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Companies Bank on Snacks to Bring Big Profits

Shelby Report Candy & Snacks Feature

by Ashley Bates/staff writer

The snacking trend is one of the most influential ones affecting a range of businesses, from supermarkets and convenience stores to fast-food and other restaurants, and it’s being fueled by consumer demand.

Today’s consumer seems to be perpetually on the run and thus needs a quick “pick-me-up” snack in mid-morning or mid-afternoon. Snacking also plays into the health trend of eating more ­frequent and smaller meals throughout the day.

Food companies have recognized the importance of the trend, and the snacking wars have begun. Facing stagnant growth in their base grocery business, packaged food companies are increasingly turning to snacks for growth.

Snacking “is a long-term trend and the future of eating,” said Gary Stibel, chief executive of the New England Consulting Group. “You and I will continue to snack more and sit down to a meal less.”

Consumers are snacking significantly more now than they were just two years ago. Almost half (48 percent) of consumers polled say they’re now snacking at least twice a day, compared to 25 percent in 2010, according to research from Technomic.

Analysts and companies project that there’s enough growth to go around in the $560 billion global snacks market as measured by Euromonitor Inc.

These developments encourage companies with proportinally smaller snack holdings, such as ConAgra Foods or General Mills, to get bigger in snacking, while larger players such as PepsiCo Inc., which owns Frito-Lay, and Kraft Foods, need not worry about losing any market share.

“There’s plenty of room. The global market’s very fragmented,” said Lee Linthicum, Euromonitor’s head of global food research.

Snacks are even making their way into the frozen food aisle. Nestle-owned Lean Cuisine is getting into the “snack” business with new frozen snacks in its Culinary Collection line.

Broccoli Cheddar Dip with Pita Bread, Fajita-style Chicken Spring Rolls, Spinach and Artichoke Dip and Thai-style Chicken Spring Rolls are new snack additions that hold calories down to around 200.

Another reported incentive for pushing snacks is that snack prices can be raised more easily than those of some grocery staples, according to analysts.

Generally, snacks are at a lower price point than other grocery items and shoppers are able to pay a little more for the enjoyment and convenience of snack items.

Snack companies have made big moves for growth over the past year, including Frito-Lay, which is now focusing on adding both premium and lower-priced chips to its line; ConAgra is set to introduce already-popped Orville Reddenbacher’s popcorn and frozen Greek ­yogurt in June; Kellogg Co. has a pending deal to take over snack giant Pringles; and General Mills made a small deal to buy Food Should Taste Good Inc.

To help focus its businesses, Kraft plans to separate its North American grocery business from its snacks division, which will include Oreo cookies and Cadbury; the proposed new name for the snack division is Mondelez, a newly-minted name to indicate the global nature of the company’s snack business.

Sally Lyons Wyatt, a snack expert and client strategy and insights executive with SymphonyIRI Group, recently spoke at SNAXPO, the annual Snack Food Association ­conference, on the “State of the Snack Food” industry.

Her presentation highlighted factors that snack food manufacturers need to keep in mind for increased sales and growth. First, finding the right pricing lever is paramount for driving category growth, capturing a share of snack spending and building and retaining customer loyalty. A keen understanding of the balance between consumers’ overall quest for healthier living and the need for ­enjoyment and indulgences, along with finely targeted marketing programs with messages that engage consumers early and often, drive sales.

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