US: Food makers hope snacks bring big profits in small packages

Food companies are reaching for the snack bowl. Facing stagnant growth in their base grocery business, packaged-food companies are increasingly turning to snacks as an avenue for growth.

The companies hope to capitalise on American consumers who continue to snack more throughout the day, and on trends in developing markets, such as more women entering the workplace and the spread of modern retail formats.

Snacking “is a long-term trend and the future of eating,” said Gary Stibel, chief executive of the New England Consulting Group, which has advised such clients as PepsiCo’s Frito-Lay, the largest salty-snack player in the world by sales. “You and I will continue to snack more and sit down to a meal less.”

Analysts and companies project that there’s enough growth to go around in the $560 billion global snacks market, as measured by Euromonitor, for most food companies to take a bite. So even as such smaller snack players as ConAgra Foods or General Mills try to get bigger in snacking, such larger players as PepsiCo, 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.

Another incentive is the fact that snack prices can be raised more easily than those of some grocery staples, according to analysts. Snacks generally start at lower prices and offer the added value of convenience, for which shoppers are willing to pay more. They’re also generally bought on a whim, such as when drivers fill up their tank at gas stations or shoppers pick up a prescription at a drug store, making them an afterthought that satisfies an urge.

The companies are attacking snacks in different ways. Frito-Lay is focusing this year on adding more premium- and lower-priced chips to its portfolio to capitalize on more growth in those price ranges. ConAgra, meanwhile, is introducing already-popped Orville Reddenbacher’s popcorn in ready-to-eat bags. ConAgra’s also unveiling a frozen Greek yogurt product in June that it will market as a snack rather than a dessert.

Kelloggis taking the acquisitive route with its pending $2.7 billion deal for Pringles. General Mills also made a small deal, recently buying Food Should Taste Good, which makes tortilla chips in such flavours as sweet potato and chocolate, to take advantage of the growth in snacks and natural products.

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