Equity Research

Snack to the Future

Woman eating a granola bar at sunrise



Large, Pervasive Category

Snacks is one of the biggest aisles in the grocery store and one of the largest categories in consumer packaged food. Per IRI, snacks sales in measured channels represent nearly $50 billion at retail. In fact, snacks sales represent more than 10% of all consumer packaged food (excluding beverages) sales at retail. The snack aisle is growing faster than the rest of the center of store. More specific, snack category sales in aggregate have grown at a compound annual rate in the midsingle digits over the past several years. Snacking is becoming a more central feature of consumer eating habits. Innovation is resulting in more healthful and functional options appealing to a wider range of consumers. And advancement in product form is making snacks relevant across more use-cases. In other words, snacks benefit by being on-trend. The snack category is led by Frito-Lay (PepsiCo) but remains relatively fragmented with a long tail. While the top 15 brands account for about two-thirds of category sales, all other brands have market share below 1%. Private label in aggregate accounts for about 10%, which has been largely uniform for several years.

Report Overview

Consumer Category Close-up is a report that profiles and examines developments in a specific consumer packaged goods category. In this volume, we consider the snacks category, including aggregate growth rates and composition as well as company-specific sales and market share. We also seek to identify on-trend offerings inclusive of specific brands and product types, as well as relevant digital and ESG considerations.

For purposes of this report, which focuses on a particular consumer category, we apply IRI data that estimates sales and market share in measured channels—those are mass, food, drug, and convenience—in the retail channel, not Costco or natural/specialty, which are large, important channels for snacks, especially for those with better-for-you positioning. For this volume we examine snacks, which consists of the following subcategories: snack bars, salty snacks, popcorn, rice and popcorn cakes, snack nuts, dried fruit snacks, dried meat snacks, dips, and other snacks.

Compelling Demand Themes

While aggregate category metrics can be helpful, they often obscure important currents found below the surface. With a sharper lens, we find evidence of success for certain businesses and brands in higher rates of growth and market share gains. In considering the performance of these businesses, the positioning of the corresponding brands, and the characteristics of specific products, we see the emergence of three major themes—each with its own set of attributes—contributing to relative outperformance in the category. In our view, these can be broadly defined as health and wellness, lifestyle needs, and use-cases.

Health and wellness. The quest for improved health is not new, but we believe it has been made more important in food and, more specific, snacks with growing consumer awareness of the contribution that eating habits can have for overall wellness. This is particularly true when it comes to ingredients, with consumers favoring items that are organic and natural, are made with clean and simple ingredients, and/or offer a better macronutrient profile than conventional analogues. We find that snacks with health and wellness product attributes have outperformed, as measured by sales growth, the total snack category. Product attributes such as organic and clean (no artificial) ingredients have grown at rates in the double digits and twice that of the overall snack category.

Lifestyle needs. Advances in the understanding of general nutrition and various chronic disease states and contributing factors, coupled with innovation in snack food formulations, have spurred demand for new products targeting more specific lifestyle needs. The CDC estimates that on any given day, more than 17% of U.S. adults (ages 20 and over) are on a special diet. This is 300 basis points higher than a decade ago.

We find that snacks with dietary preferences have outperformed, as measured by sales growth, the total snack category. Product attributes such as gluten-free have grown at rates in the double digits and twice that of the overall snack category. And new products have been designed to provide desired functionality in areas such as weight management, energy, mental acuity, and sleep.

Use-cases. Consumers, more active and not as dialed into legacy three-square-meals-a-day eating conventions, are looking to snacks for more use-cases. More specific, consumers are snacking more often throughout the day, as a diet consisting of smaller but more frequent meals is increasingly perceived as nourishing, good for metabolism and fighting hunger, and convenient. A Harris Poll survey in 2019 showed 6 in 10 adults now prefer to eat many small meals throughout the day, as opposed to a few large ones. In addition, 7 of 10 millennials indicate the same preference, as did two-thirds of consumers who make health a top priority. We find that snacks innovating in use-cases have outperformed, as measured by sales growth, the total snack category.

For a copy of the “Consumer Category Close-up” report mentioned in this article or information on any of the companies in Jon Andersen’s research coverage list, please contact your William Blair salesperson.

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