1

Snack-Food Industry – Driving factors

The snack food industry benefited from increased demand for several of the industry’s products during the past five years in line with rising household disposable income. In addition the industry has a moderate level of market share concentration. The top four players are accounting 43% of revenue. This revenue depends on numerous reasons and factors. One are the changing eating habits due to less frequent restaurant dining and hurried lifestyles that encourage on-the-go eating and a growing tendency to replace meals with common smaller snacks. Companies and businesses combat the raising obesity by developing healthier snack foods that still taste appealing. The boundaries between meals and snacks are growing ever blurrier, creating consumer consumption habits that will resonate for a long time. The children and kids of today, comfortable with replacing entire meals with snacks, will pass these lifestyle traits on to their children, assuring that eating snacks will remain a big part of life. Nevertheless consumers seek ways to achieve a healthier lifestyle because they become more aware of the negative health effects of eating foods that contain high levels of sodium. Therefore, producers quickly perceived the changing consumer tastes by offering more healthy options. Snack foods that are marked as “it is better for you” or “fatless” will remain popular. After accustomed to a special snack, this becomes a private label snack because consumers are looking for their best value when buying snacks. Due to inflation people are more likely to buy some snacks instead of going to restaurants and cooking for themselves, but at the same time inflation causes the price to go up on snack food. Consumer also look for new innovations, flavors and trends that make a big impact on sales and market shares. Another factor are the raw materials whose prices are increasing due to the global demand

2

that is growing as well. Moreover, marketing innovations play a key role in this industry. Based on a study conducted in 2011, GIA announced a forecast in the US snack food market to reach $334 billion by the year 2015 (“Global Snack Food Market”, 2011). Obviously, snack food manufacturers are required to research the market and their customer so they can innovate proactive marketing.

Firms in other Industries offering substitute products strong - risk for snack food producers in the form of sandwiches, fruits or delis that are produced by other companies in the nutrition field - local businesses and grocery stores might have special offers for their products, which might compete the snacks - can have an impact on the selling price indirectly for the producers to orientate themselves

Suppliers strong - pressure by bargaining and supplier-seller collaboration / contract - if suppliers provide raw material including key ingredients such as oil, sugar and wheat they can increase prices that would have an impact on the manufacturing prices of the producers - can influence the availability of material negatively

-

-

Rivalry among Competing Sellers strong striving for a better market position competitive advantage for producing new products that are low in fat and calories pressure comes from the threat of entry of new rivals snack foods manufacturing industry generates about $300 billion in revenue with 4.3% annual growth between 2006-2011 market for snack is relatively large and expanding US snack foods manufacturing industry includes about 500 companies with combined annual revenue of $30 billion

-

-

-

-

Potential New Entrants Moderate - easier for an existing firm to make the transition into the snack food industry - costly for a new competitor to purchase new equipment, creating their product as effectively as existing firms, establish the distribution channels and gain a customer base

Buyers Moderate different preferences of the buyers create a sub competition in the chain or industry when producing kind of the same product as competitors, adopt a different ideology in marketing and approach the customers another way consumers are becoming more concerned about healthy products and seeking healthier snacks even though there are several options for consumers, strength is considered moderate Snack food companies depend highly on large retailers they must secure profitable long-term contracts with major retailers