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Sweetening the Deal for U.S. Snack Food Producers
By Cheryl Claus
Go ahead, nibble that cookie. Or drop a little change into the
office vending machine. Don’t feel alone; you’re not
the only nibbler in North America. Across borders in both
directions, just about everybody occasionally gives in to a snack
attack.
Snack food is big business in the United States and is increasingly important in international markets. With the exception of snack nuts, U.S. snack food exports rose by almost 2 percent in 1998 and by almost 45 percent since 1992.
Not surprisingly, our NAFTA partners (Canada and Mexico) continue to be the No. 1 market region for snack food exports. In 1997, these countries accounted for approximately one-third of U.S. snack food exports compared to one-fifth for Western Europe, 18.5 percent for Japan, China, Taiwan and Hong Kong, 12 percent for other Asian countries (including Australia and New Zealand) and 9.6 percent for Latin America minus Mexico.
While snack food sales are up worldwide, proximity and liberalized import policies resulting from NAFTA are largely responsible for expanded sales in Mexico and Canada, where, by the year 2003, all quotas and tariffs on snack foods are scheduled to be eliminated.
Opportunities in Mexico
Mexico offers outstanding opportunities to American exporters of snack foods. The increasing openness of the Mexican market, expanding affluence and the changing tastes of consumers have encouraged an increase in snack food imports. Snack imports totaled over $69 million in 1993 and, despite the currency crisis of 1995, sales have been expanding at more than 20 percent annually with the United States maintaining a 98-percent share.
In addition to expanding exports, the
United States is developing a strong position in Mexico’s
domestic market: Texas-based Frito-Lay owns Sabritas, the largest
Mexican producer of snack foods, which has at least 75 percent of
the corn-chip market alone.
Potato chips are also very popular in Mexico, with imports peaking at $23.8 million in 1994. Although by 1995 chip import levels had fallen to $1.8 million, they are edging back to previous levels with the United States garnering nearly 100 percent of that market.
When the Chips Are Down
While both corn and potato chip sales decreased after the peso crisis, U.S. popcorn sales to Mexico remained steady averaging between $6 million and $7 million from 1994 to 1998. This superior performance is partially explained by the recent expansion of movie theater complexes in Mexico. At home, microwaveable popcorn is very popular and favorite U.S. brands include Act II and Delipop.
Snack nuts are also popular in Mexico; peanuts are common but Mexico’s large production tends to limit imports. Sales of mixed nuts are expanding slowly as they are more susceptible to price increases caused by fluctuations in the value of the peso. In 1996, snack nut sales again reached $7.3 million after peaking at nearly $18 million in 1994.
Although the United States has clearly dominated this market, it can expect to face tough competition as South American countries seek proprietary free trade agreements with Mexico.
Even Greater Opportunity in Canada
Even before NAFTA, U.S. snack food exports to Canada were greatly stimulated by the signing of the U.S.-Canada Free Trade Agreement (CFTA), which became effective in 1989. Since the inception of the CFTA, the provisions of which were incorporated into the North American Free Trade Agreement, the value of U.S. food and agricultural product exports to Canada has grown at an annual rate of nearly 13 percent. In addition to these trade agreements, U.S. exports to Canada are facilitated by that country’s proximity, common culture, language and similar lifestyle.
Women now make up 50 percent of the
Canadian workforce, which has increased household buying power
while stimulating demand for convenience foods.
Canada remains the No. 1 U.S. export market for snacks despite
the continuing weakness of the Canadian dollar (it has dropped 12
percent in value against the U.S. dollar since 1992). Canadian
imports of salted snack foods from the United States in 1997
reached $70 million, and were expected to reach $78 million in
1998. 
As in Mexico, the potato chip is very
popular; in 1995 it comprised an estimated 60 percent share of
total salted snack food sales. However, Canadian consumers are
acquiring a palate for nachos and tortilla chips, along with
their long-time favorite, potato chips and salted nuts.
Despite the popularity of salty snacks, in recent years, cookies and crackers have taken over as top snack categories. Total U.S. exports of these products to the NAFTA region reached $114.8 million in 1997, accounting for nearly 35 percent of total snack-food sales.
As in the United States, Canadians are becoming increasingly health conscious and lower fat and nonfat snack products show great promise for U.S. producers and exporters.
Future Trends in U.S. Snack Exports
The Snack Food Association, headquartered in Alexandria, Va., conducts an annual survey of its U.S.-based manufacturers to follow new developments in sales and marketing. More than half (56 percent) of all companies responding indicated that they export snack products to Canada while 28 percent export to Mexico. Many of these companies have developed joint ventures with local companies to ensure proper distribution. With regard to export promotion activities, 28.2 percent of all respondents indicated that they attend international trade shows on a regular basis.
As changing tastes, global communications and freer trade through NAFTA encourage consumers to try new products, U.S. snack food processors will be crunching up even sweeter numbers in the years ahead.
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The author is a marketing specialist with AgExport Services
Division, FAS. Tel.: (202) 720-9487; E-mail: clausc@fas.usda.gov
Sources include FAS post trade reports, statistics from the U.S. Department of Commerce and Snack World, the publication of the Snack Food Association.
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Real Finds, Those Pork Rinds
Rudolph Foods of Lima, Ohio, reports notable success exporting pork rind snacks to Mexico. With annual sales of $50 million, Rudolph Foods does nearly 13 percent of its business in Mexico, Central and South America. Current sales of their popular chicharrones are $6.5 million and have doubled since the previous year.
Says Richard Rudolph, Executive Vice President for Sales and Marketing, "We expect our sales in Mexico to greatly escalate with the gradual lessening of tariffs from 20 to 8 percent this year. With the passage of NAFTA, tariffs will be reduced by 2 percent annually and will be completely eliminated by 2003."
Rudolph expects export sales will also increase as consumers continue to become aware of the convenience of snack foods. He adds that in order to be successful in these markets, exporters should build personal relationships.
"Traveling to these markets in person is very important," says Rudolph. "Telephones and fax machines don’t build trust."
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