The Industry
Traditional Intermediaries
Opportunities for New Intermediaries


The Snack Food Industry

The Snack Food Association, the international trade association of the snack food industry representing snack manufacturers and suppliers defines snacks as potato chips, tortilla chips, corn chips, pretzels, meat snacks, nuts, pork rinds and popcorn ( For the purpose of this report that is the definition we will use as well.

   Industry Growth

The snack food industry has seen a steady growth pattern over the past decade as indicated in the table below. Due in part by new product introductions within the snack food industry sales in 1999 reached $19.38 billion or a 6.2% increase over 1998.  Leading the way for new snack product introductions was the national launch of Frito-Lay’s WoW! line of snacks in Olestra, a caloric-free cooking oil from Protor & Gamble. Frito-Lay touted the introduction of its most successful product launch ever with sales exceeding $350 million. Opinions of industry experts varied on how much of the market Olestra-contaning snacks will capture, ranging from 3% to 10%  (Industry Report, 2000). New snack products in 1998 also included innovative flavor introductions.  Toasted soynuts and mixed vegetable chips were also among the new snacks introduced in 1998 (Industry Report, 2000). The highest increase in sales for 1999 were meat snacks ( 27.2%), pork rinds (18.7%) and corn snacks (13.6%).

A Decade of Snack Sales

Dollar Sales in Billions
Percent change
Pound Volume in Billion
Percent change
6.2 %
4.4 %
 7.3 %
 2.2 %
 8.5 %
 2.8 %
 2.1 %
 1.3 %
 0.3 %
 -2.7 %
 2.6 %
 3.0 %
 5.9 %
 6.2 %
 2.7 %
 5.0 %
 5.3 %
 6.1 %
 5.8 %
 3.0 %
           Source:  Snack Food and Wholesale Bakery. 2000 State of the Industry
Report.  Published by the Snack Food Association

Trends in the Industry

There is a multitude of products that the snack food industry produces. The list is growing steadily as competition forces companies to introduce snacks with refined features, such as new raw material basis, improved texture, shape, color, flavor, and nutritional content.

In the snack food industry it’s all about category leaders, leading brands and first-to-market with a new product feature or flavor. Manufacturers in the salted snack arena are targeting the get-up-and-go, do-it-to-the-max lifestyles of consumers. Eric Kufel, President and CEO of Poore Brothers, says the role that regional companies can play is offering new adventurous products.  Having just acquired Boulder Natural Foods and its line of natural kettle chip products, Poore Brothers hopes to take advantage of consumers need to experience a taste sensation (Industry Report, 2000). According to Kufel, about 10% of the population looks for something unique and different when purchasing salted snack foods and Poore Brothers wants to fill that niche.

But flavors aren’t the only headline making news in the salted snack industry. Consolidation continues, both within the industry and among the retailers, while the dismantling of Granny Goose removes yet another regional competitor within the industry. The recent bankruptcy filing by Guy’s Foods reminds everyone in the industry that experience does not guarantee success (


The snack food industry has gone through significant changes over the last few decades.  The size, growth and markets served as well as the different products offered have made the salted snack food industry one of the most competitive industries in the United States today.

One of the things that makes the snack food industry so competitive is the constant threat of new entrants.  An entrants ability to take advantage of economies of scale and product differentiation, as well as gain access to distribution channels can increase a new entrants chance of survival within the industry

Having said that, new entrants constantly face the problem of access to distribution channels and the bargaining power of their suppliers. For industry giants such as Frito-Lay or Golden Flake this does not apply, both companies have utilized a strategy of forward integration by gaining ownership or control over distributors and retailers to strengthen their power within the industry.  In fact, Frito-Lay operates over 848 tractors and 2,251 trailers, and each year travels over 96 million miles nationwide.  They also own and operate over 41 manufacturing plants in 26 states (Industry Report, 2000).  Golden Flake manufacturers and distributes their full line of snack foods through a direct-store delivery system (Industry Report, 2000).

Yet another threat to new entrants is the capital necessary to start production within this industry. This factor seems to vary depending on who the company plans on competing with. Many smaller companies in the U.S. have been able to start up with little or no capital and maintain a strong local or regional presence. However, it might take many years and an enormous amount of capital to compete directly with Frito-Lay or Golden Flake.

Diversification of competitors also determines the intensity of competition. For example, PepsiCo the parent company of Frito-Lay is extremely diverse in its product offerings.  PepsiCo over the years has used a strategy of concentric diversification in its purchase of restaurants and several other industries to gain a competitive advantage over the competition (Industry Report, 2000).

Many companies have tried to create a certain degree of product differentiation to gain a competitive advantage over one another. The problem with this is that competitors can quickly copy the “new” feature and may be able to distribute it faster or more reliably than the company that created the feature. Frito-Lay spends millions of dollars each year researching and developing new products like Doritos and the rest of their line of salted snack foods, only to have competitors duplicate their successful products.

One problem facing many companies, large or small, is the threat of product substitution.  Some larger chain stores produce their own snack foods labels that tend to be much less expensive and are in direct competition with national and regional brand names.  Other threats of substitutes come from larger companies like Nabisco and Campbell’s Soup Company that both have a very diversified line of food products. If consumers suddenly decide not to buy potato chips there are many products like crackers and cookies, which most salted snack food companies do not produce or sell, to attract the consumers.

Overall, the outlook for profitability within the snack food industry is positive, especially if you are Frito-Lay, Golden Flake or another industry leader.  These top companies have gained such a large share of the market that other companies are having an extremely difficult time entering and staying afloat in the industry at this time.  The extensive use of integration and the power these leading companies have over buyers and suppliers have made it difficult to compete(Fillmer,1999). In the future learning to compete with these companies or finding a niche in the market is going to be very difficult for smaller companies that do not have access to the resources of these industry giants.

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This report was completed in October 2000 for the class B2B Electronic Commerce
given by Professor Carmel in the program of Management of Global Information Technology
at the Kogod School of Business at American University in Washington, DC.


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