High prices for popular branded snack foods are pushing some consumers to cut back or choose more affordable alternatives.
Several companies in the snack industry are reporting lower-than-expected sales, citing price sensitivity from consumers worried about the economy and struggling to cope with food inflation. Prices for snacks are up about 22% since February 2020, which is basically on par with food-at-home inflation, according to the the Consumer Price Index.
On Wednesday, General Mills reported a “slowdown” in snacking categories including bars, fruit snacks and salty snacks. General Mills, which makes some of the most popular cereals such as Cheerios, as well as Nature Valley granola bars and Fruit Roll-Ups, said the trends in snacking impacted the company’s performance for the most recent quarter.
Asked if the troubles in snack-food sales could be a result of GLP-1 weight loss drugs such as Wegovy, General Mills CEO Jeff Harmening said on an earnings call that it’s more about consumer confidence.
“Our belief is that consumers have become much more value conscious,” he said, noting that Americans are also going out to restaurants less often and cutting back on other discretionary groceries (i.e., not kitchen staples).
Shoppers are skipping expensive snack foods
Snack food companies are reporting to investors that they are feeling the impact of Americans’ more economical shopping behavior in the grocery aisles.
J.M. Smucker recently said its Hostess brand was seeing decreased sales, with the company’s executive citing general inflation in the economy that is weighing on consumer spending. Campbell’s, which owns Goldfish and Kettle Brand chips, reported a 2% drop in organic sales, also blaming snack food demand.
Oreos maker Mondelez International recently said it expected a drop in profit due to rising cocoa prices, which have prompted price increases.
Research confirms that consumers with tighter budgets are adjusting their shopping habits, choosing cheaper options or store-brand snack foods at the grocery store. One survey by 84.51°, which is part of Kroger, found that 43% of shoppers are open to switching to lower-cost brands for snacks and candy.
“Consumers still have their snacking occasions, but they are switching to lower-cost brands more often to satisfy their needs,” Melissa Myres, insights director at 84.51°, told Progressive Grocer. “They’re willing to trade down or into other options when it comes to snacking.”
Beyond price sensitivity, PepsiCo, which owns Frito-Lay, reported another market shift affecting snack sales: health. In an earnings call last month, CEO Ramon Laguarta suggested that companies will need to market healthier products: “There’s a higher level of awareness among American consumers toward health and wellness,” he said.
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The high prices of popular branded snack foods are causing some consumers to cut back or opt for more affordable alternatives. This trend has been observed by several companies in the snack industry, who are reporting lower-than-expected sales. The current economic climate and food inflation are causing consumers to be more price-sensitive, leading to a 22% increase in snack prices since February 2020, according to the Consumer Price Index.
General Mills, known for popular cereals like Cheerios and snacks like Nature Valley granola bars and Fruit Roll-Ups, recently reported a slowdown in their snacking categories. CEO Jeff Harmening attributed this to consumers becoming more value-conscious and cutting back on discretionary groceries, as well as dining out less frequently.
Other snack food companies, such as J.M. Smucker and Campbell’s, have also reported decreased sales in their snack brands. They cite general inflation in the economy as a factor affecting consumer spending. Mondelez International, the maker of Oreos, has also announced a drop in profit due to rising cocoa prices, which have led to price increases.
Research has shown that consumers with tighter budgets are adjusting their shopping habits by choosing cheaper options or store-brand snack foods. A survey by 84.51°, a subsidiary of Kroger, found that 43% of shoppers are open to switching to lower-cost brands for snacks and candy. Melissa Myres, insights director at 84.51°, explains that consumers are still snacking, but are opting for more affordable options to satisfy their cravings.
In addition to price sensitivity, PepsiCo, the owner of Frito-Lay, has identified another market shift affecting snack sales: health. In a recent earnings call, CEO Ramon Laguarta suggested that companies will need to focus on marketing healthier products, as there is a higher level of awareness among American consumers towards health and wellness.
Overall, the snack industry is facing challenges due to consumers’ economic concerns and changing preferences. As a result, companies may need to adapt their strategies and offerings to meet the demands of the market.
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