Dive Brief:

• H-E-B will soon begin construction on a 64,000-square-foot snack manufacturing plant located less than a mile from a company distribution center just outside Houston, according to the Houston Business Journal. 
• This will be the second snack plant H-E-B operates. The sole current location, a 40,000-square-foot facility in San Antonio, manufactures the company’s private label potato, tortilla and corn chips.
• H-E-B has not set an opening date or provided details on when construction might be completed.

Dive Insight:

Judging by national sales figures, it’s a good time to be in the snacking business. According to IRI’s most recent “State of the Snack Food Industry” report, U.S. consumers snack an average of 2.7 times per day, while 14.2% of consumers say they snack five or more times per day. Overall, people are looking for a variety of snacking options, including both healthy and indulgent choices, and are often substituting snacks for meals.

At the same time, sales of traditional bagged snacks like those manufactured in H-E-B’s San Antonio facility have recently plateaued, research shows. According to Nielsen, potato chips bring in $7.2 billion annually, but saw dollar sales grow just 1.7% last year. Pretzels, which bring in around $1.5 billion per year, lost .5% in dollar sales over the same period.

Might H-E-B expand its manufacturing capabilities in higher-growth snack categories? Meat snacks, which includes jerky as well as innovative new choices like meat-and-fruit bars, have seen 7% compound annual growth over the past four years, according to Nielsen, and account for $2.8 billion in annual sales. On-the-go produce snacks, which include innovative bagged and packaged varieties, see $1.1 billion in annual sales and grew at a rate of 10% per year between 2012 and 2016.

H-E-B sells premium jerky through its Central Market store brand, along with a variety of granola bars. But its chip business is certainly no slouch, with numerous choices available, from kettle cooked chips to “Texas Dipper” corn chips and tortilla strips. According to its company site, H-E-B prides itself on using locally sourced ingredients. The company also has an additional sales outlet in its mail order service, launched in 2015, that specializes in sales of grocery products, including snacks, to out-of-state fans.

Whether it’s expanding into new categories, building up supplies of existing ones or some combination of the two, there's no doubt H-E-B is making a savvy move to stay competitive in the red-hot Texas grocery market.