The snack food industry sector consists of establishments primarily engaged in manufacturing of salted snacks, such as potato chips, corn chips, tortilla chips, popped popcorn, pretzels and similar snacks (NAICS 311919) and salted and roasted nuts and seeds (NAICS 311911). The snack food industry sector also includes consumer-ready packaged chocolate and non-chocolate candies (NAICS 311320, 311330 and 311340), cookies and crackers (NAICS 311821), unpopped popcorn, and meat snacks. For the purpose of that analysis, the snack food industry is divided into three major segments: salted snacks; candy; and other snacks, which includes baked-sweet goods, cookies & crackers, meat snacks and popcorn.

The world snack food market has continued to grow, reaching an estimated $68 billion in 2004. The United States continues to be the largest market, accounting for about one-third of the world’s total. Japan and the United Kingdom, together, account for another one-quarter of the world’s total.

The spread of Western eating habits to other parts of the world continues as lifestyles in those parts of the world become busier and traditional family meal times become a thing of the past. As a result, the demand for snack foods continues to increase.

U.S. snack food exports rose for the second consecutive year in 2004, up 8.3% from 2003 to $1.3 billion. Although U.S. snack food exports to Mexico fell 2% in 2004, exports to Canada increased 18%. (Canada and Mexico are partners with the U.S. in the North American Free Trade Agreement.) These countries are still our largest export market, accounting for more than 56% of U.S. total snack food exports. The Japanese/Chinese Economic Area displaced Europe to become our second largest export market, as a result of a 9% increase in U.S. snack food export to that region and a 23% decline to Europe (see table on next page for details).

In 2004, the largest snack food export category was chocolates and candy at 43%, followed by salted snacks with 34% and other snacks with 23%.

Also, all snack food categories experienced increases in exports: salted snacks grew 9%, candy, chocolate and non-chocolates rose 6%, and other snacks increased 12%.

The following discussions of selected country markets are based on U.S. Department of Agriculture FAS (Foreign Agricultural Service) Attaché Reports. For the complete report, check http: //www.fas.usda.gov/scriptsw/attacherep/default.asp.

Thailand’s snack food market is one of the largest and most diverse in the Asia-Pacific region, with an estimated total value of $280 million and featuring more than 2,000 competing brands in 2003. It is estimated that at least 360 brands of salty snacks are available, of which 80% are actively promoted. The majority of these snacks are Asian-style snacks. However, Western-style snacks have become more popular in recent years, with potato chips now comprising a large percentage of the Thai snack market. This is primarily due to Frito-Lay’s pioneering efforts to increase the popularity of potato-based snacks in the Thai market.

The market is generally classified into five main segments: potato chips, extruded snacks, peas and nuts, fish snacks and prawn crackers. The potato chip market is estimated to account for 30% of the overall snack market ($86 million). Extruded snacks are believed to make up the largest percentage of the entire snack market, accounting for approximately 35% of the total ($100 million). Prawn crackers, dry peas and nuts, and fish snacks each account for about 10% of the market (each about $27-$30 million). These estimates exclude the many snacks manufactured by smaller Thai companies and home-based producers, particularly those who sell their products in rural areas of Thailand. It is virtually impossible to gauge the sales volume of these products, so the actual size of the entire Thai snack market is also difficult to estimate.

Thailand’s snack market has strong potential for growth. Estimated per capita consumption of Western-style snacks is still very low compared with other Asian countries, such as South Korea and Japan, which have per capita consumptions more than twice that of Thailand. Although the Thai snack market currently is growing, the market for imported ingredients used in snacks may not continue to grow at the same rate due to price sensitivity of most consumers. Many snack producers cannot use imported ingredients in their products because of increased production costs.

Many Thai snack food producers believe that consumer tastes and preferences are changing very quickly — they are always willing to try new products and flavors. As a result, many companies have spent a large amount of money on research and development of new snack products and flavors.

The Thai snack market is highly fragmented, so companies must regularly monitor changing consumer preferences. This became increasingly important after the economic crisis in 1997 due to the decline in consumer purchasing power. Even during the recent economic recovery, consumers are switching to lower-priced products. For example, in an attempt to maintain its current consumers and gain a larger market share, Frito-Lay is selling large packets of snacks that offer 20% more content, while maintaining current prices.

More Thai consumers are eating potato chips, so manufacturers are coming out with new flavors in an attempt to capture a larger share of this lucrative market.

Two of the latest flavor innovations are seaweed and wasabi flavored products. Many companies have decided to produce one or both of these flavors and have provided large marketing budgets to push these new products. Initially, these new flavors have done very well in the market. However, it remains unclear if they will be able to withstand the test of time. Many new flavors enter and exit the market very quickly, so only the best-tasting products and flavors can survive.

Estimates of per capita snack consumption in Thailand vary significantly, ranging from a low of one small pack per week to a high of 10 small packs per week. The largest manufacturers set their estimates at around four to six small packs per week. Small packs for these companies are in the range of 15 to 25 gm. (0.53 oz. to 0.88 oz.).

Per capita consumption is very difficult to measure accurately because snacks consumed by a percentage of the population are locally produced, made by small rural manufacturers. It is therefore difficult, if not impossible, to estimate actual production and consumption.

According to industry sources, per capita annual consumption of potato chips in Thailand in 2001 was about 400 gm. (14.1 oz.). Therefore, with a population of more than 60 million, Thailand’s total annual potato chip consumption is about 52.9 million lbs. Thailand’s per capita potato chip consumption was significantly lower than the U.S., which has a per capita consumption of 8 kg. (17.6 lbs.), fresh weight equivalent. Japanese and European consumption is estimated to be 4 kg. (8.8 lbs.), while South Korea’s consumption is 2 kg. (4.4 lbs.). It is also estimated that total snack consumption in Thailand was 1 kg. (2.2 lbs.) per person per year and added that snack consumption in the U.K. was upward of 4 kg. per person per year.

In 2004, U.S. snack food exports (based on the U.S. Department of Commerce definition stated at beginning of report) to Thailand grew almost 19% to $7.9 million. Salted snacks account for about 54% of the total ($4.25 million), followed by candy with 27.5% ($2.18 million) and other snacks with 18.5% ($1.48 million). A concluded Free Trade Agreement with Thailand will benefit U.S. exporters of snack foods. Current tariffs on imported snack foods are in the 30-40% range.

The gross sales of confectionery products in South Korea (Korea) were about $1.8 billion in 2003, up 4% from 2002. The four major players accounted for more than 60% of total sales. The confectionery industry is expected to grow 3%-5% annually over the next few years.

Confectionery products are imported into Korea from many countries. The total imports of confectionery products amounted to $167 million in 2003. The U.S. was the dominant origin in 2003 with a 24.5% market share and $40.9 million in sales, followed by China (14%, $23.4 million) and Australia (7.1%, $11.8 million). It should be noted that the Korean definition of confectionery products includes not only consumer-ready packaged items, but also bulk confectionery imports. Imports of confectionery products are expected to expand by about 10% in the foreseeable future. Korea also exports about $100 million of confectionery products annually to other countries, including Japan, China and the United States.

The long-term growth of the confectionery sector is forecast by local contacts to slacken over time. A key reason identified by local manufacturers is the falling birth rate and, thus, the anticipated reduction in the number of consumers’ ages 10 to 19 years old. As a result, manufacturers can no longer rely on bright, colorful, new product launches targeting children to maintain sales. There is a corresponding need, therefore, for manufacturers to become increasingly sophisticated with product development and marketing to target the emerging consumer groups, such as working females, parents and those over 60.

Sales of imported confectionery items are persistently growing as a result of their brand recognition and vigorous promotional activities. As these imported brands are aggressively penetrating the Korean confectionery market, product life cycles are shortening, leaving both domestic and international players to constantly reinvigorate established items and launch new products. While there is expected to be little change in the major players in the foreseeable future, the increasing penetration of imported brands is a cause for concern for the local companies.

Sugar-free, low-carb and functional products are expected to account for an increasing proportion of new confectionery products. Items fitting into the Korean “well-being” trend are supplanting traditional sugar-based confectionery goods. Young women and many men are increasingly anxious to keep slim, fit and healthy. Dieting is a big business in Korea and related sectors, such as low-fat foods and health drinks, have increased significantly. Functional candies, such as throat candies, sell well. The success of sugar-free products with health-enhancing ingredients reflects prevailing consumption trends in Korea.