KANSAS CITY โ Sooner or later, it had to happen. Something had to give. What goes up eventually settles down, even in the most resilient of markets. Thatโs exactly what occurred in the snack industry, which flourished during the past few years with double-digit dollar sales gains and robust unit growth.
Granted, todayโs situation is anything but dire. People are still snacking at record high frequencies, often three to five times daily. Thatโs powered salted snack sales, which posted a 6.9% dollar rise with more than $31.1 billion in annual sales, according to Circana data for the 52 weeks ending Jan. 28. However, unit sales slipped 0.5% for salty snacks. In many categories, though, those units fell even more, indicating that the recent boom in retail space has lost some of its luster and not only for core salty items.
In the broader snack aisle, which includes cookies, crackers, bars, fruit chips and others, sales reached $51.7 billion, up 4.6% while units tumbled 2.1%, according to Circana.
โDuring the pandemic, snack sales were fantastic,โ observed Linsey Herman, vice president of product development, Factory Innovation LLC, Bethlehem, Pa., a consulting company in the food and beverage industry. โEverybody was staying at home. They werenโt going to restaurants. A lot of those dollars were transferred to in-home eating. Now restaurants are open again, and there are more opportunities to eat away from home, and thereโs just more opportunity in foodservice.โ
In many categories, the dynamics of the situation are quite fluid, noted Mark Singleton, vice president of sales and marketing, Rudolph Foods, Dallas. The pork rind category, for instance, saw dollar sales, unit sales and volume slip as a whole, but itโs not a one-size-fits-all market.
โAccording to the data, itโs not a static situation across the country as far as the pork rinds category,โ he explained. โWeโre seeing some real strength in high-density Hispanic areas and in the South. However, weโre seeing some areas of weakness in the Northeast that can be attributed to a lack of keto focus with new consumers.โ
Mostly, Singleton added, snack producers have experienced softness with conventional grocery stores, particularly in urban areas where retailers are dependent on more snack dollars to contribute to the revenue in their stores.
โHopefully, the weakening of inflation pressures over the last couple years will allow for some investment in promotions that spark unit volume,โ he said.
Such weakness in unit and volume is not only impacting snack categories. Itโs happening across most of the food and beverage industry. Sally Lyons Wyatt, global executive vice president and chief advisor, consumer goods and foodservice insights, Circana, suggested multiple factors are at play, including food inflation over the past two years and consumers now seeking to economize.
โWe found consumers were looking for ways to help manage, not only food budgets, but also overall household budgets,โ she recently told Beth Day, contributing editor, SNAC World magazine for SNAC Internationalโs 2024 state of the snack industry report compiled in conjunction with Sosland Publishing. โComing into 2024, we will be overlapping huge dollar growth from the inflationary period during the first part of the year. Consumers are trying to manage all monthly expenses and have greatly reduced discretionary spending. What we are seeing with snacks is that what they have bought and shifts they have made are impacting unit and volume sales.โ
Lyons Wyatt added that shoppers are pulling different levers with their snack selections. Channel surfing, for instance, is one way to get the biggest bang for their snacking dollars.
โSome consumers are buying less than they did before,โ she suggested. โA portion of consumers are downsizing to buy smaller sizes, or buying multi-packs to stretch what they have in the pantry for a longer period. Others may not return to categories as often. Where consumers shop has also shifted. Mass [merchandise] and convenience channels are gaining in dollar share. Mass channels offer value, and convenience stores offer convenient accessibility of products. Unit sales also increased in club stores, and Internet outlets increased volume with overall core snacking. Specialty stores also saw an uptick in unit sales as well. If manufacturers can increase both unit and dollar sales, they are golden.โ
Reaching a critical barrier
In a presentation at SNAC Internationalโs Executive Leadership Forum last fall, Lyons Wyatt stated that rising dollar sales and sliding units gave her cause for concern. For the first time in years, she pointed out, unit sales in the snack category underperformed the broader food and beverage market. This indicated a potential โsales strainโ in the snack market as consumers shift their purchasing patterns in response to inflation and higher prices.
At that time, she mentioned the 2% decline in units didnโt disturb Circana researchers too much, but theyโre keeping a close eye on that percentage going forward.
โItโs when we go past the 2% mark that we start to get nervous in an environment like we are in where you had pretty highly inflated pricing,โ she said.
Circana research has indicated the extra-large snacking companies with $6 billion or more in sales are seeing their share of the pie expand along with smaller businesses with less than $100 million in sales. Lyons Wyatt said other large and mid-sized snack companies are seeing slight declines in their share of the market.
Snack makers also shouldnโt expect the hefty annual increases in dollar sales they saw during the stay-at-home period unless companies keep on raising prices to cover higher ingredient, labor and operating costs. She urged snack companies to try to minimize pricing partly because some households are having difficulty keeping up with inflation.
Some categories are seeing growth in sales, units and volume. Specifically, corn chips hit the trifecta, rising 19.5% to $1.9 billion with hefty unit and volume growth, mainly because of the performance of Plano, Texas-based Frito-Lay North Americaโs dominance in the segment. Likewise, the versatile pretzel category experienced an 8.7% bump to just over $2 billion while unit and volume eked out slight gains.
Justin Spannuth, vice president and chief operations officer, Unique Snacks, Reading, Pa., and SNAC International chair, attributed pretzelsโ resurgence to a move toward more premium items, such as Dots pretzels, a brand owned by The Hershey Co., Hershey, Pa.
โThe pretzel category caught fire when Dotโs disrupted the market with a new approach to seasoned pretzels, selling a ton of SKUs for a much higher price point,โ he explained in SNAC World magazine. โThis created a flurry of competitors chasing to ride their tailwind. Consumers showed their willingness to pay more for something they really wanted, and the ingredients didnโt have to be clean, so that meant we were talking about the non-BFY (better for you) consumer, which was a surprise. Grocers were happy to โgiveโ those brands space for these new competitive, seasoned pretzel products especially when they were paying for urgency of consumer attention with promotional programs, as well as a single register ring of a seasoned pretzel giving the retailer higher margin profits than most other snacks because of the high price point.โ
Spannuth added that Unique Snacks has been working to create other new and innovative products to disrupt the snack space. The companyโs new Puffzels are a crunchy, seasoned, extruded corn snack looking to bring new flavors to that fast-growing category.
โWe are hoping for great distribution expansion with retailers in 2024,โ he said. โWe are also seeing nice growth in our regular pretzel items as we continue to bring brand awareness to consumers.โ
Spicing it up
When it comes to innovation, snack producers rely on a full toolkit of options. Frito-Lay is leveraging the iconic flavors of its powerhouse brands like Doritos into new categories. Most recently, the Doritos Cool Ranch variety joined Doritos Nacho Cheese within the Smartfood popcorn portfolio. During the past two years, the company rolled out Cheetos popcorn with great success.
Likewise, Utz Brands, Hanover, Pa., extended its Zappโs brand into the pretzel category with its New Orleans-style seasoned pretzel sticks.
Utz also introduced Mixed Minis Pretzels that come in three bite-sized shapes, including twists, rings and waffles, and flavors such as Sea Salt, Garlic Butter and Mikeโs Hot Honey.
Innovation is vital in the impulse-driven snack market.
โConsumers show more interest in concepts that contribute to the taste and flavor of salty snacks compared to interest in certain BFY attributes,โ said Kelsey Olsen, food and drink analyst, Mintel. โAdditionally, we have seen crossovers across a wide range of categories, pointing to the idea that anything can be a snack.โ
Mintelโs 2024 โSalty Snacks reportโ noted 30% of consumers are interested in trying salty snacks with seasonal twists, 29% of them expressed interest in snacks made with flavors from other brands, 27% are interested in tasting products inspired by international flavors, 24% of consumers are looking for salty snacks that are diet-friendly and 21% of those surveyed would like snacks with functional attributes.
Moreover, 30% of salty snack consumers, led by Generation Z and millennials, report that they seek out new flavors, 35% of them report that they would consider purchasing more salty snacks if there were more interesting flavors, and 29% agree that itโs fun to try snacks with unusual flavors.
Beth Carreon, president of Coco Bakery, an operating company part of Canadian-based Bond Bakery Brands that serves customers on both sides of the border, suggested the biggest hurdle for cookie and snack companies involves standing out from the pack where countless manufacturers and brands compete with one another.
โConsumers are looking for three things,โ she said. โFunctional ingredients to address health-and-wellness trends, snacks that allow them to indulge โ but often in single-serve formats โ and flavors that are either exotic and adventurous or bring a sense of nostalgia.โ
She added Coco Bakery has focused on single-serve indulgences in on-trend flavors as an area of growth. The company launched macarons in nostalgic flavors like Birthday Cake and Peanut Butter and Jam.
โSimilarly, our cake pops come in nostalgic flavors like Birthday Cake and Red Velvet, but in the single-serve format that is easy to say โyesโ to,โ Carreon said. โInnovation is at the core of everything we do. Our ears are constantly on the ground for emerging trends in flavors and formats. We heard from our customers and consumers that โsnacks on a stickโ were exciting for them, and launched our Mac Pops, chocolate dipped macarons on sticks, which have been a source of growth for Coco Bakery in the last six months. By constantly engaging with our customers and consumers and sharing feedback with our agile product development team, we are able to quickly address trends and launch new products.โ
Cara Figgins, president, Partners, a Tasteful Choice company based in Des Moines, Wash., suggested the new product fog is lifting from the pandemic and supply chain issues of the past few years.
โI think there was sort of a COVID hangover that had lasted for a little while,โ she explained. โPeople have regained their enthusiasm for bringing in new products. The buyers just needed more time to regroup themselves. Now everyone is looking for new items. What can they do to refresh? Are there price points that can be competitive but with items that bring consumers to their departments? Weโre seeing a lot more enthusiasm.โ
Partners is rolling out sourdough-style flatbreads for in-store bakery/delis that come in Rosemary, Garlic Herb and Sea Salt varieties with a clean ingredient label that reinforces the homemade, back-to-basics focus on the ingredients. Over the past few years, the company has also expanded in the private label and co-manufacturing arenas.
โWe have a pretty diverse portfolio of what we do,โ Figgins said. โRetailers are more open to looking at new items. We seem to be getting a lot of interest in not just the new deli products, but also in our All American line, which is a center-store snack item.โ
Calbee America, Fairfield, Calif., is expanding the presence of its Japanese legacy snacks and introducing them to mainstream US grocers. Maiko Shimano, senior marketing manager, said those products include JagaRico, tasty and crunchy potato sticks made with potatoes and vegetables that come in Original and Hokkaido Butter flavors. The company is also moving its iconic Shrimp Chips, which are wheat-puffed snacks made with sushi-grade, wild-caught shrimp, from the Asian and international sections of stores to a broader audience.
โWeโre seeing a trend toward bold, unexpected flavor combinations,โ Shimano observed.
He added that Calbee recognized a gap in the marketplace for wholesome, fruit-based snacks geared toward children and will be expanding its Harvest Snaps offerings with a kid-friendly lineup featuring nutrient-dense fruits as the No. 1 ingredient.
Moreover, the company launched Crunchy Loops Hot & Spicy snacks that are made with red lentils and turn up the heat and flavor for health-conscious consumers.
Singleton pointed out Rudolph Foods also ratcheted up the heat with Hot Honey and Pineapple Ancho Chile pork rinds under the Southern Recipe brands. Rudolph is also launching a new Fire & Lime flavor within the Pepeโs Chicharrรณnes line.
โItโs purposely hot. Itโs not subtle,โ Singleton said. โItโs supposed to be hot with an explosion of heat and lime like weโve never put on a pork rind, so weโre really excited about that.โ
In Canada, Rudolph offers an All-Dressed variety that features a north-of-the-border, classic combination of ketchup, barbecue sauce, sour cream and onion, and salt and vinegar.
โItโs one of the best things we have ever put on a pork rind,โ Singleton noted. โI cannot eat enough of them.โ
Positive thoughts for the road
Singleton said snacks, especially items like pork rinds that many consumers still havenโt tried, have room to expand, as habitual snacking throughout the day becomes even more popular.
โOptimism is my middle name, so I think the pork rind category will do great because it fulfills a vital part of consumersโ dietary routines,โ he explained. โPeople are eating several times a day, particularly high-protein and low-carb snacks. We think the future is very bright as we develop household penetration and trial. Weโre going to get people to eat more pork rinds in more places.โ
Despite economic challenges, Lyons Wyatt said, snacking could have a very good year in 2024 and beyond for a number of reasons. First, the lifestyle of millennial and younger consumers in the United States supports snacking.
โTo leverage this momentum, producers must get innovation back on track because innovation has been the backbone of snacks,โ she suggested. โInnovation around creating a variety of products with the right packaging, the right size, the right price and available in the right channels is incredibly important to respond to the shifts consumers have made with snack purchases.โ
Within specific categories like potato chips, popcorn or nuts, she added, snack makers must make sure their products meet the needs of consumers where they purchase them and at prices they can afford.
โWith inflationary prices dropping, if snack manufacturers can deliver on these criteria, and increase innovation, snacks will have a great year,โ Lyons Wyatt said.
By tapping into peopleโs impulses for new, exciting flavors, the snack market will regain the momentum that drove it to expanding heights in recent years.
