This category includes establishments primarily engaged in manufacturing fresh cookies, crackers, pretzels, and similar "dry" bakery products. Secondary products that are part of this industry include biscuits, graham crackers, saltines, cracker meal and crumbs, cracker sandwiches made from crackers, wafers, and ice cream cones and cups.
311821 (Cookie and Cracker Manufacturing)
311919 (Other Snack Food Manufacturing)
311812 (Commercial Bakeries)
Although mom is still America's favorite cookie maker, the bakeries that attempt to make cookies and crackers as good as mom's have become a huge industry. Total sales of cookies and crackers was estimated at approximately $10 billion in the late 1990s. While major players are dominant, 27 percent of the 8,900 nationally distributed brands in 1999 were not under one of the major labels.
Adult consumers have turned their backs on low-fat and no-fat items and begun returning to better tasting products. While sales of expensive national brand cookies have declined somewhat, due to the sluggish economic conditions of the early 2000s, sales of lower-priced private labels have risen.
Keebler, which went public in 1998, has sought to acquire other baking companies to supplant Nabisco as the number one player in the industry. Keebler had a 28 percent share of the cookie and cracker market in the late 1990s, compared to Nabisco's 34 percent. Every fourth cookie or cracker bought in the United States today is sold by Keebler; every third is sold by Nabisco. Both companies were purchased by larger players in the early 2000s.
In the major bakery companies, the cookies and crackers segment of business often operates as a separate division. Many bakery companies are divisions of holding companies that are also involved with other consumer products that include food, beverages, and, in the case with RJR Nabisco, Inc., tobacco.
Other manufacturers of cookies and crackers operate strictly under the bakery goods heading. Companies such as Mrs. Field's Cookies and Famous Amos at one time operated exclusively out of their own retail outlets. They later expanded to supermarkets and specialty stores. A number of these private label companies work through distributors that can handle a number of varied products. Many of the larger companies handle their own distribution, working directly with supermarkets and retailers.
The U.S. Chamber of Commerce noted that cookie and cracker manufacturing was the fastest growing segment of the bakery industry in 1992. Shipments of all bakery products rose an average of 1.3 percent per year from the years 1987 to 1992. Sales of cookies and crackers for the same years, however, increased by rates of 2.3 percent. The primary reason given for the projected increase in sales was the recent introduction of low-fat, low-calorie, low-cholesterol cookies and crackers.
Well into the late 1980s, bakery goods showed a consistent increase in sales. But consumption of sweet baked goods began to decline around 1992. Consumers were changing their buying habits and sought out bakery products that were lower in calories. Cookie and cracker sales also slowed by 1992, but showed signs of growth due to the availability of the new low-fat varieties.
An important reason for declines in Nabisco's cookie and cracker business is that, during the 1980s, Nabisco aggressively increased its prices until consumers started buying less. Nabisco still holds the lion's share of the business; however, private labels have begun to cut heavily into Nabisco's market share. Nabisco is said to be working overtime to undercut its private label competition. In an effort to bolster its market, Nabisco is making an effort to gain market space in discount outlets and convenience stores. Nonetheless, private labels are slowly making inroads in all the major cookie and cracker markets.
Because it is still the leader in the cookie and cracker industry, the private labels appear to be pointing their big guns at Nabisco. There are a number of upscale private lines available, including Sam's Choice, a line being sold at Wal-Mart stores, and Master Choice, sold at A & P stores. One of the front-runners, and a leader of the upscale private label pack, is President's Choice. Produced by Canada's Loblaw Companies, the chocolate chip entry is beginning to close the lead that Nabisco's Chips Ahoy! Brand enjoys.
A number of companies introduced products to suit a changing market of health-conscious consumers. Nabisco introduced a new line of fat-free cookies and crackers called Snackwells. As reported in Advertising Age, Nabisco management insists that "The company is placing substantial corporate emphasis behind product categories that health-wise consumers are increasingly demanding." The company added that Snackwell cookies have one gram of fat compared with three grams in traditional cookies on the market.
By 1997, Snackwells was the top-selling brand of cookie and cracker in the country. The brand's popularity reflected the fact that 173 million Americans were eating reduced-fat and fat-free foods, representing an 81 percent increase from 1993.
Food and Drug Administration (FDA) approval in 1996 of a new fat substitute, Olestra, promised to change the low-fat cookie and cracker market even further. Olestra, which was developed by Procter & Gamble, added no fat or calories to foods and was expected to appear in new formulations of crackers, tortilla chips and other snacks.
Bakery companies have been making changes in the ingredients they have been using for years in efforts to minimize the use of chemical agents. Companies are phasing out potassium bromate, which had always been a integral part of their recipes. Health-conscious, labelreading consumers are turning from products with potassium bromate to products that contain acceptable alternatives, such as barley malt. The U.S. Industrial Outlook reported that the per capita consumption of crackers edged up mainly due to bakery companies changing ingredients to satisfy consumer demands and tastes. The increase, it was believed, was due to cracker manufacturers eliminating questionable ingredients like tropical oils and white flour, and using canola oil and whole wheat flour in their place. This combination is preferred by health-conscious adults who purchase crackers and examine ingredient labels.
According to Baking & Snack, cookies sales fell by 1.9 percent in the early 2000s. The total value of shipments in the cookie and cracker manufacturing industry grew from $10.28 billion in 1999 to $10.31 billion in 2000. Over the same time period, shipments in the commercial bakeries industry grew from $23.8 billion to $24.8 billion, and shipments in the snack food (other than roasted nuts and peanut butter) manufacturing industry grew from $10.7 billion to $11.09 billion.
The consumer segment most responsible for boosting the sales of baked goods is the 35- to 54-year-old age group, according to a survey compiled by the U.S. Bureau of Labor Statistics. The survey showed that people in this age group regularly spend more for bakery products. Happily for cookie and cracker manufacturers, this consumer segment was growing at a rate of 2.7 percent yearly, and by the late 1990s, it was expected to represent nearly 30 percent of the total U.S. population. One explanation for heightened consumption was that individuals in this group were at the peak of their earning potential, and therefore had more disposable income.
In the late 1990s cookies and crackers became the second largest segment of the dry grocery category in supermarkets, with carbonated beverages coming in first. Almost 98 percent of all households purchase cookies and crackers. Due to this market saturation, manufacturers of cookies and crackers have had to work harder at expanding their sources of sales. They are exploring nontraditional outlets such as toy retailers, drug stores, and children's stores to sell their products. They are incorporating the use of licensed characters for their cookies, hoping to increase consumption of cookies among children aged 5 to 14. Nabisco led the way, by introducing the Rugrats Frosted Cookie, based on the television series, in August of 1999.
The biggest turnaround in the industry in the late 1990s was the sudden and swift rejection of the manufacturers' no-fat and low-fat cookie and cracker lines. Calling it a return to indulgence, the industry has scrambled to present its products, both current and new, as full-flavored. While consumers continued to worry about the amount of fat in their diets, it seems that cookies and crackers were not the place they were looking to cut it.
Many industry leaders are introducing new products and reformulating old ones. Nabisco's Snackwell line is no longer advertised as no-fat, but rather reduced fat. The company added fat to its cracker lines, which were still about 40 percent less fat than regular cracker lines.
Keebler, seeing consumers would buy new products, provided they tasted good, rolled out several new products in 1999. In May 1999 the company introduced Keebler's Double Fudge 'n Caramel Cookies, to great success. Where the cookies were launched, Keebler saw its entire Fudge Shoppe Cookie line sales increase 56 percent. Targeting the adult market, Keebler also concentrated on its Soft Batch Brand, introducing a new product, Homestyle Soft Batch Cookies, in 1999.
One of the brands Keebler inherited when it bought Sunshine Biscuits was Hydrox. Hydrox was introduced in 1908, four years before Oreo. Nabisco had the superior distribution lines and marketing dollars and soon over-took Hydrox, leading customers, even today, to believe Oreo hit the market first. Keebler plans on aggressively challenging the market share of Oreo', which remained the top selling cookie in 2001. Keebler changed the name of the cookie to Droxies, redesigned the cookie, and reformulated the recipe in 2000. Some analysts feared the new Droxies would be seen as a rip-off of a rip-off and warned that Keebler has a big hill to climb.
Nabisco, the number one cookie vendor continues to aggressively marketing its cornerstone brand, Oreo. In 1999 the company held the third annual Oreo stacking contest and rolled out a new contest—Don't Eat the Winning Oreo. Nabisco created a special cookie mold that allows the company to stamp a prize directly on the cookie. When a customer got an Oreo with "Car," for example, they won a car.
The inflation-adjusted prices of agricultural commodities are not expected to represent a factor in the cookies and crackers manufacturing industry. Although there have been periodic price increases, the average index of real prices of ingredients has actually shown a decline. This pattern should continue. Also, with the use of computers and better telecommunications, bakery companies today are more sophisticated and more easily able to protect themselves against sudden price increases of agricultural commodities.
Nabisco has consistently been the leader in the industry. The Nabisco Company produces, distributes, and markets a broad range of cookies, crackers, and snacks. Nabisco Biscuit Company sells nine of the top 10 cookies and crackers worldwide, including Chips Ahoy! and Oreo chocolate sandwich cookies, the world's largestselling cookie brands; Ritz crackers; and Snackwell cookies and crackers. Nabisco reported sales of $1.8 billion in the first half of 1999 in their biscuit division, up from $1.7 billion in the first six months of 1998.
Nabisco markets its products through a direct store delivery system. To boost its share of the cookie market, Nabisco signed a licensing agreement with ConAgra in 1997 to market cookies and bread crisps under the Healthy Choice brand name.
Majority shareholders of RJR Nabisco fought the board of directors to spin off its tobacco holdings. The shareholders feared increasing lawsuits and government intervention would put a large strain on the company, draining assets from the profitable food divisions. In June of 1999 RJR Nabisco Holdings Corp. was renamed Nabisco Group Holdings Corp., reflecting the corporation's separation of its food and tobacco businesses. Philip Morris Companies Inc. acquired Nabisco Holdings in 2000. Eventually, Philip Morris integrated the Nabisco brands with its Kraft Foods operations.
The second largest cookie manufacturer in terms of market share is Keebler, a public company, with Flowers Industries, Inc. owning a 55 percent share. Like Nabisco's, Keebler's products are represented in major supermarkets throughout the country. Keebler also produces and distributes a wide range of crackers and snacks. Keebler acquired Sunshine Biscuit in 1996, went public in 1998, and bought President Baking Co, bringing Famous Amos cookies and Girl Scout cookies under the Keebler umbrella. Due to these acquisitions and strong brand showings, Keebler posted a 20.1 percent gain in sales in the first half of 1999 over 1998, to $185 million. Kellogg Co. acquired Keebler in March of 2001. Keebler now operates as a division of Kellogg USA.
In 1995 the cookies and cracker industry employed approximately 49,200 people, 38,700 of whom fall into the category of production workers. The average hourly wages for those workers came to about $12.57 per hour. The states with the most employees in the cookies and crackers industry are North Carolina, Illinois, Pennsylvania, and Georgia. In 1999 the reported wages for bakers was $11,960-$40,039 and route drivers was $11,960-$27,559.
The export trade of bakery goods has amounted to a small portion of the total bakery production in the United States, because of the problem of perishability and consumer preference in other countries. Nevertheless, bakery exports are growing. Exports consist mainly of cookies, crackers, and specialty cakes that have adequate shelf life, attractive packaging, and competitive prices.
The real value of U.S. export shipments for all bakery items was not likely to grow more than 1.5-2.0 percent annually from 1993 to 1997. The fastest growth was expected to be from cookies and crackers exports which is expected to grow about 2 percent yearly. International competitiveness of bakery products is still a long way off.
It is conceivable, however, that in the coming years exports and imports of bakery products, with cookies and crackers leading the way, will become more of a viable international fixture. According to U.S. Industrial Out-look, international trade in bakery products will continue to increase.
Concern for the environment has affected the operations of bakery companies. Most are now spending more of their dollars on environmental protection. Many companies are introducing pollution abatement equipment, especially for their ovens, and will be introducing other pollution control measures. Many are converting their delivery vans so they can operate on cleaner-burning propane instead of gasoline. It is expected that environmental control efforts will eventually increase operating costs by as much as 10 percent.
Some manufacturers are employing extrusion used in other food industries. This engineering process permits continuous blending of ingredients. It results in a greater variety of products being made available to the consumer, and it results in less waste during production time, and also consumes less energy. Changes in ingredients and procedures are monitored carefully by the Food and Drug Administration.
Nabisco has implemented an engineering information management software system, called Work Place Active Asset. This enables its 11 bakeries and headquarters to easily share information, such as engineering drawings. This software will allow everyone, including consultants, suppliers, and local bakeries, to access the complex engineering information. Nabisco has also created an online analytical processing (OLAP) data mart. With more than 8,000 products, the OLAP allows Nabisco to accurately track sales and consumer preferences, with the largest data mart holding sales, price discount, spoilage, transportation, and promotional information for two years. Management, financial analysts, and salespeople use this information. Using this information led to the dropping of the Life Saver holiday candy packs at Christmas. The product was not selling, and the move saved Nabisco $1 million.
Not to be outdone, Keebler rolled out its IDEA Wizard (Instant Data Evaluation Access) in 1999. Since the cookie market and cracker market are distinct, with its own customers and loyalties, the IDEA Wizard allows Keebler to collect information on each segment of its markets, then develop plans for specific retailers regarding self space and merchandising. The IDEA Wizard stores information from several sources, including scanners. Retailers access the information, along with audio and video clips about new products, focus groups, and marketing messages from Keebler.
One problem facing all makers of cookies is uniformity of product, so the right number fit in the packaging. Scientists, underwritten in part by Nabisco, have discovered a way to break down pentosans in flour. Pentosans are large sugar molecules that slow the rise and fall of dough. With fewer pentosans in flour, the cookie dough rises, then falls with a burst, making a flatter cookie. While the enzyme needed to break down pentosans cost about $2.50 for every 1,000 pounds of flour, the result of fewer pentosans is a quicker baking time.
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