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, and branding expenditures and resources. These investments when combined with high customer loyalty have resulted in sales growth and high profit margins.

During the current crisis, customers are more likely to reduce snack spending, make purchases on promotion, and/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 and aggressive marketing tactics should help counter the unfavorable effects of the current recession.

Competition in the US snack food production industry is intense since the market is mature and saturated. Correspondingly, below are the key drivers manufacturers can utilize to either grow or maintain share.

Ability to secure key input supply contracts - to aid production planning and reduce procurement costs, manufacturers need reliable contracts with suppliers of key raw inputs including guaranteed supplies at fixed prices.

Ability to pass on price increases - for supplies without fixed prices, manufacturers need to continue to pass on unexpected cost increases to maintain profitability. The major players have been passing on cost increases to offset high energy and commodity prices due to the high brand value of their products. However, supermarkets and grocery stores (due to their increasing power from consolidation) could resist price increases and stock more of their own private labels to enhance 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 and drug stores, convenience stores, and other locations with high foot traffic.

Ability to change via differentiation and innovation - manufacturers must anticipate, differentiate, and respond to changes in both consumer dietary trends and preferences to preserve or grow share. Demographic and population ethnicity shifts have resulted in new tastes and preferences, requiring manufacturers to change their product lines to meet these new requirements; by using healthier ingredients, product, labeling, packaging, marketing, and other innovations.

For example, consumers are becoming more health conscious and pressed for time and are increasing their consumption of convenient, healthy, and/or tasty snacks. As a result, the fruit and nut snack bars segment combined with low-sodium, low-fat, and organic snack food represent a growth opportunity.

Ability to endure consumer price sensitivity - consumer price sensitivity varies between product segments. Brand loyal consumers are not as sensitive to price changes due to the associated high image, reputation, and product quality perceptions. Likewise, a premium price is charged for products such as Oreo and Doritos. Nevertheless, consumer shifts to cheaper alternatives including cheaper substitutes such as chocolate and muffins and/or private labels could take place; especially for product segments not perceived as high quality.

Ability to thrive internationally - since saturation in the US market could eventually result in undesirable profit margins; manufacturers should continue to seek expansion in Canada, Mexico, Korea, Taiwan, Philippines, Japan, and other countries.

The current crisis should not impact the snack food production industry too much. Nevertheless, manufacturers must continue to secure desirable distribution placement, receive attractive supplier contracts, differentiate, innovate, and seek international growth. Likewise, manufacturers will have a greater chance of growing or maintaining share, margin, and/or sales over the long term.

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