Cashing In on Americans' No-Rules Approach to Snacking

Nearly every American snacks -- every day -- spending a combined total of nearly $90 billion on snacks in 2017. Half of snacking consumers admit to nibbling three snacks per day, one more than a few years ago, contributing to snacks' more than 3% annual growth.

Snacking has shifted from an occasional munch to playing a purposeful role in daily eating decisions. A snack can be a mini-meal, a solution to a craving, or a tasty reward after a difficult day. Those who watch the world of snacks say that time of day influences what types of snacks people reach for.

  • Breakfast-time sends snackers toward good-for-you food and beverages that will set them up for the day.
  • Midmorning brings the next snack attack, with more happening through midafternoon. People tend to be looking for a boost of energy at this time of day.
  • If lunch is rushed, people seek filling snacks, and may cobble together a few snacks to make a meal.
  • Dinner is an opportunity to eat well, but as evening approaches, all bets are off. Indulgence rules. Think nachos with melted cheese, sour cream and guac. Though the trend to healthier is playing out here, too, with people substituting low-fat cheese or yogurt for great-tasting nachos with a little less guilt.

The big trend to note is that although indulgence still leads consumers to the snack cabinet, many say most of their snacks are "healthy" or at least healthier than last year.

The definition of snack has also changed as snacks have become more than just treats. Snacks can be defined as any food or beverage that:

  • Is a smaller portion than a meal.
  • Is consumed between "regular" meal times.
  • Needs little to no prep or clean up.

This means snacks can be salty or sweet, grain or protein-centered, with fruits and veggies in fresh or crispy forms included in the mix. To make it into the shopping cart or be first choice when snack impulses strike, food and beverage companies need lots of options that meet consumers' changing cravings.

PepsiCo's getting it right

PepsiCo's (NASDAQ: PEP) snack line-up recognizes the varying roles snacks play in consumers' lives, with brands grouped into "good for you," "better for you" and "fun for you" segments.

  • Good for you brands include icons like Quaker oats as well as newer additions like Kevita probiotic drinks.
  • Better for you products are a nod to people's interest in healthier options, with options like Baked Lays, Stacy's Pita Chips, Smartfood, Propel water, and Pepsi Zero.
  • Fun for you tastes include Pepsi mainstays like Fritos, Doritos, Cheetos and Pepsi, along with Starbucks' bottled coffee beverages.

In the most recently reported quarter, Pepsi notched 5% operating profit growth in its Frito-Lay North America division, while Quaker Foods North America's operating profit was flat and North American Beverages notched a 16% decrease.

Recent acquisitions and new products show the company understands how consumers are thinking about snacking.

  • Bare Snacks' assortment of fruit and veggie chips gives Pepsi a larger presence in the midmorning through midafternoon snack time, where consumers look for healthy, filling options. The company's double-digit revenue growth in 2017 suggests it's hitting the right, clean-label notes with consumers. Pepsi announced the deal to acquire Bare Snacks in May.
  • SodaStream, Pepsi's most recently announced acquisition, builds on the company's pledge to introduce healthier snacks. The brand's sparkling-water machines are popular and the company brought in $171 million in revenue in the second quarter, a 31% increase. It will bring a DIY complement to Pepsi's ready-to-drink cans of Bubly sparkling water.
  • Lightly salted and baked versions of Lay's chips, Black Bean Tostitos, and SunChips Veggie Harvest Chips give consumers options for healthier indulgence.

With healthier food and drink growing to 50% of Pepsi's revenues in the last decade, consumers appear to be agreeing with the changes.

Snackers still like to have fun

But even with the health revolution, there's still growth to be found with fun snacking. Most consumers acknowledge snacks are "treats" that reward them with great taste (and excitement). One way food manufacturers are grabbing attention is with crossover flavors -- sprinkling Reese's pieces into ice cream or adding chili pepper heat to caramels, for example.

Perhaps the king of such flavor mashups that give consumers something familiar but also new -- and delicious -- is the Doritos Locos Taco at Yum! Brands' Taco Bell. The restaurant introduced Doritos Locos Tacos in 2012 and sold 100 million in just 10 weeks. The monstrously popular mashup of a taco and a Doritos snack chip remains on the menu today, with the company branching out and offering diners taco shells flavored like Nacho Cheese Doritos, Fiery Doritos, and Cool Ranch Doritos. The chain's Nacho Fries, introduced earlier this year, are another hit that mixes fun foods together.

Yes, flavor blends can add a health benefit, like adding carrots to blueberry muffins. But often the crossover is simply for the fun of it.

Pepsi rides this wave with its Lay's Do Us a Flavor challenge. Americans submit their crossover flavor ideas to pair with Lay's potato chips for the chance to win $1 million and bragging rights when their flavor hits shelves. The most recent winner? Crispy Taco. But second and third runner-ups Fried Green Tomato and Everything Bagel with Cream Cheese are also available. Crowdsourcing new flavor ideas gets consumers involved with the brand -- millions of ideas are submitted -- and bring in revenue, too. In the contest's first year, the winner -- Cheesy Garlic Bread -- bumped Lay's sales more than 8% the quarter after launch.

Where will snacking go next?

Americans snack for energy, for comfort, and for experience. They eat snacks driving to work, at parties and barbecues, after workouts, and standing at the kitchen counter at midnight. While a snack usually has a purpose, it doesn't follow rigid rules. Anything goes when it comes to snacking.

What will attract consumers? Flavors that tingle the taste buds, at a price worth paying and available in snackable, portable sizes. Pepsi has a strong track record for delivering snacks that hit all these points. Continuing to offer creative, craveable snacks that meet the need for flavor, function, fun, and a pursuit of health can keep the company's brands top-of-mind with consumers.

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Lisa Jackson has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool has a disclosure policy.