On the hunt for a few fresh crisp ideas
If the World Cup didn't boost Golden Wonder sales, what will? asks Hilary Clarke
Sunday 23 August 1998
If it does, then there should be a bigger bite of it available for all crisps and snack manufacturers, not least Golden Wonder which has seen its sales soar since Sharpe led a pounds 68m management buyout three years ago.
If it doesn't, then the the brand name may lose some of its shine. This would make the promised flotation of the firm over the next 24 months more difficult to achieve.
"Historically the snacks market would grow every year, but in the last 12 months that rate of growth has fallen away," said Sharpe. For the year ending June 1998, bagged snacks value growth fell from 3.8 per cent to 0.8 per cent, and the rate of growth for crisps fell from 3.2 per cent to a negative 0.2 per cent.
Nor did the World Cup provide the much-hoped-for boost in sales, in spite of the increase in sales of alcohol.
Sharpe believes the reason for the decline is a lack of new ideas in the industry - both in terms of new products and ways of marketing them. "Pringles has shown if you get the right product, with the right composition you can be very successful." The potato snack, owned by Procter & Gamble has more than half the UK packet snack market.
Whilst the R&D departments of PepsiCo's Walkers, United Biscuits and Golden Wonder scratch their heads to come up with the next Wotsits, Quavers or Pringles, the marketing men have been busy with promotions of the "buy 10 bags of crisps and get two free" kind.
"They have only been thinking short term - what people are doing is giving stuff away rather than selling it. That encourages volume growth rather than value growth," said Sharpe.
Under his leadership, Golden Wonder has invested "at five times the rate of previous years, and more than 10 times that of most of our competitors to ensure Golden Wonder plays a major role in the UK snacks market."
Last July Golden Wonder announced a pounds 30m investment, including a new factory in Scunthorpe which, as well as providing a state-of-the-art production line, will also be used to research new snacks.
The other way Sharpe plans to stay on top is by improving its distribution.
"Because it's an impulse product, it's low price, it's fun; one of the key factors for success is to make it available," he said. "We have spent a lot of money and time putting the resources in place to make our products more available."
Whilst distribution to the big supermarket chains, around 55 per cent of the business, takes care of itself through centralised distribution outfits, Sharpe said the legwork is in selling the product to other "impulse" outlets - pubs, petrol stations, clubs, corner shops.
The City has a high view of Sharpe and all he is doing at Golden Wonder.
"In the snack business good management is crucial, and I believe they have found the right formula at Golden Wonder," said one city analyst.
"Golden Wonder has put together a decent strategy in terms of market share and financial performance. They've still got the shadow of PepsiCo out there, but UB's position has weakened," said John Elston, analyst with Panmure Gordon.
Apart from PepsiCo with Walkers, Procter & Gamble with Pringles, and United Biscuits with KP, there are a number of other small competitors, including the Middle East-owned Snack Factory and Bensons, the only UK snack company listed on the London Stock Exchange.
Last year Golden Wonder, which has a 19 per cent share of the total crisp and snacks market, increased its turnover to pounds 152m from pounds 103m in 1995, the year of the MBO.
None of them are likely to improve sales through exports, especially in crisps which, says Sharpe, "are bulky and have a short shelf life." As a result, the crisp market in Europe is very fragmented.
The only Golden Wonder exports are ones to Spain to serve the ex-patriot community there, and the Armed Forces stationed in Germany.
Acquisitions of smaller brands may be another Golden Wonder strategy for expansion - but for the moment Sharpe is keeping his mouth shut about possible purchases.
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