Industry update: innovation and health drive snack sector

Convenience, a focus on health, and product innovation and differentiation are regarded as key factors driving forward the snack food sector, which is estimated to have grown by an average of 5.2% per annum in the five years to June 2007.

While potato chips dominated product sales, products containing less fat, such as Frito-Lay’s Red Rock Deli potato chips and nuts and pretzels, attracted increased sales, reflecting consumers’ growing health consciousness.

Indeed, the nutritious snacks segment, comprised of savoury snacks such as health food bars, experienced the most significant growth this year at 22%, making up 10.8% of the market.

New flavour development and successful advertising campaigns have also seen corn chip sales grow steadily over the past five years to 11.5% of total sales revenue.

Industry forecast

IBISWorld has forecast that the snack food manufacturing industry will experience a 5.2% decrease in revenue over the next year as the market matures.

However, industry revenue of $2290 million during 2007-08 is expected to rise to $2439 million in the period 2011-12.

Changes in supply chain conditions, such as the cost of cereal inputs that have been affected by recent drought, downstream demand from retailers and grocery stores as a result of changing consumer tastes and preferences, and market consolidation and competition are depicted as the main factors inhibiting growth.

Increased sugar prices will inflate production costs, unless these costs can be passed onto consumers.

However, given the competitive trading conditions in Australia and overseas this is unlikely.

As many snack food products are not regarded as essential by consumers, household consumption expenditure and disposable income have an impact on snack food purchase.

Therefore, marketing campaigns will need to continue to focus on increasing impulse purchases.

Growth in the snack food segment will also be fuelled by the continued development of innovative food products and production techniques, creating value-added foods in line with consumer health trends.

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