Potato Chips, Corn Chips, and Similar Snacks

SIC 2096

Industry report:

This classification consists of establishments primarily engaged in manufacturing potato chips, corn chips, and similar snacks. Establishments primarily engaged in manufacturing pretzels and crackers are classified in SIC 2052: Cookies and Crackers; those manufacturing candy covered popcorn are classified in SIC 2064: Candy and Other Confectionery Products; those manufacturing salted, roasted, cooked, or canned nuts and seeds are classified in SIC 2068: Salted and Roasted Nuts and Seeds; and those manufacturing packaged unpopped popcorn are classified in SIC 2099: Food Preparations, Not Elsewhere Classified.

Industry Snapshot

The "salty snack" industry includes potato chips, corn chips, tortilla chips, ready-to-eat popcorn (except candy-coated), pork rinds, potato sticks, and extruded snacks such as cheese puffs. According to the Snack Food Association, sales for snacks during 2005 totaled $24.6 billion. Frito-Lay was the undisputed champion of this industry category, with Tostitos, Ruffles, Rold Gold, Fritos, Lay's, Cheetos, SunChips, and many more top sellers under its umbrella. Potato chips and tortilla chips controlled the snack foods market. Some 84 percent of American households eat potato chips, which had one-third of the salty snacks market in the mid-2000s.

The dietary trend in the 2000s toward healthier eating did not affect the snack category of foods as much as anticipated, as approximately one-third of the population regularly ate snacks in place of a meal. Single-serve and other "on the go" packaging was lifting sales by catering to the demands of a faster-paced lifestyle. Three-fourths of those who snack do so in the evenings. In addition, snacks were becoming more healthful, with reductions in sugar and fat. New labeling requirements in 2006 stipulated that nutritional labels must specify trans fat content, otherwise known as hydrogenated fats and oils, in grams. Industry leader Frito-Lay beat the rush by including the line on its labels in 2003, well in advance of the deadline for compliance.

In the late 2000s, there were a reported 454 establishments engaged in manufacturing potato chips, corn chips, and similar snacks with shipment values exceeding $44 billion with industry-wide employment of 31,994 workers in 2009. The average manufacturing facility generated $167.6 million in sales employing 78 workers. California, Texas, Pennsylvania, New York, and Illinois were the leading manufacturing states; however, New York was responsible for the bulk or more than $43 billion of industry shipments.

Manufacturing of potato chips and the similar snacks category held 47.4 percent in market share followed by potato chips and other potato-based snacks manufacturing with 16.7 percent in industry share, while tortilla chips manufacturers with 15.9 percent in market share had shipments valued at $144.3 million. Others included corn chips and other corn-based snacks manufacturers with shipments totaling $30.8 million and popcorn, already popped (except candy covered) manufacturers with $18.1 million in shipments.

Organization and Structure

The salty snack foods industry has a unique structure, since Frito-Lay, a division of PepsiCo, controlled about two-thirds of the total market share. Although the industry has some elements of a monopoly (aggressive pricing and distribution policies among chip makers), the regional presence of many large and small manufacturers keeps it highly competitive.

Numerous companies of varying size make up the snack industry. Many compete only on a regional level, although some find it difficult to price their products competitively with the larger manufacturers. Others, however, create a market niche, sometimes with a specialty product such as kettle-style potato chips or baked chips sold through health food stores. If their products meet with success among customers, the smaller makers can often charge higher prices than the biggest manufacturers. Larger manufacturers are generally full-service snack companies--those offering a full range of products, including potato chips, tortilla chips, and other salty snacks. The smaller producers are more likely to specialize.

Background and Development

The potato chip was born accidentally in 1853, when railroad magnate and naval commodore Cornelius Vanderbilt was vacationing in a popular East Coast inn. He ordered fried potatoes but disliked them and returned the fries to the kitchen, complaining that they were "too thick." The cook, a Native American named George Crumm, reacted with indignation. He sliced a potato into slivers as thin as he could, fried them, and served them to Vanderbilt.

The newly invented snack gained popularity among other customers, but remained primarily a restaurant item for several decades. This style of potatoes became known as Saratoga chips, named after the town in which they were first consumed. In 1895, William Tappenden of Cleveland began manufacturing potato chips for home consumption. Snack food innovations included the introduction of ridged potato chips in 1966 and fabricated potato chips in the 1970s.

Popcorn is perhaps the oldest salty snack food still widely consumed. Indigenous peoples in what became Peru were known to toast corn kernels over flames until they burst. This tradition was recorded as early as the fifteenth century. North American Indians also prepared popcorn, and it was believed to have been shared at the first Thanksgiving dinner in Plymouth, Massachusetts. The term popcorn became accepted around 1820. Early American settlers may have eaten it--sprinkled with sugar and doused in cream--as the first breakfast cereal. It was also used decoratively from the beginning of its history, having been strung and draped on Christmas trees during the 1800s.

In 1885 the snack food industry received a boost from the invention of the first popping machine by a Chicago inventor named Charles Cretors. His machine used oil to pop the corn and was used for about a century until the development of the hot air popper. In the mid-1960s, the snack began to be manufactured on a mass scale by Orville Redenbacher, who then promoted his brand as a gourmet hybrid popcorn. The next major innovation came in 1986, when Pillsbury introduced microwavable popcorn.

The 1990s.
Industry analysts reported that the snack food industry fared well in the early 1990s, given the economic downturn. In fact, over time the industry developed a reputation for being recession proof. However, stiff competition required increasingly aggressive promotions to grab the consumer dollar, so some viewed salty snacks as a no-growth industry.

Dollar sales of savory snacks--in a broad category including pretzels and snack nuts--grew from $10.6 billion in 1987 to $13.8 billion in 1992, an increase of 30 percent. Per capita consumption jumped from 17.49 pounds in 1987 to 20.55 pounds in 1992. The field was dominated by Frito-Lay, which claimed nearly half of the overall salty snack food market in 1992. But Americans' appetite for specialty and relatively "healthy" snacks kept the industry competitive. More than 400 new products were introduced in both 1991 and 1992, including several varieties of multigrain chips, flavored ready-to-eat popcorn, and diet cheese puffs.

Profits for salty snack manufacturers were 7.5 percent in 1992, representing a slight drop from the previous year. These figures included additional snacks, such as pretzels and packaged nuts, which were made by "full-service" salty snack companies such as Frito-Lay and Borden. Pre-tax profit margins for this broad category of snacks slipped from 6.8 percent in 1991 to 4.2 percent in 1992. Domestic dollar sales in 1992 were $9.6 billion--up overall from 1991 sales. Consumers bought approximately 3.6 billion pounds of salty snacks, or nearly 18 pounds per capita consumption.

Potato chips led the way in salty snack consumption in 1992, with a retail sales volume of $4.41 billion. This dollar amount represented the sale of more than 1.66 billion pounds of potato chips, which claimed 32 percent of the market for all savory snacks--including popcorn, meat snacks, pretzels, and snack nuts. Steadily increasing throughout the 1990s, by 1998 potato chips had increased 15.1 percent in sales from the previous year, with pound volume increasing 6.5 percent. The low fat and no fat lines of potato chips were behind the surge in sales, and by 1999 the category was shrinking at a considerable rate.

Tortilla chips were the second most consumed salty snack. More than $2.57 billion worth were sold in 1992--a volume of 1.06 billion pounds. This represented a 20.5 percent market share by pound volume, or 18.6 percent by dollar sales. Also popular throughout the mid-1990s, by 1998 tortilla chips were bought overwhelmingly in supermarkets--44.8 percent of all tortilla sales. Corn chips saw sales of almost $750 million in 1998, with 49 percent of that going to supermarkets. That year, Doritos led the way in tortillas with $693 million in sales, followed by Tostito's with $526 million in sales. Frito's was the corn chip leader with $208 million in sales, followed by Frito's Scoops with $98 million. Manufacturers were beginning to combine sales of tortilla and corn chips with dips and salsa, thus appealing to customers' desired convenience. Potato chips and tortilla chips combined accounted for about 50 percent of the savory snack market.

More than 40 percent of all purchases of salty snacks were made in supermarkets--food stores that reported annual sales of at least $2 million. Grocery stores--food stores with sales of less than $2 million annually--accounted for between 10 and 20 percent of salty snack sales in the early 1990s, depending on the product. The remaining salty snacks were sold in convenience stores, mass merchandisers (large general merchandise stores that also carried grocery items), warehouse club stores, drug stores, vending machines, and other retail outlets such as delicatessens, liquor stores, and sports stadiums.

The industry experienced steady sales growth, even during the recession of the early 1990s. However, pound sales volume rose faster than dollar sales volume due to the keen competition that characterized the industry. The decline in price per pound was also consistent with falling retail grocery prices nationwide. The issues described by snack food companies as posing the biggest challenges to profitability in the mid-1990s included: competitive pricing, government mandated nutritional labeling, changing distribution patterns, and rising supermarket shelf fees. Although sales remained flat in the mid-1990s, by 1997 sales jumped 8.5 percent to $16.8 billion and rose another 7.3 percent in 1998 to reach $18.2 billion. By the end of the century, sales stood at $19.38 million, a 6.2 percent growth from the previous year.

Shifting Distribution Patterns.
A market research study found that consumers paid an average price of $2.66 per pound of savory snacks in 1992, down 2.6 percent from $2.73 per pound the previous year. This was attributed to several factors, including the recession and the competitive nature of retail products. Another major factor was a shift in distribution patterns. Large warehouse club stores and mass merchandisers charged lower prices for snacks in order to attract customers from smaller supermarkets and grocery stores. Although supermarkets accounted for nearly 50 percent of salty snack sales, sales by dollar volume rose only about 1 percent. In contrast, warehouse clubs saw an increase of more than 50 percent in savory snack sales, and mass merchandisers also saw double-digit growth. Because these larger outlets charged less per pound for snacks than supermarkets, the increased sales represented a decline in profitability.

Convenience stores historically charge the highest prices for both potato chips and corn chips. In 1992, average potato chip prices were $3.06 per pound--the only outlet where prices passed the $3.00 mark. In contrast, potato chips sold for $2.49 per pound in supermarkets and $2.44 at mass merchandisers. In that same year, corn chips sold for $2.74 per pound in convenience stores, compared with $2.44 in supermarkets and $2.00 in warehouse clubs.

Prices began a trend toward equalization in the early 1990s, however. Convenience store prices of tortilla chips, for instance, were $2.61 per pound in 1992--the highest of any outlet, although 10 percent lower than the previous year. Supermarkets, grocery stores, mass merchandisers, and drug stores saw only a modest shift in tortilla chip prices. However, the price at warehouse clubs jumped almost 30 percent to $2.27 per pound. This trend also reflected the fierce competition that kept profits low throughout the recession.

Moreover, savory snacks experienced intensely competitive pricing in supermarkets. Full-line snack companies reported spending 52 cents of each promotional dollar on price reductions. Another 25 percent of promotional expenses went toward advertising and 16 percent was used for in-store promotions. On the whole, 72 percent of full-line manufacturers reported spending more money for advertising and other promotional endeavors in 1992 than in 1991. In addition, retail shelf space increased in price during the early 1990s. On a per-store basis, the average cost per section foot paid by salty snack manufacturers leaped from $283.33 in 1991 to $342.86 in 1992.

Health Implications.
The salty snack industry has adapted to shifting consumer demands and perceptions throughout the last several decades. During the late 1960s and 1970s, Americans learned from health experts that they were consuming salt in greater quantities than was necessary or healthy. The average individual needed about one-third teaspoon of salt per day. High consumption of salty snacks and other prepared or processed foods resulted in more than double the recommended intake. What's more, salty snacks rose an average of 93 calories per serving from 1977 to 1996.

In more recent years, university studies linked low fat diets to reduced rates of cancer and heart disease. Research showed that low fat diets, typical of those in the Far East, were associated with low or virtually nonexistent incidence of cancer. This was particularly true, for instance, in breast cancer for women, which was much more prevalent in the United States and other western nations than it was in China. Moreover, when women of Chinese descent lived in the United States and adopted the high fat diet typical of Americans, the incidence of breast cancer jumped to the rate found among Westerners. Consumers were advised to reduce their fat intake, and many began to do so. Whereas in the 1960s, Americans typically consumed about one-half of their calories in the form of fat, a healthy diet was said to be one in which a maximum of 30 percent of calories was consumed through fats.

Thus, manufacturers of salty, high fat foods battled public perception that their products were unhealthy. Salty snack makers responded to changing consumer tastes by creating potato chips, corn chips, and tortilla chips that were perceived as healthy--or at least not as harmful. No-salt potato chips were developed in response to consumer demand, although in the early 1990s they accounted for less than 1 percent of potato chip sales. Following the unspectacular success of no-salt chips, low-salt varieties were introduced and proved more successful, showing double-digit market share growth in the early 1990s.

Low-oil potato chips proved more successful, and other specialty chips were baked rather than fried, and another manufacturer sold chips that were cooked in the potato's own juices, resulting in a fat-free chip. Similar innovations were found in the tortilla chip industry in the early 1990s. Low salt and low oil tortilla chips combined to make up about 9 percent of overall volume.

Despite manufacturers' responsiveness to consumer demand for healthier products, the desire to eat foods lower in fat nevertheless affected the salty snack industry. Among industry products, popcorn consumption virtually exploded in the late 1980s and early 1990s. Multigrain snacks also showed remarkable growth for the first few years after their introduction. Other foods that competed with potato chips and similar snacks included pretzels and snack nuts, both of which gained market share much more rapidly than potato chips and tortilla chips in the early 1990s. This was due at least in part to consumer perception of pretzels and nuts as having more nutritive value than potato chips. Even low oil chips contained more fat than pretzels, for instance, which were baked rather than fried. Snack nuts contained relatively little salt and oil and featured nutrients such as protein and minerals not found in potato or tortilla chips.

Flavor Variety.
The development of flavored chips and snacks throughout the 1980s and 1990s was generally successful in keeping snack consumption on the rise. Small manufacturers introduced kettle-style potato chips--cooked in kettles as done previously. Many larger manufacturers followed suit, either developing their own versions of kettle chips or buying smaller companies that developed them for regional markets.

Regularly shaped chips made up 46.2 percent of pound volume, and ridged chips of all flavors accounted for 34.4 percent in 1992. Fabricated chips represented 13.9 percent of the market for potato chips in that same year. Flavored potato and corn chips also multiplied, accounting for many of the new product introductions during the late 1980s and early 1990s. In addition to barbecue flavored potato chips, consumers purchased sour cream and onion, ranch, and other flavors. Tortilla chips experienced the most success of any salty snack food, with the introduction of flavor varieties, including cheese, ranch, salsa, and a variety of spicy flavors. In addition, white corn tortilla chips were introduced in the early 1990s and found favor with consumers.

Ready-to-Eat Popcorn.
Ready-to-eat (RTE) popcorn grew in popularity during the late 1980s and early 1990s. Dollar sales jumped from $248 million in 1987 (including caramel-coated) to more than half a billion dollars in 1992. This was in contrast to more sluggish growth in the microwavable popcorn category, in which sales remained flat from 1990 to 1992 after booming during the 1980s. Analysts attributed this slowdown to market maturation--almost 90 percent of consumers owned a microwave oven by 1990. Caramel-coated RTE popcorn made up the largest market share of any individual type, but noncoated popcorn still dominated the market. Other flavor varieties included white cheddar and cheese, butter, and cinnamon. Low-salt RTE popcorn also sold well. Many RTE brands were air popped, making them virtually fat free. Moreover, RTE popcorn could be purchased and eaten immediately, making it even more convenient than its microwavable competitors. RTE varieties appeared to be causing the demise of a second competitor, unpopped popcorn, for which dollar sales slumped 11.3 percent to $117.4 million in 1992. This trend suggested that RTE popcorn would eventually split the market with microwavable brands, whereas unpopped popcorn would become a supermarket dinosaur.

Showing similar pricing and distribution patterns to potato and tortilla chips, RTE popcorn commanded the highest price in convenience stores in 1992--$3.46 per pound. The lowest price, $2.28 per pound, was found in the warehouse club stores, which nevertheless saw an 11.8 percent price increase over the previous year. As of the early 1990s, RTE popcorn was produced by only a few manufacturers, but as others took note of its popularity and profitability, new companies began marketing their own products.

Extruded Snacks.
Extruded snacks is the industry term for cheese puffs, corn puffs, and onion rings. The largest segment of this snack category--about 96 percent--was controlled by cheese-flavored products. Like other savory snacks, extruded snacks were characterized by the introduction in the late 1980s and early 1990s of many flavor varieties. A diet company even introduced individual-serving size, low-calorie cheese curls. However, the new varieties failed to bring as much growth as expected to the industry overall. By 1998 extruded snacks had sales of $810 million, up just 1.4 percent from 1997. The leaders for this category were Cheetos with $228 million in sales, followed by private-label brands with $45 million. Extruded snack manufacturers continued to try to pump up the segment, experimenting with urban and ethnic lines. The top flavors for extruded snacks were cheese and spicy hot.

Extruded cheese snacks, although no higher in fat content than potato chips and corn chips, suffered from a consumer perception that they were highly processed and not as healthful as related snack foods. Throughout the 1990s, consumers showed a preference for more natural, less processed foods--including snack foods. Although consumers wanted convenience, there was nevertheless a trend toward the use of whole foods rather than refined foods, which might have implications for the extruded snack industry.

Cheese snacks were up 3.7 percent in 2001, with more than $1 billion in sales. Flavor intensification also ruled this segment, with makers introducing zesty new flavors and lively packaging. In 2001 Frito-Lay launched Flamin' Hot Cheetos and Mystery Colorz Snacks Cheetos, which featured a color-changing additive to turn the consumer's tongue blue or green.

Pork Rinds.
The pork rind segment of the salty snack industry grew steadily from $163.4 million in 1987 to $236 million in 1992. Double-digit sales growth in the late 1980s slowed to about 5 percent annually in the early 1990s. One reason for growth in this segment was that the industry leader, Frito-Lay, increased its focus on pork rinds in its promotions--particularly in the southern United States. The South represented more than 50 percent of total pork rind consumption, with Pacific states totaling another 20 percent. The New England and mid-Atlantic states had virtually no market, with only 4 percent of national pork rind sales. Pork rinds resurfaced late in the 1990s, as sales of $420 million in 1999 reflected its status as a trendy diet snack. Sales that year grew faster than any other snack food segment except jerky. Boosting this snack's popularity was the introduction of microwavable brands in 1992. The new product offered a 60 to 70 percent reduction in fat--undoubtedly a source of appeal to consumers. In addition, pork rinds, like other salty snacks, appeared in flavor varieties including Cajun, jalapeno, barbecue, and chili.

Reduced Fat and Fat-Free Products.
When Frito-Lay introduced Wow! fat-free potato chips, they were well received and the industry recognized the fat-free line as the best selling new product in 1998. That year sales of Wow! chips were $350 million, and some analysts predicted future sales of about $500 million a year. However, by 1999 the company said it expected only about $250 million in annual sales from the fat-free line. Although the fat-free line of potato chips had been heavily anticipated, by the time Frito-Lay got them to the market, interest in fat-free snacks, cakes, and cookies had dropped considerably among consumers. Nutrition experts hurt sales when they appealed to the Food and Drug Administration (FDA) for labels on the products warning consumers of possible gastrointestinal side effects of the fat substitute Olean and that the chips had been fortified with vitamins A, D, E, and K because Olean prevented their absorption.

Multigrain Chips.
Of all the salty snacks manufactured and sold in the early 1990s, the type that demonstrated the greatest growth was the multigrain chip. Although only a $198 million industry in 1992, this sales volume represented a growth of 76.5 percent from the previous year. The first-year sales of Frito-Lay's multigrain product, Sunchips, totaled $115 million.

Introduced in 1990 by Frito-Lay, multigrain chips grew quickly enough that industry observers expected the product to become a substantial segment of the salty snack industry. Two competitors introduced their own versions of multigrain chips, but Frito-Lay still cornered the market in 1992 with $192 million in sales--nearly all of the product's volume. The success of multigrain chips was attributed to the perceived health value of the snack, which was made of grains and was relatively low in salt and oil.

By contrast, the decline in sales for four straight years signaled a maturing market for corn chips. In 1987 the corn chip industry saw $560 million in sales, but by 1992 that figure had grown to only $598 million. The introduction of flavor varieties did not boost sales--which peaked in 1989 at $668 million and slid each year thereafter. Efforts by Frito-Lay to bolster sales through redesigned packaging and new marketing campaigns met with consumer apathy. Nevertheless, corn chips represented 4.3 percent of the overall snack market.

Potato Chips.
Potato chips increased 7 percent in sales from 2000 to 2001, with more than $6 billion. Pound volume also increased 3 percent to 1.85 billion pounds. New flavor introductions accounted for the rise in sales along with a continuing increase in the snack trend in general. Spicy flavors such as jalapeno and Cajun seasonings had become a popular and profitable trend in potato chips in the early 2000s. Frito-Lay also introduced the market's first gourmet chip in 2001--Lay's Bistro Gourmet Potato Chips--with a variety of gourmet flavors. Prepackaged chip-and-dip snacks, convenient for on-the-go consumers, also became an important trend in chips, including Frito's Tostitos Chips & Salsa kits, as well as a chili and cheese dip version of its Frito Sloppy Joe and Scoops.

Tortilla and Corn Chips.
Tortilla chips showed an increase of 5 percent in sales for 2001, standing at $4.15 billion. Pound volume rose 1.3 percent that year, to 1.5 billion pounds. Corn snacks sales rose 2.1 percent that year. Flavor introductions also were a trend fueling tortilla chips, along with changes in shapes and textures. Frito-Lay's Doritos Extreme line of generously spiced chips enjoyed considerable success in 2001. The company also developed Doritos Ranchero and Doritos Salsa Verde tortilla chips, Fritos Sabrositas lime and chili corn chips, and Churrumais fried corn strips with chili and lime seasonings. Whereas Doritos held the top spot in tortilla chip sales in 2002 with $677.7 million, Frito-Lay's second-place Tostito line became one of the fastest growing tortilla chip brands. For the year ending October 2002, Frito's also was the corn chip leader with $176.6 million in sales, followed by Frito's Scoops with $128.6 million.

Industry Challenges.
In a 1993 survey of salty snack manufacturers, increased government regulations were cited most often as the biggest challenge facing the industry in the mid-1990s. This concern arose from the passage of the Nutrition Labeling and Education Act of 1990 (NLEA), which required that all food manufacturers list nutrients in greater detail beginning in May 1994. In addition, the NLEA required manufacturers to list nutritional components of foods by serving sizes determined at the discretion of the government. Previously, food makers determined portion size and listed vitamins, protein, minerals, fat, and calorie content accordingly.

The trend mentioned second most frequently in the survey was an increasing level of industry consolidation. Growing consumer emphasis on the health value of foods was cited as the third most important challenge in the mid-1990s. Other trends noted were increasing retail shelf space fees, continued intense pricing competition with other manufacturers, demographic changes, and rising environmental concerns.

Sales for the snack food industry reached $24.6 billion in 2005, per the Snack Food Association. Potato chips were the most popular snack with 20.5 percent of sales in 2005 as reported by The Food Institute, followed by tortilla and corn chips (15.2 percent). To meet demand for the on-the-go lifestyle of the mid-2000s, sales growth was spurred on by single-serve packaging of everything from chips to crackers to cookies.

The leading brands in U.S. sales at the end of 2005 per research by Information Resources, Inc. (in supermarkets, drug stores, and mass merchandisers, excluding Wal-Mart) reported in Snack Food & Wholesale Bakery included: Lay's ($754 million); Wavy Lay's ($277 million); Ruffles ($255.9 million); Pringles ($243 million); and private label ($127.5 million). Overall, the potato chip industry accounted for nearly $6.3 billion in 2005 sales with supermarkets selling the largest portion at nearly 41 percent followed by grocery stores (23 percent) and mass merchandisers (6 percent).

The low-carbohydrate craze was giving way to demand for lower calorie, lower fat snack options by the mid-2000s. Produced by Kettle Foods, the all-natural Kettle Chips gained 2005 sales of $28.9 million. Other organic snacks experiencing growth are manufactured by GeniSoy (soy-based) and Terra (potato- and vegetable-based). With growing consumer demand for healthier snacks, many companies were introducing new products or re-packaging old favorites. Kraft began more healthful offerings by packaging many snack offerings in servings of 100 calories each. Frito-Lay labels its healthier offerings with a "Smart Spot" symbol. To qualify, the items must meet the nutritional criteria set forth by the U.S. Food and Drug Administration (FDA) and the National Academy of Sciences, including that it contains less than 35 percent of its calories from fat, one gram or less of saturated fat, and zero trans fats, among others. As of 2006, new industry-wide labeling requirements meant that nutritional labels on snacks would show a line indicating trans fat content by grams. Frito-Lay's ailing WOW! brand was being relabeled as "light" in order to push sales back up (Lay's Light, Ruffles Light, Tostitos Light, and Doritos Light).

Current Conditions

Overall snack consumption fell from -0.8 percent in the first-quarter of 2007 to -1.7 percent in the first-quarter of 2008 as 26.5 percent of consumers were snacking less and another 47.5 percent were spending less on snacks as the economy worsened, before rebounding to 1.1 percent in the fourth-quarter of 2008. While volume fell one percent in the salty snacks food category, dollar sales increased seven percent outperforming a majority of its counterparts and the overall snack industry increased four percent.

Competition was heating up between channels with grocery stores losing share to convenience stores, as was competitive price pressures as 79 percent of consumers shopped for the best value. Convenience store sales in the salty snack category like potato chips and tortilla corn chips grew 16.97 percent in 2008. Overall, salty snack sales grew 4.5 percent with potato chips capturing nearly one-quarter of industry sales. Branded snack products, however, were losing market share as some 69 percent of consumers were purchasing private-label snacks as the economy continued to struggle.

With competition fierce in the snack category and 86 percent of consumers admitted to shopping from a list compiled from home, Sally Lyons Wyatt, senior vice president at marketing firm, Information Resources, Inc. warned snack food manufacturers to "find ways to reach customers there before they ever leave for the store."

Based on volume, salty snack sales were flat for 2009; while dollar sales climbed by seven percent following manufacturer's price hikes. Still, during the first-quarter of 2009 potato chips and tortilla corn chips continued to dominate the snack foods market with 25.5 percent and 19 percent of industry share, respectively. Other, the largest category with 37.2 percent included cornmeal puff/curl, non-tortilla corn chips, and multi-grain salty snacks, according to market research firm, Nielsen.

According to market research firms Mintel's Global New Products Database, manufacturers introduced 350 salty products through the first eight months of 2009. Potato chips and tortilla chips sales increased 22 percent and 18 percent, respectively between 2007 and the estimated 2009 sales. Despite strong sales of potato chips and tortilla corn chips, the snack sector was expected to slow as the economy improves; however, through new product offerings and improved supplier systems that deliver better taste the industry will continue to experience market growth.

Industry Leaders

The Frito-Lay Company, based in Dallas, Texas, and a division of PepsiCo, had 44,000 employees and reported net revenue of $10.8 billion in 2006 according to their annual report, an increase from $9.56 billion in 2004. The undisputed leader in the salty snack category, the company has a firm grip on premium shelf space, outspent every other company in marketing and merchandising, and had a superior distribution system. Its leading products by sales in 2006 were: Lay's Potato Chips, Doritos Tortilla Chips, Cheetos Cheese Flavored Snack, Ruffles Potato Chips, Tostitos Tortilla Chips, and Fritos Corn Chips. As the industry leader, Frito-Lay has been able to diversity its product line-up to include the production of healthier snacks. One example was the 2007 release of the Flat Earth vegetable and fruit crisps label. Other items include multigrain-enhanced Tostitos and Baked Cheetos; meanwhile, Ruffles were made using sunflower oil, which allows for the taste to stay the same while reducing the amount of saturated fat. The company's "Smart Spot" products accounted for about 15 percent of the overall net revenue with growth that was higher than other products.

For years, large corporations attempted to challenge Frito-Lay's dominance in the snack business. Anheuser-Busch, Keebler, and Borden all tried and, after battling the giant in advertising and merchandising dollars, all decided to get out of the salty snack business. The closest national brand competing against Frito-Lay was Eagle, owned by Anheuser-Busch for 20 years. After losing about $75 million on the brand, Anheuser-Busch sold the division to Procter & Gamble (P&G) in 1996. A leader in packaged goods, P&G had overall net sales of nearly $76.5 billion reported for 2006. Introduced in 1968, the company's Pringles brand was in fourth place among all brands generating $243 million in 2005 sales, an increase of nearly 3 percent from the prior year.

Other leaders included Kraft Food Inc. and Jay's Foods Inc. The leading food producer in the United States, Kraft had overall net revenues in 2006 in North America of $34.4 billion, with the snacks and cereals segment accounting for 18.5 percent (nearly $6.4 billion, a slight increase of 1.7 percent from 2005). Meanwhile, Jay's Foods Inc. had about $1.6 billion in 2006 sales with 500 employees; however, in late 2007 the company was facing bankruptcy and attempting to locate a buyer.

Frito-Lay Company reported a net revenue of $13.2 billion in 2009 according to their parent PepsiCo, Inc.'s annual report, an increase from $11.5 billion in 2007. Kraft Foods Inc. posted revenues of $40.4 billion with 97,000 employees worldwide in 2009, a 3.7 percent decline compared to $41.9 billion reported in 2008 with the "snacks" segment responsible for 37.2 percent of overall sales. Jay's Foods Inc. became part of Snyder's of Hanover following the closure of its Chicago manufacturing plant on December 5, 2007. Despite competition from national brands such as Frito-Lay, which has a 67 percent market share, Jays Foods has 23 percent share of the potato chip market in Illinois, Indiana, Wisconsin, Missouri, and Iowa and more than a 60 percent share in the ready-to-eat popcorn category.

America and the World

Worldwide, the snack market reached $68 billion in 2004--a nearly 3 percent increase from the prior year--including other snack categories such as candy and other snacks including baked-sweet goods, cookies and crackers, meat snacks, and popcorn. U.S. export growth expanded to $1.3 billion, an 8.3 percent jump from the 2003 total of $1.28 billion, which had been relatively unchanged from 2000. According to the U.S. Commerce Department, $183 million worth of potato chips were exported by the United States in 2004, an increase of 26 percent from 2003. Meanwhile, U.S. corn chip and pretzel exports rose 12.5 percent from 2003 to 2004 for a total of $73.2 million. The largest combined markets were Canada and Mexico as part of the North American Free Trade Agreement (NAFTA) that was implemented in 1994, which accounted for 56 percent of the U.S. export market. While Mexico's total dropped by 2 percent in 2004, Canada jumped by 18 percent. Following was the economic area of China and Japan whose exports increased by 9 percent in 2004 while the former second place market of Europe fell by 23 percent.

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Manila Bulletin; August 30, 2010; 700+ words
...alcoholic beverages, infant formula, all kinds of milk, complementary food and extruded snack foods like potato chips, corn chips, and similar snacks. Some of the criteria were based on an internationally agreed food standards, the Codex Alimentarius...
Making a Splash in Snacks: Snack Manufacturers Are Dipping into a New Wave Pool of Offerings for Consumers, Including Better-for-You Options, Exciting Flavors, Exotic Combinations and Packaging Enhancements
Snack Food & Wholesale Bakery; July 1, 2013; 700+ words
...Highbeam.com, in the late 2000s, there were a reported 454 establishments involved in manufacturing potato chips, corn chips and similar snacks, with shipment values exceeding $44 billion. Industry-wide, employment totaled nearly 32,000...
Research and Markets Adds Report: 2013 U.S. Snack Food Manufacturing Industry - Industry & Market Report
Food & Beverage Close-Up; October 24, 2012; 466 words
...Food Manufacturing. This industry comprises establishments primarily responsible for manufacturing potato chips, corn chips, and similar snacks. Pretzels and crackers are classified in 2052; candy covered popcorn is classified in 2064; salted...
Research and Markets Adds: 2012 U.S. Snack Food Manufacturing Industry-Industry & Market Report.(Report)
Health & Beauty Close-Up; October 31, 2011; 534 words
...Food Manufacturing. This industry comprises establishments primarily responsible for manufacturing potato chips, corn chips, and similar snacks. Pretzels and crackers are classified in 2052; candy covered popcorn is classified in 2064; salted...
Research and Markets Adds: 2010 U.S. Snack Food Manufacturing Industry Report.(Report)
Health & Beauty Close-Up; November 18, 2009; 544 words
...Food Manufacturing. This industry comprises establishments primarily responsible for manufacturing potato chips, corn chips, and similar snacks. Pretzels and crackers are classified in 2052; candy covered popcorn is classified in 2064; salted...
Making a Splash in Snacks: Snack Manufacturers Are Dipping into a New Wave Pool of Offerings for Consumers, Including Better-for-You Options, Exciting Flavors, Exotic Combinations and Packaging Enhancements
Snack Food & Wholesale Bakery; July 1, 2013; 700+ words
...sales of snack foods to...manufacturing potato chips, corn chips and similar snacks, with shipment...chips and similar snacks category...tortilla chips manufacturers...included corn chips and other corn-based snacks ...
Research and Markets Adds: 2012 U.S. Snack Food Manufacturing Industry-Industry & Market Report.(Report)
Health & Beauty Close-Up; October 31, 2011; 534 words
...industries, including potato chips, tortilla chips, corn chips, and popcorn...NAICS 31191: Snack Food Manufacturing...corn chips, and similar snacks. Pretzels and...NAICS 31191 - Snack Food Manufacturing...Potato Chips & Similar ...
Research and Markets Adds: 2010 U.S. Snack Food Manufacturing Industry Report.(Report)
Health & Beauty Close-Up; November 18, 2009; 544 words
...industries, including potato chips, tortilla chips, corn chips, and popcorn...NAICS 31191: Snack Food Manufacturing...corn chips, and similar snacks. Pretzels and...NAICS 31191 - Snack Food Manufacturing...Potato Chips & Similar ...

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