The Snacking Boom
The proportion of Americans who consume snacks three or more times
a day increased 56% by 2010, as indicated by the latest official
figures. A much larger percentage of consumers have been snacking,
compared with just 10% in the late 70s and 20% in the 90s.
A survey conducted in 2013 by consumer insights company Hartman
Group revealed that 48% of Americans skipped meals a minimum of
three times a week. Additionally, 63% decide what to eat less than
an hour before meals.
Such trends are being mirrored by the composition of food sales.
Data from market intelligence company Euromonitor International
shows that U.S. retail sales of soups grew at an annual average of
0.4% during 2008-13. Pasta sales increased 1.3% annually in the
U.S. during the same period.
On the other hand, sales of nuts, snack bars and chips increased
7.8%, 5.4% and 4.2%, respectively. It seems the very perception of
snacking has changed. Once considered to be an occasional
indulgence, a snack has now become anything portable and nutritious
which either complements a meal or replaces it altogether.
Changes in consumer preferences are being reflected in the sales of
companies manufacturing food products. In the case of diversified
firms, some divisions are witnessing growth while others contract.
For instance, revenue for the U.S. snacks division of
General Mills, Inc.
) increased 6% during the fiscal year ended May 25. During the same
period, revenue at its U.S. meals division shrank by 4%.
But this phenomenon has skewed the pitch for more specialized
). Overall sales for the breakfast cereal maker declined 3.1%
during the last quarter. Now, the company is trying to keep up with
changing eating behavior with its "To Go" range of breakfast
products which include strawberry shakes.
Another option is to offer smaller portions of existing products.
Kraft Foods Group, Inc.
) has recently launched a range of what it calls "portable protein
packs" as part of the Oscar Mayer line. Pickles are now available
in smaller portion sizes and General Mills recently launched a line
of protein bars.
Overall, breakfast habits have undergone the biggest change. A 2014
survey by market research company IRI revealed that over 33% of
Americans consume a snack early in the morning and 55% eat
mid-morning snacks. This is respectively up from 14% in 2010 and
45% from 2009.
This phenomenon has forced diversified conglomerates like
) to change their offerings. The company's Quaker division,
renowned for its oatmeal, has begun test marketing breakfast shakes
Wal-Mart Stores Inc.
ConAgra Foods, Inc.
) is catering to new dinner habits with 7.5 ounce microwavable
pasta and meatball options. Meanwhile, Nestle has launched "snack
pizzas" and stuffed pretzels.
The trend being observed among consumers is to consume smaller and
healthier portions. The idea is to increase convenience and lose
weight by reducing the size of servings and their individual
But Hartman's 2013 survey reveals that this kind of self-control
vanishes by nightfall, when candy and ice cream still call the
shots. This is when the likes of Baskin Robbins, owned by
Dunkin' Brands Group, Inc.
), takeover. More significantly, they don't have to change their
product portfolio at all.
Companies keeping pace with changing customer preferences are the
best bet in this scenario. Below we present three stocks which
possess the potential to grow appreciably in this environment, each
of which also has a good Zacks Rank.
Kraft Foods Group, Inc.
is one of the largest consumer packaged food and beverage companies
in North America. It sells branded products in beverages, cheese,
coffee, refrigerated meals and grocery categories, mainly across
the U.S. and Canada.
Effective from Jul 1, 2013, its reportable segments became
Beverages, Cheese, Refrigerated Meals, Meals & Desserts,
Enhancers & Snack Nuts, and Canada.
Kraft Foods holds a Zacks Rank #3 (Hold) and has expected earnings
growth of 22%. The forward price-to-earnings ratio (P/E) for the
current financial year (F1) is 18.97.
is the leading global food and beverage company marketing hundreds
of brands in more than 200 countries. Its principal businesses
include: Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports
drinks, Tropicana juices and Quaker foods.
Pepsi holds the number one position in global snacks business with
popular brands like Doritos, Cheetos and Lay's. Around half of
PepsiCo's sales come from snacks and the other half from beverages.
PepsiCo's strong and growing snacks business has largely offset its
sluggish beverages business.
Currently the company holds a Zacks Rank #3 (Hold) and has expected
earnings growth of 3.9%. It has a P/E (F1) of 19.83.
Dunkin' Brands Group, Inc.
owns, operates, and franchises quick service restaurants worldwide.
It serves hot and cold coffee and baked goods, as well as ice
cream. It owns the Dunkin' Donuts and Baskin-Robbins brands.
Dunkin' Brands Group is headquartered in Canton, Massachusetts.
The ice cream brand is available at nearly 2,500 outlets across the
U.S. Earlier this year, Baskin-Robbins tied up with Boardwalk
Frozen Treats to distribute its products to major grocery
Apart from a Zacks Rank #3 (Hold), Dunkin' Brands has expected
earnings growth of 17.60%. It has a P/E (F1) of 25.59.
It remains to be seen whether this is just a passing phase for the
food products sector. But recent data suggests that those stocks
which have taken cognizance of these changes will hold their
ground. This is why these stocks would make good additions to your
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WAL-MART STORES (WMT): Free Stock Analysis
GENL MILLS (GIS): Free Stock Analysis Report
PEPSICO INC (PEP): Free Stock Analysis Report
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KELLOGG CO (K): Free Stock Analysis Report
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