The Goods (U.S. Edition) – Do You Want Buys with That?
Welcome back to The Goods! This week we’re discussing the prolific rise of Nerds Gummy Clusters, the crash of retail’s “sugar high,” and chaotic packaging.
Love it or hate it, it’s candy corn season. Candy corn maker Brach’s churns out roughly 30 million pounds1 of the sweet stuff for the fall each year – enough to circle planet Earth about five times. This year, true fans can even visit a candy corn suite (or is it a sweet?) at the Great Wolf Lodge,2 which is decked out in the classic orange and yellow hues. Visitors even get VIP parking!
What’s in: this week’s trends
- Embrace the Chaos: With more options than ever on shelves and advertising becoming more expensive, companies are turning to creative – and often outrageous – packaging to create buzz. Brands are now using “chaos packaging,” offering products in untraditional containers3 like sunscreen in whipped-cream cans, gin in motor oil containers, and tampons in ice-cream tubs. Marketing experts say packages that cause some kind of cognitive dissonance are more likely to capture the attention of shoppers than traditional boxes, bottles and cans.
- Consumers Frappe Back: Americans are becoming more frugal with their coffee purchases – limiting coffee shop runs, hunting for deals at the supermarket, and reusing K-Cups to save money.4 This price sensitivity has triggered companies like Keurig, Dr Pepper and Starbucks to adjust their strategies after promotional pricing dragged down revenues. Starbucks is now focusing on service improvements and Keurig is adding other caffeine fixes to its portfolio, announcing the purchase of energy-drink maker Ghost for more than $1 billion last week.5
- Rate and Switch: Citing environmental reasons, Kroger and other major grocery stores have implemented electronic shelf labels or digital price tags.6 Consumers and legislators have raised concerns that this new feature will allow for frequent price changes on staples like eggs and milk, enabling grocery stores to suddenly increase prices during peak hours or before a snowstorm. However, the process might also benefit the consumer, making it easier for stores to implement price reductions on items with upcoming expiration dates.
Cash or card: consumer behavior
What’s going on with the consumer these days? Americans are being encouraged to eat less red meat, the demand for postpartum care products is rising, and we could be seeing the end of retail’s sugar high.
- You’re Making a Bean: New scientific recommendations are encouraging Americans to limit their red meat intake, citing high cholesterol and fat that can increase the risk of cardiovascular disease and other health problems.7 The report also aims to de-emphasize meat as a main, encouraging Americans to look to beans, peas, and lentils as other sources of protein. U.S. dietary guidelines are updated once every five years, shaping school lunch programs and influencing widespread consumer behavior.
- Special Delivery: Mainstream retailers and online registries are seeing more demand for postpartum care products, with Babylist experiencing a 32% increase during the first half of 2024 compared to last year.8 Company Frida Mom is now in 3,400 Walmart stores, maternity brand Emilia George’s “postpartum essentials kit” is its best seller and Target now has a postpartum care section adjacent to the baby aisle. As these products go mainstream and conversations around postpartum increase awareness for expecting mothers, these are no longer “shy buys.”
- Sweet Defeat: We may be seeing the end of the retail “sugar high” of 2021 and 2022 – a time when smaller retail chains benefitted from consumers making big purchases due to federal stimulus payments and revenge spending.9 Now, these chains are facing increased pressure from big box retailers like Walmart, who can price their products more competitively. As a result, 2024 is on track to see the highest number of chain store closures since 2020.
Making moves: industry transformations & innovation
ICYMI, even industry icons need to reinvigorate their brand presence through unique and creative ways. Here are some new brand moves that you should know about:
- The Snack that Subtly Smiles Back: Showing adults that Goldfish are for grown-ups too, the cheesy snack is temporarily rebranding to “Chilean Sea Bass Crackers” in a bid to attract Gen Z and Millennials.10 This isn’t Goldfish’s first dip into new waters: in 2021, the brand introduced a Franks’ Red Hot variety to cater to a more mature palette with a hot and spicy tolerance. While the rebrand is temporary, we can’t help but wonder what wine pairs best with these sophisticated snacks.
- Nerds of a Feather: Ferrara Candy has found its sweet spot with Nerds Gummy Clusters. The gummies coated in the iconic Nerds pebbles are responsible for close to 90% of the company’s overall annual revenue.11 After Ferrara acquired Nerds in 2018, the company conducted consumer focus groups to create the gummies, achieving the perfect tangy crunch-to-chew ratio. Only six years ago, all of Nerds had less than $50 million in sales. This year, Nerds Gummy Clusters alone has already generated more than $500 million. The brand now rivals candy powerhouses like Starbursts, Sour Patch Kids, and even Skittles.
- The Costco of Doing Business: A year after cracking down on memberships with ID scanners stationed at Costco’s entrances, the largest wholesale club retailer is expected to experience an 8% boost in signups. Mirroring Netflix’s membership crackdown, Costco is predicted to gain 4 million new memberships.12 If new members opt for the higher-priced Executive membership, Costco will earn an extra $324 million in revenue, highlighting its reliance on membership fees for overall profitability.
Capital Markets Corner
What consumer news is moving the market this week? Our investor relations experts break down this week’s trends and headlines.
- Clutch Ado About Nothing: A federal judge blocked Tapestry’s proposed acquisition of Capri Holdings, a deal that would have created a house of brands including Coach, Michael Kors, Versace, Kate Spade, and Jimmy Choo.13 In August 2023, Tapestry announced its $8.5 billion agreement to acquire Capri. The FTC sued to block the transaction in April, and a U.S. district judge sided with the FTC on Friday, arguing that a Tapestry-Capri merger would reduce competition in the accessible luxury handbag market. After the ruling was announced, shares of Capri plunged 48.8% while Tapestry’s stock rose 13.5%.
- Do You Want Buys with That? McDonald’s reported a 1.5% decline in global sales during its third quarter earnings on Tuesday, marking the chain’s largest drop in four years.14 This follows recent news of the fast food giant temporarily halting sales of its Quarter Pounder after a deadly E. coli outbreak was linked to one of its ingredients. Despite the outbreak, McDonald’s reaffirmed most of its annual guidance, signaling that the outbreak is mostly in the rear-view and does not anticipate the outbreak having a material impact on the business.
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[1] Leanne Italie, “Love it or hate it, feelings run high over candy corn come Halloween,” AP News (October 24, 2024), https://apnews.com/article/candy-corn-halloween-trickortreat-384c51299fe00945c0e92b29cc3ff86a
[2] Lizzy Buczak, “Sweeten Your Fall Getaway With a Stay in a Candy Corn-Themed Suite,” Parade (September 11, 2024), https://parade.com/news/sweeten-fall-getaway-stay-brachs-candy-corn-suite-great-wolf-lodge-review-videos
[3] Katie Deighton, “Ice-Cream Tubs of Tampons and Sunscreen From a Whipped-Cream Can: Welcome to ‘Chaos Packaging’,” The Wall Street Journal (October 21, 2024), https://www.wsj.com/articles/ice-cream-tubs-of-tampons-and-sunscreen-from-a-whipped-cream-can-welcome-to-chaos-packaging-47745f4f?mod=e2fb&fbclid=IwY2xjawGLWOZleHRuA2FlbQIxMQABHSB37QOyNl0agVfMT4-Wwgh72NZ4Lw7dJPuulPiLZNDJyHoTMuvyrv3_4w_aem_1Y7eWSryBitOm4JBWSuueQ
[4] Laura Cooper, “Coffee Price War Burns Keurig and Starbucks,” The Wall Street Journal (October 27, 2024), https://www.wsj.com/business/hospitality/coffee-prices-keurig-starbucks-sales-fd0b5cf9?mod=retail_news_article_pos5
[5] Lauren Thomas, “Keurig Dr Pepper to Buy Energy-Drink Maker Ghost for Over $1 Billion,” The Wall Street Journal (October 24, 2024), https://www.wsj.com/business/deals/keurig-dr-pepper-to-buy-energy-drink-maker-ghost-for-over-1-billion-4fc86a60?mod=article_inline
[6] Sara Ruberg, “Kroger and Walmart Deny ‘Surge Pricing’ After Adopting Digital Price Tags,” The New York Times (October 23, 2024), https://www.nytimes.com/2024/10/23/business/kroger-walmart-facial-recognition-prices.html?utm_source=mrdaily&utm_campaign=mrdis&utm_medium=email
[7] Andrea Peterson, “The Battle Brewing Over How Much Red Meat You Eat” The Wall Street Journal (October 28, 2024), https://www.wsj.com/health/wellness/red-meat-dietary-guidelines-nutrition-eat-99743c99?mod=hp_featst_pos3
[8] Melissa Daniels, “How postpartum products like Frida Mom broke into mass retail,” Modern Retail (October 28, 2024), https://www.modernretail.co/operations/how-postpartum-products-like-frida-mom-broke-into-mass-retail/?utm_campaign=mrdis&utm_medium=email&utm_source=mrdaily&utm_content=102824
[9] Nathaniel Meyersohn, “Consumers reach their breaking point, forcing retailers to shutter stores at a worrying pace,” CNN (October 25, 2024), https://www.cnn.com/2024/10/25/business/the-retail-apocalypse-is-back/index.html
[10] Anthony Robledo, “Not just for kids: Goldfish crackers announces name change to appeal to adult snackers,” USA Today (October 23, 2024), https://www.usatoday.com/story/money/food/2024/10/23/goldfish-chilean-sea-bass/75786004007/
[11] Ben Cohen, Suzanne Vranica, “‘America’s Newest Hit Candy Is Gummy, Crunchy and Printing Money,” The Wall Street Journal (October 25, 2024), https://www.wsj.com/business/media/nerds-gummy-clusters-candy-halloween-35ae2e2a?mod=retail_more_article_pos3
[12] Dominick Reuter, “The latest sign Costco is having a ‘Netflix moment’,” Business Insider (October 25, 2024), https://www.businessinsider.com/costco-set-to-have-netflix-moment-membership-sharing-crackdown-2024-10
[13] Suzanne Kapner, Dave Michaels “Coach-Michael Kors Deal Blocked by Judge,” The Wall Street Journal (October 25, 2024), https://www.wsj.com/business/retail/judge-blocks-tapestry-deal-with-capri-b0b3644c
[14]Savyata Mishra, “McDonald’s brushes off sales hit from US E. coli outbreak, international markets weak,” Reuters (October 29, 2024), https://www.reuters.com/business/retail-consumer/mcdonalds-global-sales-fall-more-than-expected-muted-demand-2024-10-29/
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