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THE BACKGROUND - The UK has traditionally reared a nation of snackers by offering more varieties of crisps and savoury snacks than almost any other country. However, an increased focus on healthy eating, coupled with a fall in the population of under-15s, has left the market in decline; between 2000 and 2005 it dropped 3.7% to £2.2bn, according to Mintel.

Manufacturers are reacting to concerns about rising obesity and most have introduced products with lower levels of fat and salt. They have also attempted to rejuvenate the market with premium lines and added-value products.

The crisps and savoury snacks sector relies heavily on advertising and promotions, having spent more than £36m on advertising alone to boost sales in 2004. However, its focus on children has meant the sector's marketing strategies have come under scrutiny in recent years, as the government threatens to ban advertising to kids to curb obesity.

In its White Paper on health in November 2004, the government set out plans for a voluntary code restricting 'junk food' ads, but said it would consider imposing legislation at a later date if this fell short of its requirements.

The nation is getting fatter, with 21% of people in the UK estimated to be obese and many more considered overweight, so it is not surprising that snacking is attracting attention.

Consumer research by Mintel found that 42% of shoppers would stop snacking between meals to lose weight. Of those who said they would continue to snack, biscuits and crisps were losing out to healthier alternatives such as fruit and cereal bars.

As well as the potential ad restrictions, the White Paper also set out proposals for introducing clearer labelling on processed foods, which will undoubtedly affect these products.

Walkers, which dominates the sector with a 57% retail share, has tried to pre-empt this by introducing a healthy-eating initiative in autumn 2004.

This involved measures such as giving away pedometers and providing nutritional information. It also started a programme last year to reduce the saturated fat content of standard Walkers crisps by 50% by the end of 2006.

'We appreciate that consumers have increasing concerns about their health,' said a spokeswoman. 'We reduced salt by up to 11% in 2004 across several of our snack products, and are committed to reducing salt across the entire portfolio.'

Market innovation

Walkers has a long pedigree in the UK, having been founded in 1948. Now owned by PepsiCo, its brands include the bestselling UK grocery brand Walkers, as well as Lites, Potato Heads, Sensations, Wotsits, Doritos and Quavers.

The company has been innovative to stay ahead of its rivals. It created the mainstream premium crisps sector with the launch of Sensations in May 2002, which also served to add an adult-oriented snack to its range.

In 2004 it introduced Lites, a range with 33% less saturated fat than its standard crisps.

It has also launched Potato Heads, a lower-fat, low-salt crisp aimed at children in direct response to the health debate. The line is now being expanded with a no-salt variant Potato Heads Naked, which launches this month.

Walkers' most recent new product development has been Nobby's, a range of crisps and nuts aimed at young men, developed after research showed most snacks failed to satisfy male hunger.

KP, which is owned by United Biscuits, has a share close to 14% of the market. Its brands include McCoy's, Hula Hoops, Skips and Phileas Fogg.

McCoy's, which is the number two brand in the crisps market, expanded its presence in March this year with McCoy's Specials: a premium ridge-cut crisp also aimed at young men and intended to compete with Nobby's and Sensations.

KP has been working hard to rejuvenate the Hula Hoops brand, committing a £6.5m spend to it in 2004. A range of initiatives has included product extensions, price cuts and promotions.

Other players in the sector include Golden Wonder, Procter & Gamble, which produces Pringles and Dippers, and Kettle Foods.

Strong brand loyalty in this sector means own-label products have limited appeal, with a market share of about 8%.

In terms of sales, the multiples account for about 68%, while the confectionery, tobacconists and newsagents (CTNs) channel has been losing share.

The sector appears to be in decline, which Mintel believes could last for several years. Certainly, the majority of NPD has involved reducing the levels of many of the core ingredients to win over health-conscious snack deserters. Labels such as low-fat, low-salt, low-carb and low-calorie have been appearing regularly on brand extensions and new products.

Adult focus

As the proportion of children in the population declines, manufacturers are wise to continue with development in the premium and adult-oriented snacks and crisps categories to find growth.

The introduction of snacks with specific functionality, such as added vitamins or cholesterol-lowering abilities, could further help sales with specific demographic groups.

Despite these potential developments, Mintel predicts a 10% decline in real terms in the sector in the next five years, equating to a 4% increase in the market's value between 2005 and 2010 to £2.35bn.

The crisps category is expected to fare better than snacks, reaching £1.4bn by 2010, compared with almost £1bn for snacks. With an almost saturated market, sitting at 88% consumption, there is limited room for brands to extend their consumer base.

CRISPS AND SNACKS BRANDS' ADSPEND BY MANUFACTURER 2004 2002 (£000) (£000) 1 Walkers 16,139 13,855 Walkers Crisps 4789 3160 Doritos Corn Chips & Dips (all variants) 3455 3956 Walkers Sensations Poppadom Bites 1867 n/a Wotsits (all variants) 1644 n/a Walkers Square Crisps 1581 948 Walkers Sensations Crisps 1356 2258 Walkers Mediterranean Crisps 1106 n/a Others 341 3533 2 Procter & Gamble 8698 6701 Pringles Crisps 4316 6701 Pringles Dippers 3728 n/a Pringles Dips/Dippers 655 n/a 3 Quaker 3082 1947 Snack-a-Jacks Mini Bites 1887 n/a Snack-a-Jacks 1195 1947 4 KP Foods 2287 7006 McCoy's 1110 553 Hula Hoops 1075 2921 Hula Hoops Shoks n/a 1916 Skips (all variants) 62 1573 Others 40 43 5 Kellogg 1607 n/a Special K Lite Bites 1607 n/a 6 Golden Wonder 1346 573 Nik Naks 873 9 Golden Wonder Crisps 285 524 Others 188 40 Source: Nielsen Media Research/Mintel UK RETAIL SALES OF CRISPS AND SNACKS BY OUTLET TYPE, 2004 Crisps Snacks Total pounds m % pounds m % pounds m % 1 Multiple grocers* 818 62.9 754 75.2 1572 68.3 2 CTNs 56 4.3 59 5.9 115 5.0 3 Forecourts 48 3.7 49 4.9 97 4.2 4 Off-licences 13 1.0 12 1.2 25 1.1 Other impulse 100 7.7 39 3.9 139 6.0 Total 1035 79.6 913 91.0 1948 84.6 Source: Mintel *including Co-ops and independents

ANALYST COMMENT

JAMES SPICER, CLIENT EXECUTIVE, TNS SUPERPANEL

With health issues such as salt intake taking a high profile in the media, and the influence of such factors on consumers' consumption growing, the salty snacks category finds itself in decline. In the year to 19 June, it was down 4.5% in volume terms year on year.

Larger declines are being seen in the savoury snacks category, which accounts for 42% of market volume and was down 5.1%. Crisps are also returning a negative contribution to the overall trend, with a fall of 4%.

So what is driving the decline? It is not that buyers are dropping out of the market, nor that consumers are purchasing less each time they go shopping trip - although both are contributing to the downturn within the sector.

The primary reason for salty snacks' decline is that shoppers are not purchasing as frequently. The average consumer bought such products 27 times fewer this year, a drop of 3.6%. This equates to a loss of one shopping occasion for each household. This may not sound significant, but bearing in mind that 95% of the population buy these products at an average spend of £1.73 for each shopping trip, this equates to a loss of more than £40m.

This has also been reflected in consumption trends in the category. The number of occasions on which these products are eaten fell by 230m year on year in 2004.

Other categories perceived as 'healthier' alternatives to salty snacks, such as crispbreads and rice cakes, are seeing strong growth, helped by innovation, new product development and a subsequent widening of consumer choice.

If the salty snacks category is to stem its decline, it will need to adapt to growing market pressures and cater to the needs of the consumer.