When performing a five forces model for the snack food industry, I first looked at competition from rival sellers as I felt that this was the strongest threat for manufacturers. Rival sellers can easily try to produce a new line of products, mimic a competitor’s product, and it’s difficult to differentiate a snack food from the competition as there is so much competition. The market isn’t quickly growing, so rivals are competing for the same customer base and there is very little if any cost to switch from one snack food to the next. Many snack foods are very similar and there are hundreds if not thousands of competitors all fighting for the consumer’s purchase.
A high competitive pressure exists from the sellers of substitute products as manufacturers can easily mimic existing snack foods. On a recent trip to Hyvee there were a number of snack foods on my list to pick up including potato chips, fruit snacks, and pretzels. For each of these items I had a variety of choices including a Hyvee brand for each which was the lowest price competitor, each product had a healthier option, and some even had a substitute product such as the flat pretzel snack rather than traditional. As consumers become more health conscious increased competition from the health foods industry will start to cross-over into the snack food industry.
Competition from new entrants is moderate as it would be quite costly for a new start-up firm to purchase necessary equipment, create the distribution channels, manufacture their product as effectively as existing firms, and create a customer base. It would however be somewhat easier for an existing firm to make the transition into the snack food industry. For example a juice manufacturer who decides that they would like to start producing fruit snacks could pretty easily make that transition with the purchase of some new equipment,