Sweet tooth helps fight the recession

Published on Monday 8 June 2009 21:43

WHEN the going gets tough, the tough are reaching for cakes and fizzy drinks to make themselves feel a bit better.

In recession-hit Scotland, consumers are splashing out on sweet favourites, and sales of familiar brands such as Irn Bru and Tunnocks tea cakes and caramel wafers are on the rise.

There are plenty of signs the shopper is cutting back on big-ticket items such as white goods and cars, but there is growing evidence that Scots are increasingly indulging their sweet tooth.

And the beneficiaries are some of Scotland's most important brands – especially now the sun is out.

Yesterday, AG Barr, makers of Scotland's second favourite tipple, said sales since February were up nearly 8 per cent, driven strongly by its fizzy drinks.

Barr's is not the only supplier of sweet products to prosper in the downturn. Coatbridge-based Lees, maker of the famous Macaroon bar, recently recorded an 8 per cent rise in sales to 16.1m for 2008. Tunnock's is also in good commercial shape.

According to Nicola Mallard, an analyst with Investec, one of the reasons for Barr's strong performance was the cosy familiarity of the Irn Bru brand,

"There seems to be a resurgence of people going back to brands they trust," says Mallard.

Mark Gorman, head of thinking at Think Hard believes that Irn Bru is a "fabric brand", which has survived the test of time and is "fixed in the commercial psyche".

These are not the cheapest in the shops but to consumers they signal reliability. Scottish brands which he believes make the grade include Irn Bru, Mothers Pride bread, Tennent's lager, Lees' macaroons , and of course, Tunnocks.

"Although people will cut back and look for cheap brands, you do tend to find in a recession they are still willing to pay more for branded goods in certain staple ranges," Gorman says.

Can a fizzy drink really be considered a staple food? In Scotland, he says, it is.

"They are the important things in life, because they do trust those brands. You wouldn't want to drink own-brand Irn Bru, would you?"

Fergus Loudon, the sales manager for teacake makers Tunnocks, says the group has come back from a slower-than-normal start to the year and its factory in Uddingston is "back to seven days a week".

He adds that it is the trust people have in the brand as well as the need for a little sugary comfort that drives sales.

Loudon says: "To a degree, it is confidence in the older brands. The likes of ourselves, Barrs, Baxters, Walkers – they are all iconic Scottish companies and they have been around for a long time. I think the consumer can relate to that and they have confidence in the stronger brands.

"They think: 'Ah, that is good – I haven't had one of those for a while.' It is comfort eating. In times of hardship, people will always treat themselves to a treat, whether it is a caramel wafer or a can of Irn Bru."

However, Roger White, chief executive of AG Barr, takes a different view. He dismisses the "comfort factor" although he agreed people reach for the brands they know when they are feeling shaky.

"It is not about comfort eating or drinking, but people stick to what they know when they are lacking in confidence and they stick to things which are relatively affordable.

"Our brands are just known or affordable. It is easier to turn down things you are less certain of if you lack confidence. You tend to stick with something you know," White maintains.

Mark Bradford, managing director of James Allan Bakeries, a traditional seller of pies and cakes in the West of Scotland, is surprised by the growth in demand for treats – as long as they are cheap.

Bradford says that sales of savoury pies have enjoyed a resurgence but it is the cream cakes that have sold particularly well.

"Good sellers at the moment are cream cakes, which until recently were not that popular. But they have grown in popularity. You could call them a comfort food, I think people are treating themselves to low-cost treats, which our types of products are."

In addition to selling sugary sweet nothings, AG Barr also enjoys the benefits of having a strong core market – loyal Scottish consumers.

Gorman believes that loyalty in the home market is a key benefit to companies such as AG Barr which has expanded in the UK and more recently, into Russia.

"It gives backbone to your balance sheet if you know that come what may, you are still going to hold brand leadership in your original territory. That gives you some confidence to build from there. Irn Bru have done that brilliantly in the last 20 years," said Gorman.