Snacking revolution

Jack Skelly, food analyst, Euromonitor International, discusses how the world of snacking is changing, and the exciting opportunities this can offer manufacturers.

From sharing sweets to getting the last few crisps from the bottom of a packet, snacking has always involved the consumption of a wide range of products. Recently, the range has diversified further. Walk into any supermarket and you will need an extra pair of hands to account for the vast array of goods on offer.

Nuts, fruit bars, breakfast biscuits, sharing bags and meat snacks are just some of the products that are now available within this category. More than 25 per cent of all global food sales come from snacks. Within the category, the core constituents are confectionery – including sugar and chocolate products – and sweet and savoury snacks, such as crisps and meat snacks. Combined, these two product types account for nearly 50 per cent of all snack sales.

However, within developed markets, confectionery has been performing poorly. In Western Europe, sales of snack products achieved just two per cent annual growth between 2010 and 2015; the equivalent figure was three per cent in North America. More worryingly, volume consumption growth was negligible in Western Europe and actually declined by two per cent in the US. Chocolate and sweets, the two stalwarts of snacking, appear to be falling out of favour with consumers.

Market trends

There are several reasons for this change. Firstly, it is difficult to persuade consumers in developed markets to eat more confectionery than they currently do. The average Western European eats nearly 5kg of chocolate every year. Factors such as health are creating downward pressure, as people become more aware of some of the adverse effects of overconsumption.

In addition to this saturation, increases in value but not volume suggest a growing penchant among consumers for higher priced goods. This is corroborated by the success of companies such as Lindt, which has seen a 65 per cent increase in sales over the past five years. Indeed, moving away from middle market towards premium goods is a significant opportunity within developed markets.

By contrast, the market for sugar confectionery has similarly been impacted by health concerns. However, its reputation as a primarily mass market product aimed at children has prevented it from moving into premium price tiers. Therefore, while there is still a place in the market for middle priced goods, the traditional snack of the West is trying to become more premium in a bid for value growth.

Developing markets

While chocolate is the dominant snack in the West, and premium products are becoming more important, affordable confectionery is still the priority for manufacturers in developing markets such as Asia Pacific and Latin America, with regional per capita spending just €3.8 and €15 on chocolate respectively, compared to €53 and €66 in North America and Western Europe. Because of this, chocolate confectionery is one of many snacking options, rather than the dominant snack of choice.

Within Asia Pacific, Latin America and the Middle East and Africa, for example, biscuits, pastries and cakes are consumed more than confectionery items. This is partly due to their affordability. In Asia Pacific, pastries and biscuits are about one fifth of the price of chocolate, and are similarly cheaper in other regions. As well as being affordable, pastries have benefitted from the rise of a number of bakery outlet chains, such as BreadTalk in China.

Consequently, snack companies such as Mondelēz are prioritising increasing sales of biscuit brands in Asia. In 2014, the company acquired Vietnamese biscuit manufacturer Kinh Do for €321m, with the aim of using the company’s supply chains to increase points of sale for its brands.

It has stated that it wishes to adopt this acquisition strategy in a number of other Southeast Asian countries. This would potentially allow Mondelēz to import its cross-branding strategy, which it has used in developed markets. This strategy involves merging two of the company’s brands into a snack product. For example, Mondelēz sells Milka with Oreo in Germany and Cadbury’s Dairy Milk with LU biscuits in the UK.

In developed markets, these products have been successful because of their novelty. They also increase brand awareness of two product lines at the same time, which is undoubtedly a savvy marketing ploy. In developing regions, taking advantage of a preference for biscuits could help the chocolate market to grow. While the popularity of confectionery may grow over the next five years, pastries, cakes and biscuits will still be very much in vogue.

Recently, chocolate manufacturer Hershey acquired US meat snacks manufacturer Krave Jerky. The aim of this acquisition was to broaden Hershey’s presence in what it describes as the “snacking continuum” – products generally purchased for the purpose of consuming between meals. This is not “blue sky thinking” by Hershey – evidence suggests that the snacking continuum is already evolving away from unhealthy products such as confectionery and crisps, and this will only continue over the next five years.

While indulgent treats will always have their place, the evolution of snacking in developed markets is occurring due to the evolving eating habits of consumers. Put simply, people now eat snacks for more reasons than simply indulging.

For example, consider what you had for breakfast this morning. Although some may have stuck to their tried and tested cereal of choice, the chances are that many will now consume a pastry, a breakfast drink or a biscuit, such as Belvita. The brand has achieved astonishing success, growing by over 250 per cent between 2009 and 2014 to achieve sales of €762m.

The breakfast bar is a superb example of a product that capitalises on a growing tendency among consumers to incorporate a snack as a nutritious meal replacement. Euromonitor International survey data show that this preference for snacking rather than sit down meals is particularly prevalent in Millennials. Millennials are generally busier and less willing to prepare meals – the holy grail of demographic groups for snack manufacturers.

This growing focus on nutritious meal replacements is also reflected in the seemingly ubiquitous nature of high protein snacks. In North America and Europe, brands such as Krave and Jack Link’s have achieved great success, with the latter achieving over €459m in sales between 2009 and 2014. Whereas they were once the province of bodybuilders and gym buffs, protein snacks have lost their stigma and now underline a growing interest in snacking. Snack bars have also picked up on the popularity of protein, with leading brands such as Clif and Kind Bars achieving impressive sales and contributing to global sales growth of over €1.4bn within the energy bars category.

Conclusion

With reasons for snacking proliferating, some may be tempted to view manufacturers as being stuck between a rock and a hard place. After all, how can a brand be both an indulgence and appeal to the health-focussed consumer? How can companies achieve growth in markets where consumer expenditure on food is stalling, or are unfavourable to their core products?

This would be an extremely pessimistic, not to mention unimaginative, assessment of the snack market. The likes of Belvita, Clif and Jack Link’s highlight the diverse range of products that can and have succeeded within the snacking continuum.

Indeed, even chocolate companies such as Lindt and Ferrero have performed well during the past five years. What links all of these brands together is that they are extremely successful at serving a specific purpose, whether that is to sate hunger, keep healthy or indulge. This will be critical to success in the future.

Related content

Leave a reply

Sweets & Savoury Snacks World