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08/08/2022

Crunch time for salty snacks

Potato chips and other salty snacks continue to be the go-to nibbles for Canadians, but will supply issues and rising costs ruin the fun?
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illustrations of potato chips on colourful background
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Given the choice between salty or sweet snacks, salty ones continue to rule. According to Statista data, they are the most popular type of snack food in Canada, with annual sales hitting more than $2.53 billion, based on the 52-week period ending July 2021. When Loblaws and Frito-Lay went to war over pricing and stock in the grocer’s snack aisles dwindled in February 2022, a nation mourned. Consumers turned to other domestic brands and c-stores for their fix of potato chips, which provided a nice sales bump. By early April, the grocer and the snack supplier kissed and made up as salty snacks flowed onto shelves once again. If Chip-gate taught us anything, it was that salty snacks matter to retailers and consumers.

In post-peak COVID times and current peace between retailer and supplier, you might think they would be a return to normal. Not so much. The turbulence continues, as transportation costs, the rising cost of raw ingredients, supply chain issues and inflation have salty snack makers buckling up to ride out the speed bumps wreaking havoc with carefully laid-out business plans.

For Neal Brothers, it’s the best of times and the worst of times. The Canadian company has a blockbuster success on its hands with the launch of its organic original and Mexican street corn chips last year. “They have been a huge success,” says Chris Neal, co-owner and chief snacking officer. “They’ve been a hit with our retailers and consumers. It has been a nice addition to our broad family of snacks and fits our brand perfectly.”

Neal Brothers is also on trend with its kettle chips. Some varieties boast less sodium, thanks to mineral-rich pink Himalayan sea salt. Even in the darkest days of COVID, sales remained strong as Canadians turned to tried-and-true salty snacks for comfort as they nested at home. Fun fact, the broader snack food market in Canada generated a total revenue of US$9.8 billion in 2020 (up by US$1.3 billion over 2019).

A taste for innovation

Innovation will keep sales in the category humming as more consumers reach for healthier versions of salty snacks. For instance, Covered Bridge turns to legumes for Lela’s chickpea chips in flavours like red curry and creamy dill.

“From avocado and cauliflower chips to chickpeas and beans snacks, brands are continuing to develop new and exciting products,” Neal notes. “But the general public does continue to gravitate to the tried-and-trusted staples, like potato chips and corn-based items, like tortilla chips.”

When it comes to flavours, Canadians have some pretty wacky choices, from lobster and donair, to roast chicken and chipotle raspberry. Then there’s that beloved flavour oddity – ketchup, a favourite since it launched here in the 1980s. Old Dutch will ramp up the catsup factor in its new Ridgies Extra Ketchup chips.

As Matthew Tarko, product marketing manager, Old Dutch Foods Ltd., notes: “We’ve noticed that consumer demand for spicier/hotter flavours is always increasing. The fusion of sweet and/or spicy with existing flavour profiles have always been met with excitement from salty snack lovers.” The company offers fiery options like Dutch Crunch Jalapeno & Cheddar kettle chips and flavours such as Mexican Street Corn (new) and Sweet Chili in its Arriba line of tortilla chips.

Competitor Hardbite has sweet ghost pepper and honey Dijon, while Pringles leans into zippy seasonings with flavours such as jalapeno, fiery loaded nachos and barbecue.

Market pressures

The spoiler alert for upward-trending salty snack sales comes from world events. “They are having a significant impact on costs from commodities like corn and wheat, the supply of certain oils used in food manufacturing to rising gas prices—all of which are vital factors in the snack food industry,” says Neal. “In 34 years, we’ve never seen such a sudden and dramatic pressure on pricing.”

Tarko echoes those thoughts. “Sales have been a challenge throughout the pandemic,” he explains. “We’re seeing sales increases, while working to keep up with demands at the same time. We’ve also felt challenged to procure and maintain raw material supply as demand grew—consistent with industry-wide sentiment. Although this is a factor, we continue to take care of our consumer demand through retailer channels nationwide.”

Companies, like Frito-Lay, are assessing how to navigate a shortage of the sunflower oil used to deep fry their chips as the war in Ukraine, which supplies half the world’s supply, drags on. Some players are turning to alternativescanola, soybean, coconut and even refined palm oil.

Current uncertainties have caused at least one player to press the pause button on its potato chip business. Kracks has built significant brand awareness since it launched in Canada in 2018. The stackable chips packaged in a canister were priced competitively in comparison to similar brands. Importing them from Singapore has been challenging because of supply chain issues, according to Ajay Handa, director of operations, Future Enterprises Pte. Ltd. Freight costs can be as much as 70% of the cost of a container. His company decided to stop bringing Kracks into Canada last year. But it is a temporary measure, he points out.

“We are closely monitoring supply chain issues,” he says. “We do see that things will improve in the near future, likely in the fourth quarter of this year. It’s a very unpredictable and unstable business environment right now.” Once market conditions are more favourable, Kracks will be back.

Given the strength in the salty snacks category, C-stores should take advantage of supplier deals, expand their selection of flavours and formats, and stock brands at varying price points. Catering both to consumers’ urge to splurge and desire to save money puts retailers in a good place to endure the crunch that comes with market instability.

 

Originally published in the July/August 2022 issue of CSNC. 

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