Tyrells Crisps buyout of Yarra Valley Snack Foods is a crafty move

UK premium snack brand Tyrrells Crisps has just acquired the Melbourne-based Yarra Valley Snack Foods in a move that will facilitate any attempts by the company to establish a manufacturing base in Australia.

In 2014, Lay’s (37%), Red Rock Deli (16%) and Kettle (15%) were the Top 3 players in chips in Australia, according to Euromonitor data.
 
Tyrrells, one of the largest producers of premium chips/crisps, reached an exclusive supply agreement with Coles and launched in Australia in 2014, so the company is not entirely new to the Australian market.
 
The chips/crisps category is worth over A$652 million, and represents 35% of the total value of the sweet and savoury snacks category, up from 31% five years ago despite the many advances in other (and healthier) snacking types.
 
The crisps/chips category has experienced 12% value growth during 2009-14, or 2% compound annual growth. In actual terms, its value growth for the period was only surpassed by extruded snacks, which are processed / reconstituted / shaped potato or cereal based snacks, such as rice cracker snacks, Pringles and Cheetos.

Tyrrells Hand Cooked English Crisps is perhaps the most well-known brand in Europe but there are many more out there, increasingly emphasising their hand-cooked potatoes and the place of origin the salt or vinegar is sourced from (eg Anglesey Sea Salt). Recently, PepsiCo has expanded into gourmet snacks through the launch of Market Deli – premium priced thick-cut crisps made from selected potato varieties bearing no sign of the company logo on the pack bar a small statement reading “from the Makers of Walkers”. 

So is this emerging craft movement a fad or likely to be the next big thing in savoury snacks?

Tyrrells has grown at a 15% CAGR over 2009-2014 in the UK significantly outpacing the overall crisps’ CAGR of 5%. In Australia, Red Rock Deli from PepsiCo has outperformed the company’s flagship brand Lay’s over 2009-2014 in CAGR terms (5% vs 1%), though over the last two years sales have been falling.

The rapidly expanding craft beer movement is starting to exert an influence on the development of gourmet snacks, which are typically consumed with beer. 

Borrowing from the craft beer market, crisps are becoming more sophisticated, with premium ingredients that emphasise heritage and provinciality. 

Particularly in the US and the UK but also in Mexico and Russia, a growing number of beer companies are craft-branding their current line or coming up with new craft lines by acquiring small-batch brewers. 

The definition of craft beer remains debated, but regardless, they are tapping in the same trend drivers. Some of the most recent examples include Immortal IPA from Elysian Brewing in the US which was acquired by A-B InBev earlier this year and Guinness Dublin Porter from Diageo which capitalises on Dublin’s brewing heritage in order to impart a sense of tradition and authenticity.  This has an obvious impact on retail sales.  

Over 2009-2014, dark beer and premium lager, where craft beer is typically found, have outperformed beer overall globally, and particularly so in Latin America, North America and Australasia.  In Western Europe, growth in dark beer was undermined due to a strong decline in mass-market brands, which dominate the category. 

The craft movement in beer has in turn facilitated a similar movement in crisps, particularly in the UK, where on-trade establishments have been switching from serving mainstream brands like Carlsberg beer and Walkers crisps to serving small-batch products like Brooklyn Lager with Tyrrells.