Growth in snack market must stem from innovation, report

By Lorraine Heller

- Last updated on GMT

All-round innovation remains key to keeping the US snack market vibrant, according to an annual snack industry report, which identifies a number of growth opportunities at a time when consumers are striving to snack less.

Although the nation's snack industry saw dollar sales rebounding last year, up 3.2 percent compared to 0.5 percent in 2005, the majority of this market growth was due to price, said market researcher Information Resources Inc (IRI). "Volume sales remained relatively flat, so potentially the snack universe isn't growing,"​ said the group's Sally Lyons Wyatt, who presented IRI's annual State of the Industry report at the snack industry's Snaxpo 2007 event earlier this week. As well as a general consumer move away from snacking as people strive to improve their diets, another major concern facing the industry is increased competition. New product categories and new players previously separate from the snacking arena are now coming forward and claiming a share of the marketplace. Examples include cereal, which is increasingly being positioned as an evening snack, as well as the development of a 'snack' concept by fast food chains. But despite the challenges the industry faces, there are three main areas of growth opportunity that snack manufacturers can focus on in order to keep consumers in the market, said Wyatt: product development, marketing and merchandising. Product development is broken down into three main categories. Health is top of the list, and includes wellness and weight management, as well as products with nutritional and functional benefits. A second, but equally important, category is taste and variety. According to Wyatt, consumers will still pick what tastes good above all else, and this therefore remains a primary hurdle that must be broken. Meal replacement is the third category within the group, and focuses on the growing demand for quick, convenient, on-the-go products. According to IRI's latest market research, although indulgent snacks capture two-thirds of the market, healthier snack sales are growing at triple the rate of indulgent snacks. 'Light' versions of regular snacks are flagged up as an area of opportunity, as these bring the pleasure of snacking without the guilt, and are consequently consumed more times per week than their regular counterparts. "But although it's important for manufacturers to innovate and offer healthier products, they mustn't ignore indulgent products. After all, these still have a 66 percent share of the snack market, and consumers still gravitate towards these products often as a little treat or reward after eating well,"​ Wyatt told Marketing is also key to growth in the industry, said Wyatt. Manufactures stand to gain by positioning their products for particular consumer segments, as well as for specific snacking times. Two consumer groups singled out by IRI's latest report are children, and adults over 55. Snacks for 'healthy kids' must focus on portion control and nutrition, while snacks for the older population group need to cater to the lifestyle of people likely affected by conditions such as cholesterol and high blood pressure. IRI also said that snacks designed specifically for the afternoon and evening have good growth potential, but added that a lot of competition is emerging for afternoon snacking, both from new categories within the industry and new players from outside the traditional snacking arena - such as McDonalds. In-store merchandising is also key to boosting sales, and manufacturers should continue to team up with retailers in order to develop innovative displays, such as co-merchandising opportunities. Crucial to the snack industry is an understanding of shifting consumer attitudes, said Wyatt. According to IRI surveys, 78 percent of American consumers are trying to eat healthier; 63 percent are trying to replace high-calorie snacks with healthier options; 66 percent said they want to purchase nutritional products; and 57 percent said they were generally trying to snack less. "Manufacturers must understand these shifting consumer trends and use them for future growth potential. Innovation is the key if we want to keep the snacking universe healthy,"​ said Wyatt. To view Wyatt's full presentation, click here.

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