MTY Food Group’s Q2 reflected a broader trend in the industry in that the snack category is performing well amid a tough macroenvironment.
Restaurant consumer spending – and traffic – has softened so much this year, the trend has ignited an intensifying value war among quick service restaurants and beyond. But as those consumers become more discerning about pricing for their burger combo meals, they haven’t budged much when it comes to impulsive, often indulgent, snacking.
At least, that’s the perspective of Eric Lefebvre, CEO of MTY Food Group. His company includes a bevy of Canadian and American restaurant brands such as Baja Fresh Mexican Grill, Blimpie, Famous Dave’s, Champps, and Papa Murphy’s. But it’s MTY’s snacking division that stood out most during the company’s second quarter, helping to drive a sequential improvement in same-store sales (-1%) in the United States compared to Q1. MTY’s snack concepts, including Cold Stone Creamery, Wetzel’s Pretzel’s, SweetFrog, Planet Smoothie, and Pinkberry, all posted strong gains during the quarter, Lefebvre said during the company’s earnings call last week, offsetting some weakness in its casual dining category.
The company’s snack-heavy portfolio in the U.S. also helped drive a performance disparity with its Canadian system, in which same-store sales were down by 3.6%.
“Our snack category in the U.S. performed extremely well and that’s a category we don’t have as much in Canada,” Lefebvre said. “The mix of brands we have in both countries is the main differentiator here.”
Perhaps it’s a little surprising that such discretionary brands would outperform in this tightening environment, but Lefebvre said the craveable and experiential nature of these brands helps. There could also be some psychological drivers; consumers have proven before that when times are tough, they like to treat themselves.
“As the cost of a meal – even at QSR – becomes a barrier to purchase, I believe consumers will increasingly turn to lower cost snacking options to satisfy their cravings for some type of restaurant purchase,” Robert Byrne, director of consumer and industry insights at Technomic, said during a recent interview. “Consumers love restaurants and enjoy treating themselves to foodservice whenever possible.”
Perhaps that explains why nine out of Technomic’s 25 “chains to know” – emerging brands with material sales and unit count growth from 2022 to 2023 – focus on discretionary purchases. Iced tea concept HTeaO grew sales by nearly 54% while locations were up over 47%, for instance. Jeremiah’s Italian Ice was up 37% and 40%, respectively, while Handel’s Homemade Ice Cream was up 28.8% and 31.9%, and Nekter Juice Bar increased by 18.5% and 20.3%. Indeed, on Technomic’s Top 500 list, 25 of the 27 brands categorized as “other/beverage/snack” experienced sales growth year-over-year, 14 of which were up by double digits. Further, 22 of those chains experienced unit count growth, while 11 were in the double digits. This category doesn’t even count coffee café or frozen dessert brands.
According to research from Mordor Intelligence, the snacking category as a whole is expected to grow at a staggering clip – from $256.2 billion in 2023 to $559.2 billion in 2028, or a compound annual growth rate of nearly 17%. There are several factors pushing this momentum, including younger consumers who don’t define dayparts as neatly as their predecessors, the heightened cost of such defined meals, and the desire to self-indulge. What the past few years has shown us is that restaurants are simply trying to capitalize on this trend and many of them seem to be succeeding so far.
Contact Alicia Kelso at [email protected]
