Food Companies Bet on Americans Getting 'the Munchies'
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What is the episode about and how big is the U.S. snack market forecast?
Here's your Money Briefing. I'm J.R. Whalen at The Wall Street Journal in New York. How would a snack taste right about now? Food companies are betting that Americans will continue their snacking ways and push the industry to $180 billion over the next several years. We'll explain in a moment. First, these money and market stories you should know. The U.S. factory sector lost some momentum in June for the second month in a row, but the news isn't all bad. The decline was not as steep as many economists had predicted. Plus, data from the Institute for Supply Management shows that the U.S. has come through the 2019 global slowdown better than other developed nations. and that's mostly due to American consumers increasing spending in 2019 amid low unemployment and rising wages.
Most economists expect the U.S. economy to grow around 2% this year. In a penthouse belonging to the estate of Barbara Sinatra, The late wife of music icon Frank Sinatra is on the market for $8 million. The 5,600 square foot penthouse is in the Westwood area of Los Angeles. It features four bedrooms and five terraces, providing mountain, ocean, and city views. Also a living room with a built-in bar and cocktail area, along with a large table that flips over to become a poker table. Frank Sinatra's grand piano is in the apartment as well as busts of both he and Barbara. The busts and the piano are not included in the sale.
What broader money and market headlines set the context for the snack industry?
As kids, we were told, don't eat in between meals. You'll ruin your appetite. Well, times have changed. The snack market is expected to grow to $180 billion just in the U.S. by the year 2022. That has lots of companies vying for space. And Wall Street Journal reporter Micah Maidenberg is here with us to discuss. So, Micah, as you point out in your story, consumption of sweet and healthy snacks, even though that sector is expected to grow, the consumption declined last year.
Right. The big picture, of course, is that over the last 40 or so years from the late 70s till 2015, 2016, more Americans have said that they have at least one snack a day. In the late 70s, 40% of Americans said they didn't snack during the day. So that gives you a sense of how eating habits have changed. More recently, however, we noticed some data from one of the market research firms that follows consumer packaged goods or sort of that industry. We noticed that, you know, Americans were saying they were eating a little bit less snacks than they had, you know, the year prior. So for some folks who follow the industry, that begs a question of can this sort of growth that we've seen over the decades continue?
There certainly are a lot of companies out there that are betting it will, but there was that kind of choppiness, as you said.
And that choppiness has not deterred these companies from jumping in to try to succeed in this sector, but also pour a lot of resources into it.
Some of the most interesting deals in kind of food manufacturing have been with larger firms that are looking to sort of tether themselves to snacks because they do believe, they believe in that growth story. For example, Kellogg's, who we think of as a cereal maker, now owns RX Bar, which have these sort of hip packaging and very few ingredients. You'll see them at a lot of different kinds of stores. And Hershey is another really good example. I mean, everybody has a certain association of the products you get at Hershey, but Hershey now owns popcorn. They own pirate booty cheese puffs. So it's really interesting stuff.
It might be easier to rationalize a snack that's popcorn instead of a Hershey bar, though I'd run to a Hershey bar anytime I wanted a snack, but I'm not supposed to be eating that. You said Kellogg's, and that's a situation where they sort of face an unforced error along the way with RX bar, which gave themselves a kind of a hiccup, but they're in this to win.
Absolutely. And Kellogg said during their first quarter that they had to recall some varieties of RX bars because of potential non-disclosed peanuts in there, obviously an issue for people with allergies.
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