The global snack food industry is forecast to grow at a compound annual growth rate of 5.3% between 2019 and 2024, according to Mordor Intelligence. That market's future could be defined by the tastes of Gen Z consumers, who are expected to account for 40% of all U.S. consumers by 2020.
That's great news for PepsiCo's (NASDAQ: PEP) Frito-Lay, since it owns three of the five top snack brands (Lay's, Doritos, and Cheetos) in Piper Jaffray's latest "Taking Stock With Teens" survey of 9,500 U.S. teens. Campbell Soup's Goldfish and Kellogg's Cheez-It also cracked the top five.
Data source: Piper Jaffray. Chart by author.
PepsiCo's Frito-Lay North America business is known for its steady growth. The segment's revenue rose 5% to $11.9 billion, or 26% of PepsiCo's top line, in the first nine months of 2019. Its operating margin also expanded from 30.8% to 31%, indicating that its brands still have plenty of pricing power in a crowded market.
Looking ahead, new flavors for Lay's, Doritos, and Cheetos should keep Gen Z shoppers interested, while fun new initiatives -- like a cash-back program for pairing PepsiCo drinks with Frito-Lay snacks -- could also appeal to them.
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