Is the energy dissipating in bars?

The recent announcement that Kraft Foods sold its Balance Bar nutrition bar business to a private equity firm perhaps indicates that the Company's interests are currently focused in other areas. But what is its significance in terms of the energy bar market as a whole, particularly in the key market of the US, where sales of energy bars have risen from less than US$400m in 1996 to over US$2bn? Recently this growth rate has slowed, does this point to signs of market saturation?

The Innova Database records that more than 1,600 cereal bars launched in the first 11 months of 2009, up from the same period in 2008, but less than the more than 2,000 new bars introduced during the same period in 2007. The majority of launches have a health positioning, particularly in the US, where more than 90% had health positioning of some kind, compared with just over 80% in Western Europe.

Most of these are marketed on a fairly general multi-benefit health platform, particularly in European brands. It is only in the US that the market for more specialist nutrition bars has emerged from the relative obscurity of the specialist sports nutrition sector and into the mainstream. This trend is led by three players — Powerbar, Balance Bar and Clif — which pioneered the US energy bar market in the 1990s before two of the three were snapped up in 2000 by major multinational food companies looking for upcoming markets and rising interest in health and convenience. At that time Balance Bar, originally developed for consumers with special dietary needs, was purchased by Kraft, while rival Powerbar was bought by Nestlé, while number three player Clif remained independent.

Balance Bar has retained its original 40-30-30 concept of 40% carbohydrate, 30% protein and 30% fat for sustained energy and hunger management over the years, as it has explored a huge range of product options, including energy bars, fruit and nut bars, natural and organic bars, high protein bars, meal replacement bars, 100-calorie bars and low-carbohydrate bars. Many of these initiatives do not seem to have worked; with the company's range, immediately prior to its sale encompassing just four lines — Original, Gold, Pure and Carbwell.

While Powerbar has continued to lead the market, Clif Bar has gained market share over Balance Bar. Looking at new product launches in the US in the past 12 months, the Innova Database shows that, while there was little evidence of activity from Balance Bar, Powerbar continued to develop its range with a strong sports and performance image, and Clif continued to focus on its natural image and extended into new flavours and formats such as Clif Luna Cookies and Clif Shot Roks.

Meanwhile the overall cereal bars market in the US is facing some problems after years of sustained growth. Sales through supermarkets, drugstores and mass merchandisers showed only slight growth in the first half of 2009, although nutrition and intrinsic health bars, including energy bars, saw the best growth in the market, ahead of breakfast bars and rice snack squares. Also to be considered, is a majority of the nutrition bars market is sold through specialist outlets, multilevel marketing, etc., rather than mass channels, which may also be facing a downturn.

Lu Ann Williams, Head of Research for Innova Market Insights, states that "Within the nutrition bars market, traditional-style energy bars are having to compete with a range of other health-oriented bars, not only those positioned on a general or multi-benefit platform, but also on a range of formats that are currently very much in vogue, including wholegrain, high fibre, weight management, digestive health, free-from and natural."

She emphasizes that "With the high levels of product activity apparent in the bars market in recent years, it may be that saturation point is approaching, with market maturity and segmentation reaching a point where further innovation opportunities are going to be more limited, possibly causing further shakeouts in the market and creating an even more challenging environment."

Source: Innova Market Insights

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