“Popcorn—long dismissed as a mature and rather boring packaged food category with minimal growth potential—has burst back to life,” wrote Rabobank senior analyst Nick Fereday in his new report: ‘The Popcorn blockbuster’.
“In a world where the ‘fooderati’ tell us that fresh is the future and long shelf life is a dirty word, other declining center-aisle categories, such as canned soup and breakfast cereals, can take comfort and inspiration in the example of popcorn, where freshly made microwave popcorn is being trumped by the less fresh pre-popped shelf–stable kind.”
It is never too late for a category to reinvent itself
While sales of microwave popcorn dipped from a peak of $900m in 2012 to around $830m in 2014, sales of ready-to-eat popcorn have exploded over the same period. But overall popcorn volumes declined by 2.4% CAGR between 2010 and 2013, he said.
“We are, in fact, eating less popcorn in total and paying more for the privilege of eating it more conveniently on the go rather than microwaving at home."
Brands shaking up the RTE popcorn market
Innovative brands breathing new life into the popcorn category include Quinn Popcorn; 479 Degrees; Skinnygirl; SkinnyPop; Angie’s BOOMCHICKAPOP; Popcorn Indiana; POP! Gourmet; Chia Pop; Little Lad’s Herbal Corn; Snacks101; and SexyPop, says Rabobank. “As their names suggest, many of these companies are also adding a much-needed element of fun to the market. In addition, the vibrant packaging of brands such as SexyPop provides an interesting blend of Cool Britannia-like cheekiness and Indian spiritualism.”
The smaller, innovative companies are doing most of the running
And who is at the vanguard of this renaissance? Not the big CPG companies, said Fereday: “It is the small innovative companies that have the growing brands and are doing most of the running.
“In an economy where consumer spending remains subdued and major food companies are complaining about declining volumes, it is encouraging to discover a fast-growing packaged food market that has nothing to do with snack bars or Greek yogurt—and where RTE popcorn growth is expanding the overall market and not just cannibalizing microwaveable popcorn’s market share.”
So what can we learn from all of this? Here are Fereday’s five movie-inspired observations:
1. Back to the Future: “This reminds us of what we call The Iron Law of Consumption: convenience trumps everything, even (gasp!) fresh… A crucial lesson here is that if you get it right, consumers are not averse to buying packaged foods.”
2. While You Were Sleeping: “The major popcorn players have been caught napping… To date, the biggest loser has been the market leader, ConAgra, with sales of all its microwave popcorn brands (Act II, Jiffy Pop, and Orville Redenbacher's) down by about 4% CAGR between 2010 and 2013.
“American Popcorn’s Jolly Time sales have also been less than impressive, failing, like ConAgra, to capitalize on the popcorn craze. Diamond Foods has ridden the storm better, with its Pop Secret brand growing at 12% CAGR between 2010 and 2013, and achieving sales of $225m in 2013.”
So what can the big boys do to claw back some of the initiative?
“It is not too late for the major players to wake up and get more actively involved,” reckons Fereday, who says they could develop their own RTE products or acquire some of the new entrants (although they will have to outbid private equity companies).
They could also try to breathe fresh life into the microwave popcorn category, he said: “The recent co-branding of ConAgra’s Orville Redenbacher's with Bethenny Frankel’s Skinnygirl is an example of how companies could try to turn microwave popcorn around with new flavors, new branding, and new packaging.”
Finally, they could make popcorn for a retail brand or contract manufacture for one of the smaller brands, he added: “Private label RTE popcorn brands though small at just 5% of the market are growing fast: up 21% in the last 12 months, reaching an estimated $40m in 2014.”
3. The Usual Suspects: “Today’s popular trends (e.g. natural, organic, and gluten-free) like to travel in packs, and RTE popcorn has taken full advantage of this. Many consumers equate such tags as being synonymous with ‘healthy’—and therefore desirable.”
4. Some Like It Hot: “As consumers’ palates grow increasingly adventurous for bolder flavors—often inspired by ethnic cuisines—the potential for this new popcorn platform is enormous.
“In addition, we have barely begun to scratch the surface in terms of rediscovering the use of popcorn in other categories, from snack bars to breakfast cereal. Back in the 19th century, popcorn was used as an ingredient in breakfast cereal, porridge, puddings, cakes, and even soups and salads.”
5. Field of Dreams: “Popcorn could well be the next high-value crop for farmers frustrated by low margins and volatile commodity markets [to those wondering what he’s talking about, popcorn corn is a specific variety of corn and is something of a specialty crop],” said Fereday.
“This is a great time for food processors to connect with farmers looking to explore new markets and escape the commodity treadmill.
“There is a whole world of heirloom popcorn varieties to rediscover… Yellow, white, midnight blue, ruby red, turquoise, and even black [popcorn flakes are always white because the endosperm is white]. Besides the hull color, all have different flavors, kernel size, and popped shape. The marketing of such heritage varieties with their new tastes, colors and nutritional profile (more antioxidants than broccoli if you believe the hype)—is waiting to be explored and taken mainstream.
“An early entrant includes Premium White Gold Popcorn (selling 'premium white gold', ruby red, and indigo blue popping corn) by Chicago-based Urban Accents. Braver souls could also exploit the popping potential of other grains such as quinoa and amaranth or the reinvention of puffed rice snacks.”