“The future looks very bright for snacking” with category sales estimated to “hit at least, if not more than $200 billion by 2020,” said Sally Lyons Wyatt, executive VP and practice leader, client insights at IRI.
The category is well positioned for success with sales already outpacing those of overall food and beverage retail, she added, during a March webinar hosted by IRI on the state of the snack industry. Specifically, she noted, dollar sales of snacks grew 2.9% last year and unit sales rose 0.7% compared to 2.7% sales and 0.6% unit increase in all food and beverage.
Much of the growth came from more consumers embracing snacks, Wyatt said. She added 41% of consumers ate three or more snacks per day in 2014 and that consumers who said they were snacking more frequently increased 11 percentage points from 2011. In addition, the percentage of consumers who said they were treating themselves to indulgent snacks as treats climbed 8 points in 2014 from 2011.
Innovation also helped drive snack sales, Wyatt said. Many new products involved strong flavors, such as bacon, organic ingredients, popcorn, trail mix, protein, simple ingredient lists, whole grains and low sugar, she said.
Snack makers will need to do more going forward, however, in order to reach $200 billion in sales by 2020, Wyatt said. She suggested companies pursue the following five strategies to maximize snack sales:
Strategy #1: Size channel strategies – Where consumers buy snacks is changing and manufacturers need to align their assortment and distribution strategies against consumers’ evolving preferences and shopping habits to ensure they have the right product at the right place at the right time, Wyatt said.
For example, she said, value oriented channels are growing faster than traditional channels overall with dollar stores growing 10% annually at a compound rate compared to only 1.9% CAGR at traditional food outlets, 3.4% CAGR at mass stores and 2.5% at drug stores.
Snack penetration also is increasing at club, dollar and ecommerce stores, while it is falling at food, drug and mass, she said.
“Consumers have gotten smarter in how they shop in different channels and really comes down to what they need in the moment,” and whether then value price or convenience more, she said. In response, retailers are varying their product mix and pack size, and manufacturers should as well, she said.
Strategy #2: Find growth organically and naturally – More households are buying natural snacks, with much of the growth coming from non-GMO claims, Wyatt said. According to IRI data, 75.1% of households in the U.S. bought natural snacks – up 0.9 points in 2014 from 2013. Penetration of non-GMO snacks also climbed 4.6 points to 41.2% of households in 2014, but penetration of organic snacks fell 0.4 points to 32% of households in the same time.
Beyond non-GMO, claims that are driving growth in the natural segment include call outs of whole grains and premium ingredients, Wyatt said.
Strategy #3: Contemporize brand engagement – What type of snacks consumers buy often hinges on their age and lifestyle preferences, and manufacturers should target these groups accordingly, Wyatt said. For example, millennials and boomers snack throughout the day, but boomers get a later start and taper off earlier than millennials so it makes sense to target them with mid-day options rather than early morning snacks, Wyatt said.
What people eat also varies by the time of day, Wyatt said. Bakery snacks are consumed by 81% of people, but most age groups prefer them in the afternoon and evening and not at lunch or for special occasions.
Strategy #4: Tailor snacks to different need states – Iconic brands can get a face lift by demonstrating how consumers can customize them for their needs, Wyatt said. She pointed out a marketing campaign for Triscuit that showed how consumers could make the crackers their own by creatively topping them with whatever they wanted.
Likewise, positioning snacks to meet disease states or to be allergy-free shows consumers that a product is tailored to them, Wyatt said. She added that sales of allergy free snacks are up 33.5% in 2014 from the prior year.
Strategy #5: Watch upcoming trends – “Keeping a watchful eye on upcoming trends is important to continued growth in the industry,” Wyatt said. Trends she see emerging in the snack category include premiumtizing ingredients by swapping out conventional ingredients with organic alternatives, vegan and fair trade claims and snacks made with raw chocolate and sprouted grains.