When it comes to consumer and retail trends, one looming issue hangs above all others: the flailing economy.

Yet while the fiscal situation is top of mind, other significant trends continue to affect how snacks and baked foods are bought and sold. These include the sustained demand for healthier eating options and the food industry’s use of social media as a way to connect with consumers like never before.


For the past year, baking and snack manufacturers have battled rising costs, while consumers have cinched their financial belts tighter than they ever thought possible. According to an April report published by Fitch Ratings, a global ratings agency with headquarters in New York, NY, and London, UK, the biggest problem facing consumer packaged goods companies is the rapidly rising prices of the commodities essential to running their businesses. Confronted with higher-than-expected expenditures, thinning margins and flat sales, companies find themselves in a Catch-22. On the one hand, commodity prices are climbing faster than companies can implement price increases. Yet if manufacturers and retailers raise prices too quickly — or by too much — they run the risk of squelching consumer demand for their products.

To exacerbate an already tough situation, the economic outlook for the immediate future is bleak. The US Department of Agriculture predicted that food-at-home prices will rise between 2 and 3% in 2011, with some sectors experiencing price increases between 3.5 and 4.5%. “This type of increase will be very difficult for consumers to absorb,” noted Susan Viamari, editor of Times & Trends, a publication of SymphonyIRI, a Chicago, IL-based market research firm. According to SymphonyIRI’s January MarketPulse Survey, 27% of consumers have difficulty affording their weekly groceries, and one in four consumers expects that his or her financial situation will deteriorate in the coming year.

“We try to absorb as much as we can as a company,” said Linda Martin, head of marketing, FGF Brands/Stonefire Authentic Flatbreads, Concord, ON. “But there comes a point when you have no choice but to put forth a price increase. Otherwise, you put yourself out of business. As far as the impact of a price increase on consumer demand, that depends on many things: the strength of your brand, availability of substitutes and price increases on other products in the shopping cart.”

Price increases are just one strategy that baking and snack manufacturers are initiating to offset rising commodity costs. Smaller serving sizes, recipe reformulation using less expensive or fewer ingredients, increased promotions and reduced advertising budgets are all viable options. Still, these tactics provide only short-term solutions to a long-term issue. “Raising everyday prices and stepping up promotional activity are not solid answers,” Ms. Viamari warned. “Consumers must be weaned off their expectation of discounts and sales because this constant promotional activity has a very real danger of negatively impacting brand quality.”

Higher national brand prices prompt many consumers to pay more attention to private label products. Although rising commodity costs forced private label manufacturers to increase prices, the price gap between name brand and store brand products is still significant. SymphonyIRI estimated that 47% of consumers switch to store brand products during times of financial uncertainty. During the past five years, annual sales of private label products skyrocketed by more than $18 billion, although the sector seems to have stabilized in the past year. According to a recent 6-week study conducted by the Private Label Manufacturers Association, consumers can save an average of 33% on their grocery bills when they select the store brand versions of essential household and basic food items. This level of savings appeals to cash-strapped shoppers.

In addition to saving a few dollars on their weekly grocery bills, consumers discovered that they can often find store brand products that are equivalent to, if not better than, their preferred national brand. Continued improvements in product quality and ramped up marketing efforts are bringing new competition to the marketplace, and national brands run the risk of permanently losing these recession converts once the economy picks up speed.


The soft economy did not derail the continuing trend toward healthy eating. According to SymphonyIRI data, 71% of consumers still try to eat healthier, 51% of shoppers would like retailers to identify healthier choices in the grocery aisles, and 47% of consumers want to see health benefits stated on product packaging.

In the snack industry in particular, while both the healthier and indulgent snack segments are growing, SymphonyIRI determined that healthier snacks outpace indulgent snack options with 4.4% volume sales growth vs. 1.2% the previous year. Part of this growth is driven by an increase of better-for-you products such as 100-Cal cookies and crackers and fat-free, whole-grain, sugar-free and all-natural snacks. In its State of the Snack Industry 2010 report, SymphonyIRI stated that high-protein and low-sodium product categories experienced solid sales growth, with dollar sales increases of 7.6 and 6.2%, respectively, over the previous year.

Burgeoning sales of healthier snacking options provide good news for health-conscious organizations that continue to push the food industry to reduce the content of sodium, sugar, fat and other ingredients deemed unhealthy. More companies are looking for ways to meet this demand. For example, Ruiz Foods, Dinuba, CA, partnered with the National Sodium Reduction Initiative as a part of the company’s continued efforts to reduce sodium levels in its foods. To date, the company’s entire line of El Monterey Family Pack Burritos and Chimichangas are already within the 2012 sodium guidelines. In the cereal aisle, General Mills, Inc., Minneapolis, MN, pledged to reduce the sugar content in its entire line of cereals marketed to children to 10 g or fewer of sugar per serving.

However, consumer education must play a role in marketing these healthier versions. “Health-conscious initiatives in the food arena can be very confusing for consumers,” Ms. Martin explained. “You can have low-fat products in the marketplace, but the consumer may not be aware that other ingredients had to be added to make the products low-fat. You need to understand the nutritional content of the food from many angles. It’s not just low-sodium or low-calorie, but it’s looking at everything that is in the product.”

In addition to reduced sodium, sugar and fat levels, industry experts noted a trend toward development of allergen-free and dairy-free products. Sales of gluten-free products, in particular, were surprising. In 2006, retail sales of gluten-free products were $0.9 billion, according to SymphonyIRI. Just four years later, sales jumped to $2.6 billion and are predicted to reach $5.5 billion by 2015. “The extent of the gluten-free growth was somewhat unexpected,” said Yadunandan Dar, PhD, applications technology manager, National Starch Food Innovation, Bridgewater, NJ. “Gluten-free is a key trend that appears to be here to stay. There is still significant ongoing product development being done in this area to provide variety and improve quality.”

General Mills responded to consumer demand for gluten-free foods early on by formulating several products to eliminate gluten in its cereal, bakery and snack lines. The company now offers more than 300 gluten-free products, listed on its www.liveglutenfreely.com website, where consumers can print a pocket-size version for use when grocery shopping. Likewise, Kellogg Company, Battle Creek, MI, will offer a gluten-free version of its popular Rice Krispies cereal made with brown rice beginning in June.


While the supermarket channel still accounts for the majority of food shopping, consumers appear to be shifting at least some of their buying habits from mainstream retailers to the local farmers’ market and the corner bakery where they can find fresh, simple, quality foods that are flavorful, unique and safe.

Maybe that’s why “local somewhere” climbed to No. 3 on The Food Channel’s Top 10 Food Trends for 2011. According to The Food Channel’s research, local doesn’t necessarily mean geographically close. “This trend is about growing and tending — if someone, somewhere, is personally growing and tending to this product, as opposed to packing and sorting on the assembly line, then it’s local,” the report stated. “It means someone is personally committed to it. Someone has made sacrifices to bring it to market.”

Consumers clearly drive the trend toward going back to the basics and locally sourced foods, Dr. Dar said. “However, price is still a concern, so this trend may show the strongest growth for people who have higher levels of disposable income or [are celebrating] special occasions.”

While buying local can provide a unique shopping experience and promote a sense of community and giving back, commercial bakers offer a word of caution. “It is important that consumers understand what they are buying,” advised Ms. Martin. “I have been in local businesses where the products are not labeled, so you have no idea what ingredients went into these products. It can be misleading. Commercial bakers, especially those who supply products to in-store bakeries, have really perfected their craft. Consumers can find many items that are of significantly higher quality than what they might find in their local bakery.”

Retailers and manufacturers appear to be paying attention to this slight shift in shopping habits and have begun offering clean-label products. “Clean-label products have simpler ingredient statements,” Dr. Dar explained. “Several brands and grocery store chains have growing product lines that are providing growth.”

From an economic standpoint, the second half of 2011 will likely be as rough as the first half, according to most economists. Drastic times call for creative and innovative problem-solving, and those manufacturers who engage in such thinking will conjure ways to offset commodity prices, maintain their customer base and tap into emerging trends.