Australians’ love of the humble sausage in bread is world-renowned but a fast food brand that pledged to turn the backyard mainstay into a product for “modern tastebuds” appears to have missed the mark and will soon close.
Four years after first investing in the Snag Stand business, parent company Collins Foods has decided to cop $1.2 million in costs to exit the business.
Collins Foods Limited, which owns a portfolio of other fast food operations including KFC Australia and Sizzler, announced on Wednesday it would shutter Snag Stand stores after a “strategic review” of the business, with the associated costs booked into this half of the financial year.
Snag Stand promises “the best bloody snag you’ve ever had” and offers a menu of barbeque items, including sausages and wraps, from its three stores in Queensland and one in Canberra.
When Collins Foods first invested in the business, buying a stake in 2013, it told shareholders the business was “an attractive early stage company” and Collins saw an opportunity to “invest in an innovative dining concept at the early stage of its development”.
By 2016 Collins owned the entire Snag Stand business, but over the past few months it has pivoted in terms of priorities, announcing further closures of Sizzler stores and rolling out its first Taco Bell outpost in Queensland.
In its half-year results yesterday, Collins reported a drop of 17.5% in net profit after tax to $12.7 million. The business said the drop was affected by $4.7 million in one-off acquisition and refinancing costs, including the $1.2 million to shut Snag Stand.
The plans is to close Snag Stand for good over the next month, and instead focus on Taco Bell, KFC and the Sizzler brand in Asia.
While Collins Foods has given little away as to why it doesn’t see a future in the Snag Stand brand, so why, despite Australia’s love of the sausage, did the concept struggle?
Here are two big takeaways from branding and retail experts.
1. Be careful when trying to take a product “high end”
When it comes to brands trying to create more chic versions of standard favourites, branding expert Michel Hogan says it’s important you don’t try to make a product to complicated or “elite” if it doesn’t need to be.
“When you’re tackling something that has a place in the national consciousness, like Australia’s relationship with the barbeque sausage, there’s a whole thing tied to the casualness of the idea,” says Hogan.
“The simplicity of the product has nothing to do with the high-end hot dog phenomenon.”
“You take something that’s rooted in simplicity and core and primal feelings and relationships and you try to amp it up, well, in this case it’s not surprising it didn’t work,” she suggests.
The Snag Stand outlets are located in large shopping centres, including Westfield in Sydney’s Pitt St mall, and Hogan says this may also be a clue as to why the brand potentially missed an opportunity.
A business positioning a brand should think about the alternatives in the market, and take care to match the product offer to how customers tend to shop, says Hogan, who observes that when it comes to hot dogs and sausages, there’s a tendency for consumers to be happiest buying these products from “venues on the street”.
2. Look for your point of differentiation
The fast casual retail space is incredibly crowded, says retail expert and associate professor at Queensland University of Technology, Gary Mortimer.
“When I look at the numbers, it clearly shows that in fast food, the world of burgers and fries is in decline. What’s growing is the more up market fast casual,” he says.
Given significant competition in the space, Mortimer says businesses need an unique offering to truly stand out in the crowd.
“The concept of a snag on a bread roll is very much election day stuff, the idea of the “democracy sausage”, or something that’s aligned with Bunnings. You can sexy it up with some nice condiments, but it’s still just a snag on a bread roll,” he says.
Creating a food retail brand that taps into the true preferences of consumers should not be all that different from other retail: “As someone starting a fast food business, you want to understand where’s the gap, what’s my value proposition, and ask, ‘Why am I different from what’s already in the marketplace?'” Mortimer advises.
Both Hogan and Mortimer believe when it comes to differentiation, Collins Foods may also have a challenge ahead as it looks to expand its Taco Bell offer.
While there “will be initial interest in the brand because it’s American”, Mortimer says the number of higher end Mexican options now in the local market could present a challenge.
“I’m not clear on the value proposition there, and I think the days of the very low-cost Mexican meal is over,” he says.
Hogan says the real risk for businesses when trying to launch a product in a crowded market like food is failing to look at whether there’s a relationship between “the core of the thing people care about and the thing you’re wanting to sell”.
While there’s an affection for “Mexi-chic” and higher end fast food at present, Hogan questions where Taco Bell fits into customer preferences.
“I’ll be really curious to see how it goes,” she says.