items Unit Sales Source: Information Resources, Inc. – 52-Weeks Ending 11/02/04

  44. Meat Snacks IRI Data .97 oz Meat Sticks rank sixth among all Meat Snack items in dollar sales rate . . . This is in spite of an average price per unit of $0.97 versus $2.77 for the average Meat Snack item . . . Top Twenty Meat Snack Items Dollar Sales Per Point of Wtd. ACV Distribution Source: Information Resources, Inc. – 52-Weeks Ending 11/02/04

  45. Meat Snacks IRI Data Eight Meat Stick items fall in the top twenty of all Meat Snack items in terms of unit sales rate . . . Top Twenty Meat Snack Items Unit Sales Per Point of Wtd. ACV Distribution Source: Information Resources, Inc. – 52-Weeks Ending 11/02/04

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