Snack Brands Australia

Snack Brands Australia (SBA) is one of the largest suppliers of snack foods in Australia[1] and acts as the main competitor to the long established The Smith's Snackfood Company.

Snack Brands Australia
IndustryFood
Founded1998 (21 years ago)
Headquarters
Wetherill Park, Sydney, New South Wales
,
Australia
Key people
Paul Musgrave
ProductsCrisps and corn snacks
BrandsCC’s
Thins
Kettles
The Natural Chip Company
Cheezels
Jumpy’s
OwnerURC Australia Finance Company (a subsidiary of URC)
ParentUniversal Robina
Websitesnackbrands.com.au

The company was founded in August 1998 as a subsidiary of parent company Snack Foods Limited, with main product lines including Kettle, Cheezels, Natural Chip Co and Thins. The company was acquired by Philippines food and beverage company Universal Robina Corporation in 2016 for AUD$600 million (US$461 million).[2] The company has 358 employees, with Paul Musgrave as chief executive officer, in which the company had AUD $50.22 million in revenue in 2019-20.[3] Their headquarters office is in Wetherill Park, Sydney, New South Wales, Australia.

History

In 1998, The Smith's Snackfood Company was acquired by Frito-Lay (a subsidiary of PepsiCo). Because these were the two largest producers of salty snack foods in Australia, Frito-Lay agreed with the Australian Competition and Consumer Commission (ACCC) to divest a range of brands to ensure adequate competition.[4]

Additionally, several manufacturing facilities were released including plants in South Australia, New South Wales and Victoria. This package was named 'Snack Brands Australia' and was sold to Dollar Sweets Holdings.

In September 2012, Snack Brands became an associated member of the Roundtable on Sustainable Palm Oil (RSPO).[5]

In 2016, Philippines snack food and beverage company Universal Robina Corporation acquired Snack Brands Australia for A$600 million (US$461 million),[1][6] including its entirety of product lines and the two existing manufacturing facilities located in Smithfield and Blacktown in Sydney, Australia. The acquisition process spawned from Snack Brands compounded annual growth rate of 7.4% over the previous 4 years.[7]

Later in 2016, Snack Brands Australia merged with 40-year-old company New World Foods in attempt to extend the growth and share of the rapidly expanding brand.[8] This included the acquisition of Local Legends Jerky, which were distributed throughout Australia, UK, and Asia.

In 2018, plans were approved for the development of a new AUD$200 million distribution centre for Snack Brands Australia in Erskine Park, Sydney, Australia.[9] Private equity real estate investor Altis Property Partners were recruited develop the 30,255 square metre logistics facility designed for automated robotics and technology to store and retrieve items. The high bay facility will be leased for an initial 20 years upon its forecasted completion in late 2020. The development and construction process of the 10.42 hectare plant is managed by TM Insight, a global supply chain and property consultancy. It was one of the largest industrial property deals in the 2018 financial year.[2]

Products

Snack Brands headquarters is located in Smithfield, Sydney, Australia, with an additional manufacturing facility in Blacktown. These facilities produce approximately 200 million packets per annum. Product lines include:

  • CC's Tasty Cheese
  • Thins
  • Kettle
  • Kettle Original Chips
  • Kettle Popcorn Sensations
  • Kettle Chunky Chips
  • Kettle Flat Bread Crackers
  • The Natural Chip Co.
  • The Natural Cracker Co.
  • The Natural Chip Co. Original Potato Chips
  • The Natural Chip Co Tortilla Strips
  • The Natural Chip Co. Veggie Rings
  • The Natural Chip Co. Lentil Craves
  • Cheezels
  • French Fries
  • Jumpy’s
  • Samboy
  • Chickadees

Competitive Landscape

Snack Brands operates within the Potato, Corn and Other Chip Manufacturing Industry. The industry involves the production of regular potato chips, corn chips, premium potato chips, and other various salted snacks. In Australia, the industry is highly concentrated, with the top four entities accounting for 70% of market share as of August 2020.[10] Snack Brands Australia is the second largest manufacturer of savoury and corn snack products in Australia. It is the long-time competitor of The Smith's Snackfood Company, a subsidiary of PepsiCo. PepsiCo and Snack Brands share 44.8% and 37.7%, respectively, of the AUD$1.01 billion annual market revenue within the industry,[11] as of August 2020. The two companies also hold 48% and 14.2% market share, respectively, including specifically the Potato Chip Industry, at 59.3% and 22.3%.[12]

Effects of COVID-19

The outbreak of the COVID-19 pandemic, beginning in March 2020, had minimal impact on the potato, corn and other chip manufacturing industry. Products within the industry are typically low in value and consumer involvement and are traditionally not heavily affected by declines in income. An expected decrease in consumer income was anticipated in the beginning of the outbreak, evidently adding to the industry’s 1.2% revenue decline in the 2020-21 financial year.[13] International trade was disrupted during the early stages of the COVID-19 outbreak, with reduced imports and exports both further leading to this decline.

Domestic prices of potatoes have fallen over the period, reducing purchases as a share of industry revenue. In addition, increasing demand for high-value, premium potato chips have boosted prices received by manufacturers over the period.[14]

In the Media

Health Concerns

Exponentially increasing health consciousness and concerns over rising obesity levels, particularly among children, have inspired many individuals to adopt healthier eating habits over the past decade. Consequently, the movement towards healthy eating has diminished demand for traditional products like common potato chips, which consumers identify as an unhealthy snack option. In August 2016, The Sydney Morning Herald published an article outlining statistics about snack advertising deception towards claiming certain products are natural.[15] This resulted in an 8% sales decrease in the 2016-17 financial year, particularly in regard to The Natural Chip Co. Awareness of transparency in the health foods sector is expected to increase in 2021-22, alluding a threat to industry revenue.[16] In February 2020, Roy Morgan released data showing 54.7 percent of Australians were consuming healthy snacks weekly;[17] a 3.2 per cent increase compared to a decade earlier.[18]

However, aforementioned changing preferences have created opportunity for new players to enter the industry. Reduced demand for traditional unhealthy junk snacks has resulted in consumers increasingly opting to switch to healthier snack food options. Changing tastes have provided a platform for companies to establish healthier options as a way of growing and maintaining sales and market share. Snack Brands updated and manufactured new Natural Chip Co Veggie Rings and Lentil Craves, as well as Kettle Flatbread Crackers in attempt to take advantage of changing tastes.[14]

Long-time competitor PepsiCo ANZ has adapted to changing demand trends by growing and profoundly endorsing its Red Rock Deli range. However, the company still lost market share over the past decade,[19] due to declining demand for its Smith's branded chips, which are perceived as more standard and unhealthy by consumers. Contrarily, Snack Brands has grown market share over the same time period. However, this was primarily due to the unification of the Universal Robina Corporation (URC) and German snack company Intersnack, which were the owners of Snack Brands and Tyrrells companies, respectively.[11]

Sustainability

Roundtable on Sustainable Palm Oil (RSPO)

In September 2012, Snack Brands became an associated member of the Roundtable on Sustainable Palm Oil (RSPO).[5] RSPO is a transnational non-profit organisation established to encourage, develop and advance the attainment, production, funding and practise of sustainable palm oil products.

In 2013, Snack Brands made a publicised commitment to use 100% RSPO certified sustainable palm oil in all manufactured products by 2020, which has been fulfilled; predominantly in the production of Kettle Chips.[20] In October 2014, they began supply of 100% RSPO certified sustainable palm oil in procurement via the “mass balance” methodology.[5]

In February 2015, Snack Brands owned Australian manufacturing sites underwent a RSPO certification audit for Segregated Palm oil and gained certification.[21] This certification was integrated into the development of the $200 million distribution centre in 2018, with annual audits from RSPO.

In 2019, Snack Brands used a total volume of 8,560 tonnes of crude and refined palm oil, 100% of which is RSPO certified sustainable.[22]

Future Challenges

The industry-related revenue of Snack Brands umbrella company Consolidated Snacks Pty Ltd is expected to grow 4.3% annually over the five years through 2020-21, to AUD$380.1 million.[23] Merging with Intersnack and the acquisition of the Tyrrells Crisps brand accounted for the growth. However, the growing number of health-conscious consumers is limiting demand for the company's traditional junk-related brands, constraining revenue growth. The company's profit margins have been unpredictable over the past five years, due to fluctuations in input prices, predominantly potatoes.

However, a recovery in consumer income following the economic downturn caused by the COVID-19 pandemic is anticipated to increase demand for premium potato chips over the next five years. Growing consumer demand for premium chip products is forecasted to counterbalance declining demand for traditional industry goods over this period, boosting industry revenue. Overall, industry revenue is predicted to increase 0.5% annually over the five years, to $1.03 billion.[19] As a result, numerous new players are expected to enter the industry in this time period.[13]

References
  1. "Universal Robina Acquires Snack Brands Australia for US$461M". Global AgInvesting. 17 August 2016. Retrieved 8 September 2020.
  2. "Universal Robina to acquire Snack Brands Australia for $600m". 17 August 2016.
  3. "SNACK BRANDS INDUSTRIES PTY LTD & SNACK BRANDS FOODS PTY LTD". 2020.
  4. "No intervention in Smiths's sale". accc.gov.au. 21 August 1998. Retrieved 23 November 2019.
  5. "RSPO Annual Communications of Progress 2019" (PDF). 2019.
  6. "Philippines group Universal Robina pays $600m for Kettle chips maker". Australian Financial Review. 17 August 2016. Retrieved 8 September 2020.
  7. GlobalData plc (2016, October 18). Canadean Company Reports ID 1829938305. Universal Robina Corporation: Consumer Packaged Goods – Company Profile, SWOT & Financial Analysis. Retrieved from ABI/INFORM Collection.
  8. "New World Foods partners with Snack Brands Australia". 2016.
  9. Schlesinger, Larry (2018). "Private equity developing Cheezels maker Snack Brands new centre".
  10. Cloutman, N. (2020, August). IBISWorld Industry Report C1191. Potato, Corn and other Chip Manufacturing in Australia. Major Companies. Retrieved from IBISWorld Database.
  11. Cloutman, N. (2020, August). IBISWorld Industry Report C1191. Potato, Corn and other Chip Manufacturing in Australia. Competitive Landscape. Retrieved from IBISWorld Database.
  12. Marketline Industry Profile 311919 (2020). Savory Snacks in Australia. Retrieved from Business Source Ultimate via Ebsco.
  13. Cloutman, N. (2020, August). IBISWorld Industry Report C1191. Potato, Corn and other Chip Manufacturing in Australia. Industry Outlook. Retrieved from IBISWorld Database.
  14. Cloutman, N. (2020, August). IBISWorld Industry Report C1191. Potato, Corn and other Chip Manufacturing in Australia. Products & Markets. Retrieved from IBISWorld Database.
  15. Cormack, Lucy (2016). "Almost half of snack food products labelled as 'natural' considered unhealthy".
  16. Cloutman, N. (2020, August). IBISWorld Industry Report C1191. Potato, Corn and other Chip Manufacturing in Australia. Industry at a Glance. Retrieved from IBISWorld Database.
  17. Gebilagin, Lizza (2 October 2020). "The changing face of the healthy snack industry".
  18. "Nearly 9 in 10 Australian adults eat packaged snacks in an average week". 3 February 2020.
  19. Cloutman, N. (2020, August). IBISWorld Industry Report C1191. Potato, Corn and other Chip Manufacturing in Australia. Industry Performance. Retrieved from IBISWorld Database.
  20. Australia, BOS (2020). "Helping you buy responsibly - Palm Oil Alternatives" (PDF).
  21. Kaiser, R. (2020, 16 June). 2020 Annual Report and Action Plan. Snack Brands Industries Pty Ltd & Snack Brands Foods Pty Ltd. APCO Annual Reporting Tool.
  22. WWF (2020). "Snack Brands - Palm Oil Buyers Scorecard".
  23. "Consolidated Snacks Pty Ltd 2019 Performance Summary" (PDF). 31 December 2019.
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