State of the Snack Industry: Bold New World
August 1, 2014
by Bob Gatty
With snacking across the nation and many countries abroad increasing steadily, snack companies must pay close attention to consumers’ continually shifting needs, desires and tastes — all of which influence their snack purchasing habits.
There are plenty of opportunities evident in the data if snack marketers take the time and effort to look, and there is much to be learned from a huge variety of snack sellers, some new to this category, who have become increasingly creative in their merchandising and promotion strategies.
In a “State of the Snack Industry” special report at the Snack Food Association’s SNAXPO convention in early March, industry analyst Sally Lyons Wyatt offered insight into some of the trends evidenced by consumer snack sales over the past year and suggested steps marketers can take to get a piece of the action. “Consumers’ lifestyles have changed, and people are eating on the go,” observed Ms. Wyatt, IRI executive and general manager, client insights. “Take advantage of co-
merchandising opportunities — for example, market rice cakes with refrigerated spreads. Merchandising can deliver a big lift in sales. Be bold about what you want to put in the store.”
She noted that despite economic challenges causing consumers to be cautious with their money, more than $1 trillion is spent annually on food. In fact, 43% of that is spent on edible food purchased at multi-store outlets and convenience stores (MULO=C). Remarkably, IRI data shows that 86% of consumers eat snacks of one kind or another, with snack purchasing frequency increasing at a healthy rate. In fact, 51% said they consume three or more snacks daily, up from 21% just four years ago.
The average number of snacks consumed daily jumped from 1.9 per person in 2010 to 2.8 this year. Mini meals are becoming increasingly popular with 28% of US consumers saying they eat four or five such meals every day. Thirty-eight percent said they eat three square meals and several snacks each day, while 21% said they eat on the run and grab food whenever they can.
While core snack volume dipped 0.8% industry-wide, dollar sales increased 2.8%, generated by increased prices, outpacing overall CPG sales, which increased 1.6%.
Ms. Wyatt stressed the impact of today’s busy consumers eating more frequent, but smaller, meals throughout the day and increasingly looking for healthier options. While indulgent snack sales are still strong, and savory snack sales increased, sales of healthier-for-you snacks are continuing to rise, and Ms. Wyatt noted that suppliers have responded with snack sizes of fresh produce, such as apples, celery and tomatoes.
“Try really hard not to treat all consumers the same,” she advised. “If you are trying to innovate and attract consumers who go to quick-serve restaurants, for example, go to the demographic groups who go there.”
It’s also important to remember that many consumers are hard-pressed financially and still reeling from the recession, Ms. Wyatt cautioned. Fifty-two percent said they would switch to private label if budgets were tight, with snack nuts, seeds and corn nuts increasing 1.7%. Overall, however, private label volume share was flat.
Private label rose in several categories with its price advantage, with nutritional snacks/trail mixes increasing its share by 0.8% to 11.7% and carob/yogurt-coated snacks boosting share by 1% to 5.6%.
Increasing numbers of health-conscious consumers are paying close attention to nutritional claims on packages, with categories like yogurt, nutritional snacks and trail mixes, and carob/yogurt-coated snacks showing exceptional growth. Overall, 62% of healthier snack categories grew volume sales.Fresh snack products are showing strength across the board. “People want simple ingredients, and that could be taking a bite out of what you are selling,” she told members of the audience, mostly executives of companies that make and sell salty and savory snack products.
In fact, according to the American Wholesale Marketers Association’s InfoMetrics data, based on convenience distributor sales, fresh snacks — primarily fruit — are proving to be popular among customers. InfoMetrics data for the year ending March 15, 2014, indicate that warehouse-delivered fresh fruit sales increased by 18.4% over the previous 52 weeks, although accounting for just 2% of sales by the 55 distributors reporting to InfoMetrics.
Ms. Wyatt pointed out that retailers have done a good job making healthy snacks accessible, as 60% of consumers said this is the case. Natural snack sales increased 14.2% over the year, with total natural food and beverages up 106%. Organic snacks increased 6.9%, while total organic food and beverages increased 12.4%.
“All of the publicity about GMOs last year got more people to buy organic,” Ms. Wyatt said. “It’s making a difference in the trends, and retailers have figured it out.” Moreover, products that make some sort of health claim on their packaging are doing well.
A greater numbers of stores are carrying snack options like vegetable and hummus chips, she noted. “If you are playing in this area, keep it up,” Ms. Wyatt advised. “If not, you might want to consider it.”
Nevertheless, she said there is plenty of action on indulgent snacks, noting that 68% of consumers look for snacks that are fun to eat. Some leaders include chocolate-covered salty snacks, up 15.2%, dried meat snacks, up 4.6%, and frozen handheld non-breakfast entrees up 3.4%. While Ms. Wyatt advised companies to leverage social media as well as other forms of advertising, she stressed the importance of in-store merchandising. “Tout it in-store,” she said. “If it’s about indulgence, that’s OK, but getting the message in-store is absolutely essential.”
She advised marketers to take advantage of social media and couponing to bring shoppers into the store, but the sale must be closed in-store.
Ms. Wyatt advised snack marketers to manage the “path to purchase,” noting that price is still very important with 84% of shoppers looking for the best value, up 8%. However, 91% want snacks to taste good, and 66% want snacks that provide sustenance. Guaranteed fresh is sought by 72% of consumers, while 45% want portable snacks.
Even airlines today are providing inspiration for snack sellers, Ms. Wyatt said, noting that some are selling a variety of snack packs online, and that some manufacturers, such as Kraft, are putting together portable protein packs. “I think we are going to see snack packs coming into market in retail more than you might know,” she predicted.
Competition for snack sales is coming from an ever-increasing variety of outlets, including such online sellers as Boxtera, which for a monthly fee will deliver snack products to the consumer’s door, the multitude of food trucks that are popping up across the nation, as well as leading convenience stores like Wawa and 7-Eleven with online ordering and offering both healthy and indulgent options for snacks and meals.
Ms. Wyatt advised snack manufacturers to take advantage of all day parts, tailoring products to the types of occasions they wish to target, from early morning to late night, keeping in mind the snacking habits of age groups and other demographics.
She noted that early morning snacking in 2010 was at 7% of consumers, and now it is 14%. While snack sales in every day part have increased, evening snacking has skyrocketed from 44% in 2010 to 62%, and late evening from 24% to 46%.
According to IRI data, the top five morning snacks are yogurt, preferred by 32% of consumers; bakery snacks by 28%; snack bars, 21%; dairy/yogurt-based beverages, 18%; and fruit-based smoothies 17%.
Ms. Wyatt advised marketers to pay attention to trends at quick-serve restaurants, which are increasingly moving into the breakfast battleground, to understand the characteristics of consumers who frequent them and for which day part.