Crossing Cultures,  Food & Dining,  Looking Back at the United States

Overstressed Americans Binge on Junk Food, Drive up Sales, Cheers Snack Food Industry!

junkfoodThe slow-motion collapse of the U.S. economy is harming consumers and businesses across the country — well, almost every business that is.

One industry is enjoying big sales gains thanks to the stress experienced by ordinary working people. North American sales of “savory snacks” (potato chips, Cheetos, etc.) by Frito-Lay are up 9% for the third qurater, reports Potato Pro, “your source for all things potato.”

Sales rose despite hikes in gas and ingredient prices and lowered earnings for Americans. (Some companies made up for the higher costs by switching to smaller bags.)

Potato Pro jefe Paul van Eijck thinks the trend is only going to accelerate. As the U.S. economy worsens, stressed-out Americans will binge more on junk food. To quote van Eijck:

 Hooray! Americans are being booted out of their homes and losing their retirement savings, but as long as they continue to stuff themselves with Pringles, all is right with the U.S.A. — right folks?

 And if you believe that stress result in more excessive consumption of snacks, the market may start to look even better.

  
 

 

 

 

It’s always illuminating to learn how the corporate world thinks.

My connection with Potato Pro goes way back — to October 2008. (Read my post here.) I never intended to feature their insiders’ newsletter on my blog, but since they rushed me into their fraternity last month, I haven’t had a choice but to receive bulletins on the state of the savory snack industry.

I figured I would pass the news on to my readers. Here’s the Nov. 24 newsletter item in full:

Dear Barbara,

Since both Frito-Lay and Procter and Gamble just reported recent financial data I thought this was a good time to see how the savory snack market is holding up in the current economic downturn.

If one company is a good indicator of what is happening in the global snack market it is  Frito-Lay . Just have a look at the global market share of Frito-lay; It is more than 10 times the market share of Number two, Procter and Gamble, the manufacturer of Pringles.

Frito-Lay reported for the 3rd quarter a 9% revenue growth in North America, resulting from double-digit growth at Tostitos, Ruffles and Cheetos and high-single-digit growth in trademark Lay’s and Doritos. Profit was up 6% and volume 1.5%. Frito-lay managed to pass on (most of the) higher oil and fuel costs (by increasing prices and reducing packaging sizes) without suffering a loss of overall volume!

In the Middle East/Africa/Asia (MEAA) segment Frito-Lay reported a snack volume growth of 9 percent, led by double-digit growth in the Middle East, China, and India. The snacks business in Turkey grew high- single-digits, while Australia experienced a low-single-digit decline, primarily due to increased pricing.

For Europe Frito-Lay refers to unfavorable circumstances and volumes growth in the low single digits. In the UK, low-single-digit growth at Walkers reflected the success of the value-added “Walkers’ Brit Trips” promotion and solid pricing execution and cost control to offset significant commodity input costs. Strong top-line growth in the rest of Europe was led by high- teens snack growth in Russia and by mid-single-digit snack growth in the Netherlands.

Pepsico has initiated a “productivity program” and part of this program is a reduction of the  workforce with 3300 (keep in mind Pepsico has 185.000 employees!), of which 300 in Frito-Lay. Most jobs will be lost at Frito-Lays headquarters in Plano, but Frito-Lay also announced two plant closures: Closure of the Frito-Lay plant in Mission (Texas) and Closure of the Frito-Lay plant in Pointe Claire, Canada (Qc).

The second largest savoury snack manufacturer globally is Procter and Gamble. Procter and Gamble reports for its fiscal first quarter (July-September) that snacks volume increased mid-single digits due to double- digit growth in North America behind strong base business growth of Pringles and continued growth from Pringles Extreme Flavors and Stix initiatives.

 Although some of Frito-Lay’s and Procter and Gambles gains could have been at the expense of smaller local snack manufacturers, I interpret these results as a rather positive sign about how the snack market could hold up in a challenging economic situation. Especially if you keep in mind that price increases of ingredients and fuel are easing if not reversing.

And if you believe that stress result in more excessive consumption of snacks, the market may start to look even better.

Enjoy reading,

Paul van Eijck

This information makes me want to cut down on my consumption of Lay’s and Pringles immediately. Line the pockets of savory-snack CEOs?

Not!

Resist the binge! Spread the message!

Barbara R. Drake

I am an American writer who lived in Lima for seven years (2007-2014), where I covered Andean traditions, melting glaciers and daily life in the capital for Miami Herald, MSNBC and Huffington Post. I now live and work in northern Florida where I champion climate change advocacy and compassionate, affordable eldercare.

3 Comments

  • Rachel in Peru

    Unfortunately N. Americans resort to snacking on potato chips since they are working 3 jobs just to catch up with their past due mortgage payments and have no real time to cook a home meal.

    I’ve noticed that snacks are increasing in popularity in Peru as well, which may explain the increase in Peruvian children becoming more obese each year.

    Wouldn’t it be great to have a snack food business and a diet business? It just keeps the (vicious) circle in motion.

    The newsletter only demonstrates how diabolical the junk food industry is.

  • Barb

    It is sad that Americans have so little time to prepare meals — most working people are zipping thru drive-thrus during lunch hour or grabbing something from the snack machine.

    Snacks are hugely popular in Peru. It is the land of bocaditos. I don’t see that many fat kids in Peru, though, compared to the U.S.

    Yeah, it’s a vicious circle. I’ve seen strip malls in the States where you have a Jenny Craig diet center next to a Dunkin Donuts. Kind of like having an AA meeting center next to a liquor store….