Question

CASE STUDIES

THE ENERGY BAR INDUSTRY

In 1986, PowerBar, a Berkeley firm, created the energy bar category with its classic chewy bar. Positioned as an athletic energy food, it was distributed at bike shops and events that usually involved running or biking. The target segment was the athlete who needed an efficient, effective energy source.

Six years later, seeking to provide an alternative to the sticky, dry nature of the PowerBar, a competitor developed an energy bar with superior taste and texture and branded it the Clif Bar. Soon after, another competitor introduced the Balance bar, which offered a blend of protein, fat, and carbohydrates based on the nutrition formula associated with the “Zone Diet.” Faced with these challengers, PowerBar responded with Harvest (a bar with a much more mainstream taste and texture) and ProteinPlus (an entry into the high-protein subcategory closely related to Balance).

The makers of the Clif Bar observed that women athletes or those involved in fitness were approximately half of the market. However, their unique needs in terms of macronutrients, vitamins, and taste were not being addressed. Luna, the first nutritional (not energy) bar for women, was Clif Bar’s answer to this unmet need. The bar had a light crunchy texture, came in flavors like “lemon zest” and chai tea, and contained nearly two dozen vitamins, minerals, and nutrients. The target market consisted of time-strapped women who wanted an energy bar, but one more tailored to their needs.

Both in reaction to Luna’s success and to expand the segments for which the category was relevant, PowerBar focused on the sensitivity of women to calories and portion size. In response, the firm created Pria, which was smaller and had only 110 calories but had superior—almost indulgent—taste and texture.

The energy bar industry exploded over the next few decades exploiting the demand for health and weight control, portable meals, better ingredients, and nutritious snacks. Sales went from $100 million in 1996 to $2 billion a decade later and well over $6 billion by 2016. The growth was fueled by submarkets each driven by a unique “must have.”

These submarkets are defined by different applications, ingredients (consumers are becoming more ingredient sensitive), and value propositions. Over time, there have been nutrition bars, cereal bars (a replacement for breakfast), protein bars, diet bars (brands like Balance or Atkins that followed a popular diet), natural ingredient bars, all with numerous textures, flavors, sizes, and coatings. Over the decades, many hundreds of products were introduced. However, only a few became major players.

One of the successes was KIND, a brand that grew from nothing in 2004 to over $550 million in 2015 (33% of the market). It was driven by a clear vision to be a healthy, tasty, and natural snack in a sea of snacks that look and feel very different. KIND products are composed of whole fruits and nuts using gluten-free, non-GMO, sustainable ingredients with much less sugar than competitors. They are not cheap nor easy to produce given high-quality ingredients and production barriers that required innovation, investment, and commitment to overcome. The brand vision is communicated by a clear package that allows customers to see the ingredients. The tagline “ingredients you can see and pronounce” reinforces this transparency positioning. Reacting to a surge in interest in protein, KIND introduced a line of savory bars with more protein, including flavors such as honey smoked barbeque.

KIND has a higher purpose—to encourage people to reward acts of kindness. There is #kindawasomeness cards handed out to someone doing a kind act for someone else. The card has a website and code on which the card holder can request a packet of KIND bars along with another card to give to someone spotted doing an act of kindness. There have been 1.2 million documented acts of kindness as a result. There is the KIND Causes where, each month, members vote on which customer-nominated causes should be supported with a $10,000 donation. They vote by committing to do an act of kindness. For example, one proposal was to train mentors for Dryhootch, a non-alcoholic rally point for military personnel.

The energy bar market represents how a dynamic fast-changing and innovative marketplace works and the evolving winners and losers over just two decades!

FOR DISCUSSION

1. Identify the different submarkets or subcategories in the energy bar market. Which have “must haves” that drive a loyal and sizable segment? What are the strategic groupings? To what extent does each submarket represent fads that will peak and decline instead of grow. Why?
2. To what extent do you think the KIND subcategory is driven by its Kindness initiatives? Are these “must haves”?
3. What are the environmental trends that will affect this industry? Considering these trends, generate two or three viable future scenarios.
4. How can brands like Luna, Pria, and KIND be leveraged to other products and categories? What makes these brands extendable?

Answer 1

Identify the different submarkets or subcategories in the energy bar market. Which have “must haves” that drive a loyal and sizable segment? What are the strategic groupings? To what extent does each submarket represent fads that will peak and decline instead of grow. Why?

What are different sub market / categories in energy bar market?

• Male Athletes ((energy bars)
• Women athletes (energy bars)
• Fitness conscious (weight and calorie conscious)
• Health conscious (nutrition conscious)

Which have “must haves” that drive a loyal segment?

• Energy food
• Nutrition formula
• Taste and texture
• High protein
• Macro-nutrients with taste
• Organic products

What are the strategic groupings?

• Power Bar came up with energy bar but to meet competition came up with new products like Harvest, Protein plus and Pria;
• Clif Bar tapped nutrition and vitamins and not energy bars. It was for calorie conscious. They introduced Luna for women.
• Balance Bar: introduced Zone Diet with balance of nutrition elements like carbohydrates, protein and unsaturated fats.
• KIND it worked on simple organic ingredients and transparency plus a human cause for sustainability.

All got their niche and got growth in their segment. The growth will stay as people continue to get aware of the advantages of these bars. But now these companies compete with already established players of substitute products like Quaker Oats, Slim-Fast etc. so they can face decline in market share. Consumers want quality, affordable price and benefits that KIND is providing.

To what extent do you think the KIND subcategory is driven by its Kindness initiatives? Are these “must haves”?

I believe that the KIND company and its bars are heavily driven by its ideology of kindness. When KIND started in 2004, the message they wanted has never changed, which was the whole point behind the brand name. After launching the KIND Movement, the company started a marketing campaign called movement marketing. Movement marketing is a way in which businesses create marketing ideas and initiatives revolving around their mission statement or message to the world rather than around their products. Another example of movement marketing are TOMS shoes and their mission to donate shoes to those who do not have them when a pair of shoes are bought. KIND demonstrates their part of their message by utilizing corporate transparency in their products. They do this by creating their bars with ingredients consumers can pronounce and recognize.

I believe that foremost of their consumers, gluten-free, non-GMO and low sugar products are a must have because they are health-centric.

What are the environmental trends that will affect this industry? Considering these trends, generate two or three viable future scenarios.

Environmental trends that will affect the industry could include the cultural-consumer trend of desiring corporate transparency and the sustainability trend we see everywhere around us. We examples of brands’ transparency in KIND bars and their aim to use natural, healthy ingredients that are recognizable to the average consumer. Muscle Milk’s Peanut Butter Cookie Protein Bar has an ingredient called enzyme-modified soy protein and some consumers are gravitating towards more natural ingredients. KIND bars advertise their non-GMO, gluten-free bars to provide their consumers with an honest table of ingredients.

Sustainability is another cultural trend that consumers in America are moving towards. Recently, a movement to ban plastic straws from restaurants and bars shows our country’s worry about the environment. What if a company like KIND introduces a new type of packaging that was more sustainable? Reused plastic wrappings or a paper-based alternative to plastic might be very successful during a sustainability trend.

How can brands like Luna, Pria, and KIND be leveraged to other products and categories? What makes these brands extendable?

Brands like Luna, Pria and KIND are brands that are extendable because they have specific target markets or deliver a strong message to their consumers. For example, Luna and Pria were branded towards a female target market. With this as a basis, Luna and Pria could launch active and fitness related products also branded towards women, such as essential vitamin-rich drinks for pregnant women who still want to continue fit and active routines during pregnancy.

Although Pria and Luna are marketed towards a female audience, I don’t think it would be wise to extend too far off of what these brands are competent in. If Luna launched a new product line of pads and tampons, I think that would be extending their reach a bit too much, because their strengths and corporate competencies are within high-energy and fitness related foods.

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