AMERICA IS A NATION OF SNACKERS. Whether they're reaching for chips, pretzels, puffs or popcorn, consumers are increasingly choosing to graze their way through the day.
As one of the Top 5 categories in the supermarket, the implications are enormous. Snack sales in all channels, including Wal-Mart Stores , surpassed $16 billion this year, a 1.3% increase over 2010, according to the Nielsen Co. Retailers are faced with a constantly shifting aisle as new products, reformulations and line extensions cram the shelves.
Some observers estimate the market for salty snacks could grow to $24 billion within a few short years. The results of a recent survey from Snack Factory, a manufacturer, would seem to support such an assertion: Some 78% of respondents to the poll said they indulge in snack foods for lunch and 55% admitted to snacking for dinner. Snacks are no longer a between-meal indulgence; they're quickly becoming an integral part of a person's daily diet.
Luckily, some of the growth in snacking can be attributed to better-for-you recipes that include less fat and salt. A number of start-up companies are also surprising consumers with different base ingredients that go beyond traditional corn and potatoes.
“Snacking is an exciting place for an entrepreneur today,” said Richard Demb, co-founder of Abe's Market, an online natural and organic retailer based in Minneapolis. “It's such a tangible business to share with friends. That's why we're seeing all sorts of ingredients, from beans to soy nuts to kale.”
SymphonyIRI Group's annual “State of the Snack Industry” report found that 71% of consumers said they're trying to eat healthier. They're the ones who helped drive sales of better-for-you products up 4.4% compared to more indulgent snacks, which grew a mere 1.2%.
“If it looks good and tastes good and is still healthy, you've got a winning combination,” said Robert Inadomi, general manager of Vicente Foods, a store catering to health-conscious, upscale West Los Angeles.
Vicente is always cutting in new products that attract attention. The retailer recently began stocking vegetable chips made of broccoli and okra, as well as a line of fruit chips.
“Our customers tend to be very knowledgeable about food,” Inadomi said. “They're very well-traveled and so love to try new flavors and textures.”
Okra and kale aren't on everyone's must-try list, however. Most mainstream shoppers are still buying from the nation's top snack producer, Frito-Lay. The PepsiCo division — home of Lay's potato chips, Tostitos corn chips and SunChips multigrain snacks — has been aggressively reformulating its products in an effort to reduce sodium and fat content. The company is working on its goal to make half of its portfolio all-natural by the end of this year.
“Out of all the big brands, they've invested quite a bit into cleaning up their profile,” noted Barbara Ruhs, corporate dietitian for Bashas' , Chandler, Ariz. “They might have only four or five ingredients, or be lowering the sodium, though they're not really shouting that from the rooftops because they know that doesn't really help their marketing platform.”
The conversions have largely gone unnoticed by consumers, but in a category of this size they represent a seismic shift in the marketplace. According to the research firm Mintel, Frito-Lay accounts for $4.8 billion — nearly half of 2010 food/drug/mass sales — in the chip, pretzel and “other” snack food segments. According to the company, approximately $10 billion of its $60 billion in global sales comes from nutritious or healthy products — a number PepsiCo is looking to triple by 2020.
Frito-Lay's “strong leadership position allows it to set the tone for the market, as other companies pay close attention to what it does in terms of product development,” Mintel researchers wrote.
As consumers grow more accustomed to healthier snacks, they become more willing to try new products, and that's where a number of smaller companies are getting really creative.
“We see a lot of the smaller to mid-sized companies, and the way they're competing is that they're very nimble, and they can come out with interesting ingredients and spot trends and react very quickly,” said Demb of the companies selling products through Abe's website.
Michael Season's Popped Black Bean Crisps from Natural Snacks, chips made of hummus from Plocky's and Simply 7, veggie chips from Snikiddy and veggie sticks from Inventure Foods, popped rice shapes from Rice Works and Lundberg Family Farms, and lentil chips from Mediterranean Snack Foods are but a few of the newfangled products arriving in the snack aisle boasting new textures, bolder flavors and healthier nutritional profiles.
“It's tough to compete with the likes of Frito-Lay. They're truly a market leader in chips,” said Ruhs, adding that Bashas' offers several unique brands, including Crunchmaster baked rice crackers. “You have to have something that's really unique, or a price point that's really great, or it's hard to get a piece of the sale.”
At Vicente Foods, Inadomi says the new chips are what keeps the snack aisle alive in his store, where customers expect new, interesting products.
“Going for a bean base or a vegetable base, that just sets you apart even more from a company like Frito-Lay, which uses basically potatoes and corn,” he said.
Breaking into the conventional grocery channel is challenging for a smaller company. Those courting the natural and organic consumer might try to gain distribution through a wholesaler, but even here it's easy to get lost in the mix. One segment that's performed extremely well with smaller companies has been the online marketplace, where inventory constraints and space limitations are not an issue.
“They're able to market foods that folks five years ago wouldn't have been interested in,” said Demb of Abe's selection of snack makers. “There's more openness now by the consumer to try new products than there's ever been.”
Of course, online shoppers tend to be more experienced at seeking out what they want, and oftentimes this group includes health and wellness consumers who are well familiar with utilizing specialty retailers to get products that fit their lifestyles.
“They're not letting themselves be resigned to what they can just find within a five-mile radius of their home,” Demb continued. “There are more proactive consumers out there who are buying products that they can get excited about and feel good about.”
Curiosity and enjoyment aren't the only reasons consumers seek out snacks made with lentils or hummus. The growth of some brands is fueled by necessity, retailers say.
“There's been such an explosion in the gluten-free category,” said Ruhs. “When you're looking for an alternative to a wheat-based product, that leads to other products like these.”
Demb extended consumer needs to include ethical reasons.
“A nice percentage of our customer base has a preference for a certain diet, whether it be gluten-free, vegetarian or vegan, and we're trying to give them more selections,” he said.
Such expansiveness has allowed supermarkets to continue dominating sales of snacks, and retailers are hitting new highs on an annual basis, including 2010's figure of $8.7 billion. Mintel's research finds that both brick-and-mortar and online supermarkets are adept at leveraging their overall larger product assortment to aggressively price salty snacks.
In the natural food channel, sales of potato chips, tortilla chips, pretzels and snack nuts/seeds grew 30% between 2008 and 2010, according to Nielsen-owned SPINS. It isn't lost on the industry that even in a channel predisposed to health-conscious shoppers, snacking is a popular — and apparently preferred — part of their diet.
“If it's healthy, your conscience is clear,” said Inadomi. “You feel like you can eat it without any guilt.”
Sales are in the bag for branded manufacturers of salty snacks. The Nielsen Co. finds that they rake in $14.8 billion compared to private label's $1.4 billion. Yet, store brands are contenders. Some 47% of consumers stated they switch to private label when budgets are tight, according to SymphonyIRI research, which pegged private-label share of dollar sales at 12% and category volume at 17%.
Reflecting the shift towards healthier snacking on the branded side, retailers have introduced or reformulated their store brands. Bashas' is in the midst of reintroducing its Full Circle line of organic products.
“We had probably less than 100 items before,” said Ruhs, the chain's dietitian. “Now we're going to triple that number.”
In reviewing the categories to receive the Topco-supplied label of natural and organic foods, Ruhs was surprised to find that chips were among the Top 5 in gross sales. Still, she is careful when counseling customers on selecting the right kinds of snacks. She says the first question should always be: Is it healthy?
“It's natural, but that doesn't always equal healthy in my opinion,” she said.