Kepak Convenience Foods – The Interview

Kepak Convenience Foods’ innovative Rustlers microwaveable hot snacks have been a runaway success since they hit the UK in 2000, becoming a byword among young adults, and 16-24 males in particular, for immediate hunger relief. In the process Kepak has built microwaveable hot snacks into a £107m category, which it leads with a dominant share.

Rustlers offers grocery retailers of all sizes, from supermarkets to C-stores and forecourts, a winning combination of fast-selling, convenient and tasty products based on popular, contemporary recipes, pitched at an affordable price point and kept front of consumers’ minds through targeted, irreverent advertising. But there’s more to brand owner Kepak Convenience Foods’ mastery of microwaveable hot snacking besides Rustlers, as the recent successful launches of UGO’s Deli Café and Rustlers Hot Subs show.

The man responsible for Kepak’s hot sellers is John Armstrong, Marketing Director of Kepak Convenience Foods. He joined just over three years ago from Muller, and before that McCain’s and McVitie’s. John heads Kepak’s brand marketing, NPD and customer marketing, and visits key account customers for new product presentations and business reviews. An important aspect of John’s role is keeping retailers informed about the microwaveable snacks market and of course Kepak’s brands.

The facts are impressive.  Kepak has a 72% value share (Nielsen Aug 09) of Hot Snacking sales, comprising Rustlers 52%, UGO’s 9%, from a standing start, and Speedy Snacks, Kepak’s value range, 11%. Armstrong says the category still has very good growth potential, with 14% growth last year. Microwaveable snacks are approaching their tenth year, having seen double-digit growth every year since 2000, which is set to continue.

Kepak is an Irish company, but Rustlers are a British-made success story. All Kepak Convenience Foods’ production for the UK, Ireland and Continental Europe happens in Preston, as does the product development.

Rustlers – fast food, fast sellers

Rustlers’ core products are Quarter Pounder, Chicken Sandwich and BBQ Rib, with a £1.69 RRP in supermarkets. The original Rustlers line-up, they were joined in 2007 by premium products Mighty Angus, Bacon & Cheese Deluxe and The Big One, each with a £1.99 RSP in the multiples.

As these names suggest, Rustlers take their inspiration from the fast food world, providing high street favourites in the home, with speed of cooking and ease of preparation. It’s a winning strategy, with 78 Rustlers eaten per minute in the UK, 8% up on last year. Rustlers also sell in Ireland: in Continental Europe they have been available in Holland and Belgium for the last two years, and in Denmark for the last couple of months. “The big challenge in these countries is the structure of the trade, rather than the consumer. 16-24 males in Brussels are much the same as they are in Manchester, with much the same interests.”

The Rustlers brand proposition is “the same as it was at the start,” says John Armstrong – “tasty, hot, quick and easy to prepare. We’ve updated the communication, and are now on our third ad campaign, but it’s the same core message.“

Rustlers’ success has attracted others to the market: “From a category development point of view it can be frustrating,” John admits. “We want to work with the trade to build the category, rather than fight for share. Meanwhile we stay firmly focused on category development, and our brand remains market leader through investment and research into what comes next.

“As a manufacturer, consumers show a clear preference for our products based on product quality and brand investment. We have a unique cooking process due to the equipment in the factory. Our other points of difference are the strength of the brand and our relations with the trade. “

UGO’S DELI CAFÉ – Panini power

The success of UGO’s Deli Café has given Kepak confidence that they can take the hot sandwich concept into new areas beyond burgers.  UGO’s is a different proposition to Rustlers – a hot panini cooked in the workplace or in the home, made with quality ingredients: “The quality and taste expectations have been set by Starbucks and Costa,” says John, “and we’re meeting them.”

UGO’s sales so far are £10m, and the range has a “robust” rate of sale. “We’re well established now, especially in the convenience channel. We’ve broken through into Waitrose, which is a good fit with UGO’s attributes.” The initial UGO’s varieties are Chicken & Pesto, Bacon & Mustard Mayo, Chicken & Mozzarella & Olive Tapenade. Will UGO’s cannibalise on Rustlers? Armstrong is confident it won’t: “UGO’s brings in white-collar workers and women, and 70% of sales are incremental to the category.”UGO’s has a 60:40 female bias.

75% of UGO’s purchases are for lunchtime consumption, pre-bought from the supermarket or during the working day from the nearest outlet to the workplace. After a press ad burst supporting the launch, last year’s activity was about building work-time usage, with roadshows visiting office parks, rail stations and retail parks. “The merchandising message is to make sure UGO’s is in the right place in store, in the sandwich and lunch area in stores with a convenience/food to go element, or in classic supermarkets, with ready meals.”

Up periscope – it’s Rustlers Hot Subs

Kepak’s latest launch, Rustlers Subs, takes the popular ‘sub sandwich’ format into the consumer’s home, and has energised the market since launching in Morrisons at the beginning of September. The first two varieties are Tangy Meatball and Southern Fried Chicken, both with an RSP of £1.99.
Will consumers be confused by Rustlers and Rustlers Hot Subs? Armstrong doesn’t think so: “Rustlers target consumers are familiar with ‘sub’ sandwiches from the high street offering and will understand the difference.”

Kepak has research groups looking at the next likely breakthroughs for Rustlers in terms of audiences and product formats, and work has started on new products for launch a year hence. Some 60% of Rustlers’ core audience is men 16-24, the rest are people who have a functional relationship with the products and want hot quick food, from shift workers to surgeons, as seen in the top selling Rustlers store in Manchester, located near a hospital.

Balancing the sectors

Rustlers’ and Kepak’s other products’ sales classically split 50:50 between the grocery and convenience channels, says John. “Our grocery sector sales are primarily mums buying for kids at home; the convenience sector purchasers are people buying for their own consumption.”

UGO’s skewed this when they were initially launched by being all self-purchase, but John says there is blurring there too now, as the multiple grocers develop their forecourts and convenience format stores. In any case, relative to other grocery brands Kepak’s products have a more even balance than the characteristic 70:30 multiples/convenience split.

“There are plenty of gaps for Rustlers in convenience outlets, but it comes down to how much individual retailers grasp it. Morrisons have really engaged with the brand in the last three years, and are enjoying excellent growth rates: Sainsbury’s have had over 100% growth in the last two years.”

Rustlers and the other Kepak products are part of a very broad product set embracing frozen, chilled and ambient, in-home and out-of-home: “When we win, we win out on preference for hot versus cold, speed of preparation and time of day eating, with Rustlers being the ideal choice late in the evening for many people,”

John Armstrong maintains the primary objective for Rustlers is trial: “This is a rotating category, and you need to recruit new lads and consumers generally, hence we hold samplings round universities, building sites and even hospitals, because people working there enjoy hot snacks when they get the chance.

“We’re also linking our marketing to video gaming, attending gaming festivals and advertising on line on gaming sites. We’ve sponsored on-line tournaments and are considering sponsoring a gaming team. We started our TV advertising by identifying channels watched by 16-25s, but now target ‘TV on demand’, TV watched on PCs and student TV.”

Rustlers’ TV ads appear after 9pm and importantly, after 11pm, a lot of it on music channels. “The HFSS – High Fat Salt & Sugar – rules don’t apply to our advertising,” says John, ”because we don’t target kids. If anything we expect the government will back off taking more action on the health front as the agenda switches back to getting the economy going again.”

The key to success for Rustlers, Rustlers Subs and UGO’s Deli Café lies in merchandising. In supermarkets, Rustlers are best positioned with ready meals and with Pies and Pasties; Hot Subs should be placed with the rest of the Rustlers products; and UGO’s should go in ready meals and next to chilled soups. For lunchtime sales, UGO’s and Hot Subs should be sited next to the sandwich fixture. “Sandwich chillers are usually empty by 4pm, which is when there is a major opportunity to sell UGO’s and Hot Subs. “

Innovation is the heartbeat

Innovation is at the heart of Kepak Convenience Foods’ microwaveable snacks business, says Armstrong: “We need to keep finding new ways to stretch the category, find new audiences and at the same time go on with trials. There’s still something of a barrier to preparing hot sandwiches in microwaves: only 25% of 16-24’s bought Rustlers in the last 12 months. We don’t expect to get to 100%, but we can certainly do better.”

Kepak is very active in monitoring the marketplace. Tracking trends in the high street led to the launch of Rustlers Subs, while UGO’s came from the coffee shop phenomenon. “We’re carrying out forward facing work with the Future Foundation, looking at trends for the next two to five years, with health being a major factor.”

Gourmet burgers and products for sharing could also be on the cards, but Armstrong won’t get drawn into details. Can we expect to see a celebrity chef endorsing Rustlers? “Probably not with Rustlers, but on UGO’s it could be an option. We get plenty of people trying UGO’s and saying ‘I can’t believe that came out of a microwave!’”

Another route Kepak is exploring to develop sales is to serve these products hot in store. In the independent sector Kepak has a partnership with RH Hall, the microwave provider, to supply microwave ovens pre-programmed to cook Rustlers and UGO’s. In this area retailers have achieved uplifts of over 30%, especially stores near hospitals, schools and office parks.

Kepak is also trialling the Hot Stop concept in two Dublin retailers. HotStop is a full scale self service unit aimed at the top 5% of the convenience store and forecourt market, the area pioneered by coffee machines in forecourts.

Rustlers and the other Kepak products have seen neither a drop off or an uplift directly from the recession, says John Armstrong, but there is some evidence of a switch to home cooking and a trickle down from eating out to fast food. “Our conversations with the IGD and Future Foundation suggest probably another year of people behaving as if we are in recession, and the thrift habits they’ve learned will last a lot longer.

“Whatever happens in the economy, our brands are here to stay,” Armstrong concludes. “Going forward, we have no lack of ideas about how to develop and build them further. What we need is the time and the money, and of course the right partnerships with retailers.”

Kepak Convenience Foods   tel: 01772 688 312   www.rustlersonline.com