Sooner or later, it had to happen. Something had to give. What goes up eventually settles down, even in the most resilient of markets. That’s exactly what occurred in the snack industry, which flourished during the past few years with double-digit dollar sales gains and robust unit growth. 

Granted, today’s situation is anything but dire. People are still snacking at record high frequencies, often three to five times daily. That’s powered salted snack sales, which posted a 6.9% dollar rise with more than $31.1 billion in annual sales, according to Circana data for the 52 weeks ending Jan. 28.

However, unit sales slipped 0.5% for salty snacks. In many categories, though, those units fell even more, indicating that the recent boom in retail space has lost some of its luster and not only for core salty items.

In the broader snack aisle, which includes cookies, crackers, bars, fruit chips and others, sales reached $51.7 billion, up 4.6% while units tumbled 2.1%, according to Circana. 

“During the pandemic, snack sales were fantastic,” observed Linsey Herman, vice president of product development, Factory Innovation LLC, Bethlehem, Pa., a consulting company in the food and beverage industry. “Everybody was staying at home. They weren’t going to restaurants. A lot of those dollars were transferred to in-home eating. Now restaurants are open again, and there are more opportunities to eat away from home, and there’s just more opportunity in foodservice.”

In many categories, the dynamics of the situation are quite fluid, noted Mark Singleton, vice president of sales and marketing, Rudolph Foods, Dallas. The pork rind category, for instance, saw dollar sales, unit sales and volume slip as a whole, but it’s not a one-size-fits-all market.

“According to the data, it’s not a static situation across the country as far as the pork rinds category,” he explained. “We’re seeing some real strength in high-density Hispanic areas and in the South. However, we’re seeing some areas of weakness in the Northeast that can be attributed to a lack of keto focus with new consumers.”

Mostly, Singleton added, snack producers have experienced softness with conventional grocery stores, particularly in urban areas where retailers are dependent on more snack dollars to contribute to the revenue in their stores. 

“Hopefully, the weakening of inflation pressures over the last couple years will allow for some investment in promotions that spark unit volume,” he said.

Such weakness in unit and volume is not only impacting snack categories. It’s happening across most of the food and beverage industry. Sally Lyons Wyatt, global executive vice president and chief advisor, consumer goods and foodservice insights, Circana, suggested multiple factors are at play, including food inflation over the past two years and consumers now seeking to economize.

“We found consumers were looking for ways to help manage, not only food budgets, but also overall household budgets,” she recently told Beth Day, contributing editor, SNAC World magazine for SNAC International’s 2024 state of the snack industry report compiled in conjunction with Sosland Publishing.

“Coming into 2024, we will be overlapping huge dollar growth from the inflationary period during the first part of the year,” she added. “Consumers are trying to manage all monthly expenses and have greatly reduced discretionary spending. What we are seeing with snacks is that what they have bought and shifts they have made are impacting unit and volume sales.”

Lyons Wyatt pointed out that shoppers are pulling different levers with their snack selections. Channel surfing, for instance, is one way to get the biggest bang for their snacking dollars.

“Some consumers are buying less than they did before,” she suggested. “A portion of consumers are downsizing to buy smaller sizes, or buying multi-packs to stretch what they have in the pantry for a longer period. Others may not return to categories as often.

“Where consumers shop has also shifted,” she added. “Mass [merchandise] and convenience channels are gaining in dollar share. Mass channels offer value, and convenience stores offer convenient accessibility of products. Unit sales also increased in club stores, and Internet outlets increased volume with overall core snacking. Specialty stores also saw an uptick in unit sales as well. If manufacturers can increase both unit and dollar sales, they are golden.”

In an earlier presentation at SNAC International’s Executive Leadership Forum last fall, Lyons Wyatt stated that rising dollar sales and sliding units gave her cause for concern.

For the first time in years, she said, unit sales in the snack category underperformed the broader food and beverage market. This indicated a potential “sales strain” in the snack market as consumers shift their purchasing patterns in response to inflation and higher prices. 

At that time, she mentioned the 2% decline in units didn’t disturb Circana researchers too much, but they’re keeping a close eye on that percentage going forward.

“It’s when we go past the 2% mark that we start to get nervous in an environment like we are in where you had pretty highly inflated pricing,” she said.

Circana research has indicated the extra-large snacking companies with $6 billion or more in sales are seeing their share of the pie expand along with smaller businesses with less than $100 million in sales. Lyons Wyatt said other large and mid-sized snack companies are seeing slight declines in their share of the market.

Snack makers also shouldn’t expect the hefty annual increases in dollar sales they saw during the stay-at-home period unless companies keep on raising prices to cover higher ingredient, labor and operating costs.

She urged snack companies to try to minimize pricing partly because some households are having difficulty keeping up with inflation.

Some categories are seeing growth in sales, units and volume. Specifically, corn chips hit the trifecta, rising 19.5% to $1.9 billion with hefty unit and volume growth, mainly because of the performance of Plano, Texas-based Frito-Lay North America’s dominance in the segment.

Likewise, the versatile pretzel category experienced an 8.7% bump to just over $2 billion while unit and volume eked out slight gains.

Justin Spannuth, vice president and chief operations officer, Unique Snacks, Reading, Pa., and SNAC International chair, attributed pretzels’ resurgence to a move toward more premium items, such as Dots pretzels, a brand owned by The Hershey Co., Hershey, Pa.

“The pretzel category caught fire when Dot’s disrupted the market with a new approach to seasoned pretzels, selling a ton of SKUs for a much higher price point,” he explained in SNAC World magazine.

“This created a flurry of competitors chasing to ride their tailwinds,” he continued. “Consumers showed their willingness to pay more for something they really wanted, and the ingredients didn’t have to be clean, so that meant we were talking about the non-BFY (better for you) consumer, which was a surprise. Grocers were happy to ‘give’ those brands space for these new competitive, seasoned pretzel products especially when they were paying for urgency of consumer attention with promotional programs, as well as a single register ring of a seasoned pretzel giving the retailer higher margin profits than most other snacks because of the high price point.”

Spannuth added that Unique Snacks has been working to create other new and innovative products to disrupt the snack space. The company’s new Puffzels are a crunchy, seasoned, extruded corn snack looking to bring new flavors to that fast-growing category. 

“We are hoping for great distribution expansion with retailers in 2024,” he said. “We are also seeing nice growth in our regular pretzel items as we continue to bring brand awareness to consumers.”

When it comes to innovation, snack producers rely on a full toolkit of options. Frito-Lay is leveraging the iconic flavors of its powerhouse brands like Doritos into new categories.

Most recently, the Doritos Cool Ranch variety joined Doritos Nacho Cheese within the Smartfood popcorn portfolio. During the past two years, the company rolled out Cheetos popcorn with great success.

Likewise, Utz Brands, Hanover, Pa., extended its Zapp’s brand into the pretzel category with its New Orleans-style seasoned pretzel sticks.

Utz also introduced Mixed Minis Pretzels that come in three bite-sized shapes, including twists, rings and waffles, and flavors such as Sea Salt, Garlic Butter and Mike’s Hot Honey.

This article is an excerpt from the April 2024 issue of Baking & Snack. To read the entire feature on Snacks, click here.