UBS analyst Peter Grom, who covers U.S. consumer staples including packaged food, beverages, and household products, served up a sour outlook for the salty-snack category, warning that the recovery investors had hoped for remains further out than expected.
"Despite recent optimism around a potential recovery in salty snacks, our analysis would suggest the category remains challenged. While tracked channel growth has turned positive relative to prior periods, we have observed momentum beginning to moderate with L13W $ takeaway growth decelerating to +1.2% vs. the +3.4% peak growth seen earlier in the year," Grom began the note.
Grom pointed out that the salty-snack category remains under pressure from a confluence of headwinds, including rapid GLP-1 adoption, potential SNAP benefit reductions, and mounting macroeconomic challenges faced by cash-strapped consumers.
"The combination of GLP-1 adoption, potential SNAP benefit reductions, and broader consumer spending pressures tied to the current geopolitical conflict has weighed on snack demand," the analyst said.
Grom noted that the Nielsen data show little evidence of a robust recovery, with buy rates, purchase frequency, spending per trip, units per trip, and overall projected sales all slowing. The category is also losing share to "better-for-you" options.
A Recovery Remains Uncertain
Snack trend down
He pointed out that competitive pressure has greatly intensified, adding that Pepsi remains the junk food king, with nearly half of category sales, but most large incumbents are generating flat-to-negative growth across tracked channels.
Pepsi's Frito-Lay North America food unit has experienced negative sales growth for much of the past year and continues to lose share despite investments in pricing, promotions, merchandising, and shelf space.
Another pressure point has been declining sales at convenience stores. He said C-store salty-snack sales, historically a strong growth engine, fell 3.5% in the latest 13 weeks as higher pump prices weighed on traffic and impulse purchases. Another headwind at C-stores has been the decline in SNAP sales.
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One takeaway from Grom's note is that the confluence of pressures mentioned above has collided across the salty-snack aisle, derailing the recovery investors had hoped would take shape this year.
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