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08/12/2022

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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Potato chips
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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 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.

With peace between retailer and supplier, you might think there 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.

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 Brothers co-owner and chief snacking officer Chris Neal. “In 34 years, we’ve never seen such a sudden and dramatic pressure on pricing.”

Matthew Tarko, product marketing manager, Old Dutch Foods Ltd. 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 alternatives—canola, 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.” Kracks will be back once market conditions are more favourable.

A version of this article appeared at CCentral.ca.