By Micah Maidenberg
Food makers continue to invest in snacks, despite some signs
that growth in the increasingly competitive product category has
been choppy.
Consumption of healthy and sweet snacks fell last year, and
General Mills Inc. and Kellogg Co. recently reported sluggish sales
of their snack bars. Shoppers can now choose from a bevy of smaller
brands and private-label snacks. Food delivery companies,
meanwhile, aim to make it simple for consumers to order full
meals.
"I do believe the category of snacks is going to slow down,"
said Thierry Jean, a former brand executive at both Conagra Brands
Inc. and Kellogg. "I don't see the demand increasing
significantly."
Still, food makers are attracted to snacks because bars, sweets
and nuts tend to be more profitable than other food-and-beverage
products, according to Citigroup Inc. And snack consumption has
become ingrained as many people have traded breakfast and lunch,
for example, for quicker and more portable sustenance.
"When we come out with products that are convenient, that
consumers love and that satisfy consumer needs, we're successful,"
Andrew Callahan, chief executive at Twinkie-maker Hostess Brands
Inc., said in an interview. The company beat earnings expectations
in the first quarter and said it has gained market share since
2016.
Campbell Soup Co. has discussed plans to develop new products
and use its distribution operation to capture more of what is
expected to be a $180 billion U.S. snack market by 2022, up from
$150 billion this year, according to data from research firm
Mintel. J.M. Smucker Co. plans to open a new snack-making factory
by the end of this year, and Mondelez International Inc. has
established a group focused on investing in snack startups and
developing new brands.
"We are confident in the prospects for continued snacking
growth," said Tim Cofer, chief growth officer at Mondelez.
Snack sales by units in the U.S. grew at the same 0.4% rate as
the broader food-and-beverage industry last year, according to
market-research firm IRI, while consumption of some snack types has
stalled. Americans ate some 366 servings of health-oriented snacks
like protein bars, fruit cups or single-serve cottage-cheese cups
during the year that ended in March, according to NPD Group Inc.
That was down 3% from the prior year.
Sweet snack consumption dipped about 1%. Savory snack
consumption ticked up 0.4% in the year that ended in March, but was
weaker than that period in 2017.
Kellogg's snack sales in its latest quarter were hurt by a
recall of Rxbar, the snack-bar brand it acquired in 2017. Kellogg
said the bars may have contained peanuts without disclosing that on
their labels.
General Mills last week said poor sales of its Fiber One and
Nature Valley bars led to lower sales overall in the quarter ended
May 26.
"The biggest challenge we face is certainly on our bars business
in the U.S.," Chief Executive Jeff Harmening said in an
interview.
The plateauing of some snack consumption comes after years of
rapid growth. In the 1970s, 40% of Americans said they didn't
snack, according to Agriculture Department data. By 2016, 93%
reported snacking at least once a day.
"I don't have time to cook food," said Jason Beck, a 39-year-old
supervisor at a call center near Ogden, Utah, who eats various bars
or Mars Inc.'s Combos for breakfast and lunch. "Something in a
wrapper is amazing as long as it's a little bit healthy."
Many food makers continue to see growth in their snack brands.
Conagra, for example, said in June that its snacks business, which
includes brands like Slim Jim meat sticks and Boomchickapop
popcorn, notched gains in its latest quarter, with retail sales
rising about 7% compared with a year earlier.
Mondelez, one of the biggest U.S. snack companies, whose
products include Oreo cookies and Triscuit crackers, said
first-quarter organic revenue grew 0.5% in the North America
market, helped by higher prices. The company's business is larger
overseas, where it has reported stronger results.
The company last year established SnackFutures, a group that
aims to invent new snacks and invest in younger companies.
Mondelez, which wants the SnackFutures business to generate $100
million in revenue by 2022, recently struck a deal to acquire a
majority stake in a refrigerated nutrition-bar maker.
Some companies have turned to acquisitions to bolster their
snack lineups. Carlos Abrams-Rivera, president of Campbell Soup's
snacks division, said in June that the company plans to leverage
its brands -- including Pepperidge Farm cookies, Kettle potato
chips and Goldfish crackers -- to increase its snack sales.
Campbell acquired pretzel maker Snyder's-Lance Inc. last year in a
deal valued at $6.1 billion. The company reported organic sales
grew 1% in its business that includes snacks during its latest
quarter.
Hershey Co. recently added SkinnyPop popcorn and Pirate's Booty
cheese puffs to its line of chocolates, helping the company push up
sales in the first quarter. Smucker's new factory in Colorado will
produce Uncrustables, bite-sized sandwiches with peanut butter,
jelly, chocolate-hazelnut and other spreads.
Write to Micah Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
July 01, 2019 05:44 ET (09:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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