Cookies and Crackers

SIC 2052

Companies in this industry

Industry report:

This category includes establishments primarily engaged in manufacturing fresh cookies, crackers, pretzels, and similar "dry" bakery products. Secondary products that are part of this industry include biscuits, graham crackers, saltines, cracker meal and crumbs, cracker sandwiches made from crackers, wafers, and ice cream cones and cups.

Industry Snapshot

The U.S. cookie and cracker manufacturing industry was worth about $10 billion in 2010, according to a Research and Markets report. About half of the revenue came from cookies and half from crackers. In the major bakery companies, the cookies and crackers segment of business often operates as a separate division. Many bakery companies are divisions of holding companies that are also involved with other consumer products that include food, beverages, and, in the case of RJR Nabisco, Inc., tobacco.

Other manufacturers of cookies and crackers operate strictly under the bakery goods heading. Companies such as Mrs. Field's Cookies and Famous Amos at one time operated exclusively out of their own retail outlets. They later expanded to supermarkets and specialty stores. A number of these private label companies work through distributors that handle a number of varied products. Many of the larger companies handle their own distribution, working directly with supermarkets and retailers.

The concern over trans-fats in the 2000s transformed the cookie and cracker manufacturing industry in a variety of ways. While a large portion of the industry vowed to meet the challenge by offering consumers more healthy cookies and crackers, with lower amounts of sugar, calories, and hydrogenated fats, another segment opted to appeal to the indulgences of adults with premium products.

Cookie advertising, long aimed at children, sought for a more mature audience with child obesity a growing concern amid the trend for healthier diets. For example, Kraft introduced its Nabisco 100-calorie packs line of portion control snacks targeting adults. Later, Kraft expanded to bring children back into the fold by offering 100-calorie packs with sports themes, labeled Sportz Cookies and Sportz Crackers that it termed "the better-for-you snacks."

Background and Development

The U.S. Chamber of Commerce noted that cookie and cracker manufacturing was the fastest-growing segment of the bakery industry in 1992. Shipments of all bakery products rose an average of 1.3 percent per year from the years 1987 to 1992. Sales of cookies and crackers for the same years, however, increased by rates of 2.3 percent. The primary reason given for the projected increase in sales was the introduction of low-fat, low-calorie, low-cholesterol cookies and crackers.

Consumption of sweet baked goods, including cookies and crackers, began to decline around 1992. One important reason for the declines related to pricing actions taken by Nabisco, the dominant force in the cookie and cracker industry. Nabisco aggressively increased its prices in the 1980s until consumers started buying less. Private labels also began to cut heavily into Nabisco's market share. These included a number of upscale private lines such as Sam's Choice, a line sold at Wal-Mart stores, and Master Choice, sold at A & P stores.

A number of companies introduced products to suit a changing market of health-conscious consumers. Nabisco introduced a line of fat-free cookies and crackers called Snackwells. By 1997, Snackwells was the top-selling brand of cookie and cracker in the country. The brand's popularity reflected the fact that 173 million Americans were eating reduced-fat and fat-free foods, representing an 81 percent increase from 1993.

Health-conscious, label-reading consumers turned from products with potassium bromate to products that contain acceptable alternatives, such as barley malt. U.S. Industrial Outlook reported that the per capita consumption of crackers edged up mainly due to bakery companies changing ingredients to satisfy consumer demands and tastes. The increase was thought to be a result of the elimination of questionable ingredients like tropical oils and white flour and the use of canola oil and whole wheat flour in their place.

Thus the harmful role of trans-fats in the U.S. diet, found largely in baking margarines and shortenings, contributed to declining consumer interest in cookies and crackers. Effective January 1, 2006, the U.S. Food and Drug Administration (FDA) mandated labeling requirements regarding the listing of these ingredients in food items. Grams of trans-fat must be included on the nutritional label. Even before the labeling requirements took effect, the total sales volume of the U.S. cookie market decreased by more than 8 percent from 2001 until the end of 2005, according to the market research organization Packaged Facts.

Although total cookie and cracker sales decreased again in 2006, several categories within the industry showed growth. At 1.8 billion units in 2006, cookie sales were down 3.4 percent from 2005, but the $3.9 billion generated represented a drop of just 0.05 percent, according to Information Resources Inc. Meanwhile, crackers rose by more than 6 percent in sales value, and sales of low-fat versions of crackers increased almost 25 percent.

The disparity in percentage decrease between cookie unit sales and sales value can be attributed to single-serve packaging as well as consumers' willingness to spend more for nutritionally improved products. In competition with Kraft's Nabisco 100-calorie packs, Hershey's entered the cookie market in the mid-2000s with a line of premium, single-serve products. Keebler and Pepperidge Farm had also introduced single-serve products.

Current Conditions

The economic slowdown in the late 2000s affected many industries in the United States, including cookie and cracker manufacturing. Due partly to consumers becoming more cost-conscious, with less to spend on extra items like snacks, private label brands took an increasing share of the cookie market. In 2009, sales of private-label brands of cookies grew 16 percent to reach $583.5 million. Nabisco's Chips Ahoy!, Oreo, and Oreo Double Stuf held second, third, and fourth place in the cookie market, respectively. Total sales of the top 10 cookie brands reached $4.0 billion, up less than 1 percent from the previous year.

Consumers seemed more loyal to their cracker brands, as Keebler's Sunshine Cheez-It held the number-one spot with $335.7 million in sales in 2009. Nabisco Ritz, Wheat Thins, and Triscuits followed, with private label brands placing eighth in the top 10 cracker brands. Americans spent approximately $4.0 billion on the top 10 brands of crackers in 2009.

Industry Leaders

The cookie and cracker manufacturing industry is highly concentrated, and of the approximately 300 establishments engaged in the industry in the early 2010s, the top 50 accounted for 90 percent of the industry's revenues.

Nabisco has been the consistent leader in the industry and in 2010 was the world's largest cookie and cracker manufacturer. Nabisco is a subsidiary of Kraft Foods, the second largest food company in the world. In 2009, Kraft's revenues in the confectionary and snacks divisions totaled more than $24 billion. Nabisco's cookie and cracker division, called the Nabisco Biscuit Company, produces, distributes, and markets a broad range of cookies, crackers, and snacks. The company sells cookies and crackers under such well-known brand names as Oreo, Chips Ahoy!, Ritz, Triscuit, and Snackwell, among many others.

Another industry leader was Keebler, a subsidiary of Kellogg Company. Like Nabisco, Keebler's products are represented in major supermarkets around the country. Keebler also produces and distributes a wide range of crackers and snacks. Keebler acquired Sunshine Biscuit in 1996, went public in 1998, and bought President Baking Co, bringing Famous Amos cookies and Girl Scout cookies under the Keebler umbrella.

Other industry leaders in the early 2010s were Pepperidge Farm, which sold Goldfish crackers and Milano cookies, among a variety of other products, and Little Debbie. A relative newcomer to the scene was Lofthouse, owned by Ralcorp Frozen Bakery Products Inc. of Downers Grove, Illinois. Lofthouse ranked fifth in the top 10 best-selling cookies in 2009 in terms of revenue.

Workforce

According to Dun & Bradstreet's Industry Reports, the cookie and cracker manufacturing industry employed 27,365 workers in 2010. Most of the establishments involved in the business were small, with about 80 percent employing fewer than 25 people. However, companies with more than 25 employees accounted for almost 90 percent of total sales. States employing the largest numbers of workers in this industry were Pennsylvania, Georgia, and California.

America and the World

The export trade of bakery goods is a small portion of the total bakery production in the United States because they are perishable and because of differences in consumer preference in other countries. Nevertheless, bakery exports were growing in the late 2000s. According to Supplier Relations US LLC, U.S. exports of cookies and crackers grew 16 percent annually from 2007 to 2009. Exports consist mainly of cookies, crackers, and specialty cakes that have adequate shelf life, attractive packaging, and competitive prices.

Research and Technology

Concern for the environment has affected the operations of bakery companies. Most are spending more of their dollars on environmental protection. Many companies are introducing pollution-abatement equipment, especially for their ovens, and have plans to introduce other pollution-control measures. Many are converting their delivery vans so they can operate on cleaner-burning propane instead of gasoline. It is expected that environmental control efforts will eventually increase operating costs by as much as 10 percent.

Some manufacturers are employing the extrusion process used in other food industries that permits continuous blending of ingredients. It results in a greater variety of products being made available to the consumer and in less waste during production time, and it also uses less energy. Changes in ingredients and procedures are monitored carefully by the Food and Drug Administration.

Nabisco has implemented an engineering information management software system called WorkPlace ActiveAsset. This enables its many bakeries and headquarters to easily share information, such as engineering drawings. This new software allows everyone, including consultants, suppliers, and local bakeries, to access the complex engineering information. Nabisco has also created an online analytical processing (OLAP) data mart. With more than 8,000 products, the OLAP allows Nabisco to accurately track sales and consumer preferences, with the largest data mart holding sales, price discount, spoilage, transportation, and promotional information for two years. Management, financial analysts, and salespeople use this information. For example, discontinuing the LifeSaver Christmas candy packs saved Nabisco $1 million.

Not to be outdone, Keebler rolled out its IDEA Wizard (Instant Data Evaluation Access). Because the cookie market and cracker market are distinct separate customer bases and loyalties, the IDEA Wizard allows Keebler to collect information on each segment of its markets and develop plans for specific retailers for shelf space and merchandising. The IDEA Wizard stores information from several sources, including scanners. Retailers access the information, along with audio and video clips about new products, focus groups, and marketing messages from Keebler.

In the early 2010s, cookie and cracker manufacturers continued to come up with new ways of appealing to Americans' craving for carbohydrates while promoting healthier ingredients. For example, in 2010, Nabisco created Ritz Crackerfuls, which were similar to the Ritz Bits sandwich crackers but were presented in a more sophisticated box and contained 5 grams of whole grain per serving. Smaller companies such as New Hampshire-based HomeFree LLC also jumped on the health bandwagon. All of HomeFree's cookies were low in sugar, free of allergy-triggering ingredients such as peanuts, tree nuts, eggs, and dairy, and made in an allergen-friendly plant. Protein Bakery's Colossal Cookies were made with all-natural ingredients and contained many of the nutrients found in energy bars but with less sugar.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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