Nordic Snack Selling High-Value Foods in Northern Europe

Anneli Sumen woke up one morning craving a bagel. Just one problem: she was not in Chicago where she works–she was in Sweden. Swedish bagels were in short supply.

Sumen was in luck. Her job in Chicago is to promote Swedish goods in the United States, so she also knew about trade going in the opposite direction. That meant she knew about Gray’s American Stores–possibly the only vendor in the country with a bagel machine.

"We bought the machine on a trip to Chicago," said Håkan Ericsson, the store’s business manager and co-owner, along with his wife Emily Gray. "We can make other American-style baked goods, since we have our own bakery, too."

"Even if you move to the United States as an adult, it doesn’t take long to develop a taste for the foods," she said.

Since 1993, Gray’s American Foods has kept its main boutique centrally located on a downtown street in Stockholm, stocked with a line of exclusively American food products.

It’s a great place to find U.S. brands such as Oreo cookies, Hellmann’s Real Mayonnaise, Reese’s Peanut Butter Cups and Newman’s Own salad dressings.

While there are other companies that import U.S. foods, it is Gray’s partnership with the Swedish supermarkets, known as hyper-markets, that has proven to be a powerful resource for U.S. food exporters.

Gray’s American Stores provide Sweden’s supermarkets with products to stock their U.S. specialty foods shelves.

If a food sells well at a Gray’s boutique, the supermarket will try selling it from a Gray’s "American Food Corner." If it sells well enough in this special "American" section, it may end up competing shoulder-to-shoulder with similar domestic food products on the regular shelves.

"Three years ago, when we started, it was not easy to get retailers to accept our idea, said Ericsson. "But when they discovered how well our products sold, things changed. It’s not such an uphill battle anymore. Now the retailers approach us."

One benefit of this strategy is that it maximizes early U.S. product exposure while controlling many start-up advertising and sales costs.

The number of "American Corners" in 1999 climbed from under 100 to approximately 400; the goal for the current year is 1,000.

Much of this success was built on arrangements negotiated with individual store owners in two of Sweden’s larger retail chains, ICA and KF. Together, those two stores represent approximately 3,500 outlets with an aggregate market share of roughly 55 percent. art1b

The key to Gray’s marketing concept is centralized buying. Through an agreement with ICA, Gray’s nests its entire U.S. product line at the corporation’s central warehouse, from which the superstore’s individual retail outlets purchase nationwide.

"This is one of the best ways of getting U.S. retail food products into this and our other regional markets," said Ericsson. "The practice is common for a wide range of imported or locally produced retail food products."

Gray's representatives went to Finland recently and succeeded in reaching agreement with Finland's largest retailer, Kesko, to set up Gray’s American Food Corners in its store chain. Target for next year is 400 retail outlets with such corners.
[Editor's Note: A representative of Kesko Food Ltd. has informed FAS that this paragraph is in error; the agreement does not exist]

In September 2000, Gray’s will be at the GastroNord Trade Show in Stockholm. With FAS support, they plan to create a special version of their store, featuring products from U.S. food companies that could not afford the trip to Europe. They plan to call it "Gray’s Taste of America Café."

In January 2001, Gray's representatives plan to attend the U.S. Fancy Food Show in San Francisco as a buying team. They hope that their creative merchandising initiative and the export opportunities it represents will make them attractive to U.S. companies. Gray’s is looking for new snack foods, dressings and sauces, pre-mixes and confectionery products.

They’re also giving thought to a restaurant or catering start-up and will be looking for a carefully selected line of American food service products.

In addition, Gray’s plans to have a booth at Sweden’s Elmia Food Show, which is scheduled for March 13-15, 2001, just months after their buying mission in the United States. Elmia is a retail food trade show that is growing in popularity–with 6,300 visitors in 1999 and 230 exhibitors. This presents a great opportunity for U.S. companies contacted in San Francisco in January to follow up later in Sweden.

Admittedly, not every U.S. food has a future in Sweden. Ericsson, who welcomes inquires from all exporters, also offers some cautions to U.S. companies. First, the U.S. dollar is very strong, so don’t bother sending a product that can readily be purchased in Sweden at lower cost. Consumers will not pay more for a food just because it came from the United States.

"We look for products that have niche value–something different and eye-catching," he said.

Gray’s also looks for products that are free of genetically modified organisms–or GMOs. While that doesn’t mean a product has to be strictly organic, the bigger supermarket chains won’t carry GMO products–they are afraid of how some consumers will respond.

"Another big no-no is certain classes of food colorings," he added. "Blue number 2, Red 40 and Yellow 56 are all legal to sell, but no one will carry them."

Ericsson recalls how a major U.S. candy maker failed to get its top-selling domestic product into the Swedish market because the bright pop colors of the candy came from these coloring agents.

Finally, Gray’s would love to carry U.S. cereals, but for one problem: U.S. companies often fortify their product with vitamins–a big selling point for its U.S. customers. However, Sweden’s National Foods Administration does not permit such foods on the market. Gray’s hopes to find a manufacturer of U.S.-style cereals that forgoes fortification.

Massaging the Swedish Numbers

Sweden, a nation of some 9 million people, has a food market valued at $21 billion. The country currently imports in excess of $3 billion in retail food products annually.

When selling food to Swedish consumers, it pays to know that their buying habits reflect a different way of thinking about food. One that is, arguably, a little more health-oriented than that of an average U.S. consumer.

"To us, a snack is yogurt, fruit or cereal. Candy, chips and other foods that U.S. consumers tend to categorize as ‘snacks,’ we would call them ‘treats,’" said Sumen. "A treat is not considered a daily food item; it’s reserved for special occasions."

As a rule, Swedish consumers would not consider eating potato chips with lunch, she explained.

However, products that present a nostalgic picture of the United States tend to do well.

"We like U.S. marshmallows," Ericsson said. "At first, Sweden bought marshmallows mainly from Spain, but we found you can’t toast theirs over a fire like you do in the United States."

Ericsson added that television was instrumental in the success of U.S. marshmallows. About 60 percent of the television shows seen in Sweden are from the United States, he estimates.

"The idea of roasting marshmallows became popular here after people saw U.S. campfire cookouts on television," Ericsson said.

Pancake mixes also sell well, he said. Both he and Sumen agree that peanut butter and popcorn are also top performers. Salad dressing, condiments and sauces are also a good bet.

Ericsson said there is a lot of potential in foods that evoke a particular U.S. region or culture–what he calls "foods that tell a story." But to last beyond the initial intrigue, the product has to have quality.

There are reasons for Swedish interest in American food products. Swedes have enjoyed a noticeable upswing in vacation travel to the United States in the past two decades.

Demand for U.S. foods is also fed by a pattern of travel to the United States by young Swedish au pairs, interns and students. Fueling the youth trend at home, teen-oriented programs are filled with commercials for U.S. foods and treats.

Demand is also strengthened by the prevalence of English as a second language in Sweden. In addition, economic growth in the country has improved prospects for imported foods. Inflation is at a record low and per capita income is relatively high and evenly distributed.

There are many two-income households, driving a growing demand for high-quality convenience food products.

The author is the Agricultural Counselor and Attaché at the Office of Agricultural Affairs at the U.S. Embassy in Stockholm, Sweden. Tel.: 46 8 783 5390; Fax: 46 8 662 8495; E-mail: agstockholm@fas.usda.gov