Success Factors for the Snack Food Industry by Kenrick Chatman
Since people have to eat the food business unlike the snack food production industry is recession proof. Since snack food manufacturers know that consumers can choose not to purchase their products; they have employed a large amount of capital technology branding expenditures resources. These investments when combined with high customer loyalty have resulted in sales growth high profit margins.
During the current crisis customers are more likely to reduce snack spending make purchases on promotion & or switch to private labels due to an increase in price sensitivity. Another challenge for snack food manufacturers is fluctuating commodity prices. Nevertheless strong brand loyalty when combined with new product innovations aggressive marketing tactics should help counter the unfavorable effects of the current recession.
The US snack food production industry is saturated mature as a result competition is fierce. Likewise the key success factors manufacturers can employ to either grow or maintain share are below.
Ability to reserve raw material contracts to reduce supply costs aid production planning manufacturers need dependable contracts with suppliers of key raw inputs including secured supplies at fixed prices.
Ability to pass on cost increases to maintain profitability manufacturers need to continue to pass on unexpected costs increases for supplies without secured prices. to offset high commodity energy prices the major players have been passing on price increases due to their products' strong brand value. Nonetheless grocery stores supermarkets due to their increasing buyer power could stock more of their own private labels resist price increases to strengthen profitability.
Ability to reserve desirable shelf space to maximize retail sales manufacturers must continue to seek coveted shelf space for their products. They should also expand or continue expanding into other distribution outlets which include discount drug stores convenience stores other locations with high foot traffic.
Ability to change via innovation differentiation to maintain or grow share manufacturers must differentiate anticipate respond to changes in both consumer preferences dietary trends. Population ethnicity demographic changes have resulted in new preferences tastes requiring manufacturers to alter their product lines to meet these needs; by using product healthier ingredients packaging marketing labeling other innovations.
For example consumers are becoming more health conscious pressed for time are increasing their consumption of convenient healthy & or tasty snacks. As a result the fruit nut snack bars segment combined with low sodium low fat organic snack food represent a growth opportunity.
Ability to withstand consumer price sensitivity consumer price sensitivity deviates between product segments. Due to the associated high reputation image product quality perceptions brand loyal customers are not as sensitive to price changes. Thus products such as Oreo Doritos command a premium price. Nonetheless consumer switching to cheaper alternatives including private labels & or cheaper substitutes such as muffins chocolate could result; especially for product segments that are not perceived as high quality.
Ability to expand internationally manufacturers should continue to expand in Mexico Canada Philippines Taiwan Japan Korea other countries since saturation in the US market could eventually lead to mediocre profit margins.
The effects of the recession on the snack food production industry should not inflict much damage. Nonetheless manufacturers must continue to seek international growth differentiate innovate secure coveted distribution placement receive desirable supplier contract terms. Thus manufacturers will have a better chance of preserving or boosting share sales & or margin over the long haul.
Kenrick Chatman is sales margin growth authority who writes articles on industry kenrickchatman. com blog analysis business development. Feel free to read about other industries by visiting his industry kenrickchatman. com category industry analysis analysis blog. Click here to get your own unique version of this article with free reprint rights. Success Factors for the Snack Food Industry
