Food and Beverage: Growing Profits from Snacks

Coronavirus has brought changes to global eating habits. As restaurant access was more difficult, many people replaced traditional meals with snacks. As the data from the Mondelez study show, 85 percent of consumers in the world eat one snack each day to satisfy their hunger and one for pleasure. In Poland, the snack market also grew during the pandemic, but at a slower pace than before its outbreak.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

Snacks on top

The growing popularity of snacks is related to generational changes. Generation Z (born after 1997) more often than previous generations use snacks to relieve anxiety and boredom. For millennials (born 1981-1996), the most important reason for snacking is to meet their nutritional needs. And for generation X (born 1965-1980) comfort is the most important thing. As much as 75 percent Gen Z say they have recently changed at least one full meal to a snack, compared to 62% of the total population. This shows that this trend will strengthen in the near future.

The market itself remains diverse. Salty snacks remain the most important element in the US, with total sales increasing by 2021% in 5,1. y / y reaching USD 23,9 billion. The market is dominated by potato chips with sales of $ 6,7 billion and nachos with sales of $ 5,2 billion, followed by cheese snacks - $ 2,3 billion, ready-to-eat popcorn and pretzels - 1,2 billion dollars. Demand for U.S. savory snacks is expected to increase by 2025% by 1,5.

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Fruits and vegetables are more popular than sweets

Consumers are also looking for healthier snacks. In Poland (according to a study by NielsenIQ), consumers indicate among the most popular snacks fruits and vegetables (73% of responses) and only later on sweets (52% of responses). However, sales show the opposite tendency and as much as 72 percent. sales in Poland are sweet snacks. However, the trend is changing and healthier versions of products, such as dried fruit instead of crisps, are gaining popularity.

Data on the increase in the popularity of snacks also confirm the financial results Mondelez International for the fourth quarter of 2021. This American concern listed on NASDAQ, has factories in Poland and sells its products, among others under the brands Milka, Oreo, Delicje, San and Petitki. The company's sales increased by 5,4 percent in the fourth quarter. against analysts' consensus at 3,9 percent. Although sales fell by 0,3 percent. in North America, the performance was offset by strong performances in Latin America (+ 19,7%), Europe (+ 6,5%) and Africa, the Middle East and Asia (+ 5,8%). Inflation, higher transportation costs and higher commodity prices pushed the average margin down to 38,7 percent. There is no doubt, however, that the period of high inflation is a time when companies can raise prices much easier without worrying about consumer reaction. Mondelez did no differently, which by raising prices compensated for some of the rising production costs. The price of a single Mondelez share currently costs $ 65, or about 18%. more than at the end of 2019.

The forecasts look optimistic

The snacks and food industries (and the entire FMCG) have fairly good prospects. Although, as shown by Mondelez sales data, the highest growth opportunities are in markets outside the US. Currently, the biggest challenge for companies remains the increase in labor and raw material costs. However, this is compensated by high margins, which can be freely raised in the era of high inflation. Investments in the food industry, as well as investments in other sectors, should now be selective in nature, it is worth choosing companies with the best growth prospects and the best condition. With rising interest rates, a burden may be the increased level of debt, and the advantage may be organic growth out of earned profit.

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