Sector Insight: Bread and baked goods

It is only the rising price of bread that is keeping the sector buoyant, as health-conscious consumers opt for cereal at the breakfast table.

Sector Insight: Bread and baked goods

As the anticipation surrounding the royal wedding mounts - at the very least driven by the thought of an extra day's holiday - brands and retailers are rushing to jump on the monarchy bandwagon.

Not to be outdone, Hovis launched a Union Flag wrapper for its Soft White range, simultaneously tapping into wedding fever while promoting its national heritage with '100% British Wheat' labelling.

Bread is a food staple and its penetration sits at more than 95% of the population. However, the sector faces challenges. The frequency of bread consumption has declined in recent years, according to TGI, and cereal is a more popular breakfast choice nowadays than toast.

Between 2008 and 2010, volume sales of bread fell by about 5%, although value increased by about 7% as a result of higher prices necessitated by the rising cost of wheat.

In 2010, the sector was worth £4.9bn, with bread accounting for about £3.4bn and baked goods £1.5bn.

Efforts by manufacturers to expand the bread sector have focused on extending into baked goods such as muffins, crumpets, teacakes and malt loaves. Value sales of baked goods have increased 7% in the past two years.

Shoppers are often looking for healthier types of bread, and manufacturers have ensured most of their NPD has tied in with this, as multigrain and wholemeal variants become more popular. However, white bread still accounts for the biggest share of sales by volume.

Plant bakeries produce about 64% of bread items, while in-store bakeries account for about 29%. Craft bakeries have struggled to keep up, especially as rising wheat prices have made it harder for them to compete with the bigger operations' economies of scale.

Warburtons has been the most active bread brand in terms of NPD over the past two years, which has helped the company maintain its market leadership. It has also gone through a major packaging revamp, introducing a fresh logo and 'baked orange' colour across its range.

Marketing director Richard Hayes says: 'This brand refresh is a tangible demonstration of our commitment to driving brand and category value growth, and we're confident it will increase consumer interest.'

Launches by Premier Foods brand Hovis have focused on healthier variants such as Hearty Oats Bread. Last year, some of the brand's loaves were delisted by Tesco after the retailer refused to accept a Hovis price rise.

Kingsmill is Allied Bakeries' flagship brand. Last year, it added Oatilicious to its range, supported by an integrated marketing campaign.

Traditional tastes

Crumpets are the most popular variety of baked goods and are bought by more than 50% of consumers, according to research by Toluna. In a sector saturated with foreign-influenced pastries and breads, traditional products have held their own.

Croissants were once regarded as a luxury breakfast food, but are now an everyday snack item and a breakfast option.

Indeed, Brits' obsession with snacking has had a significant impact on this sector, with items such as rolls and bagels gaining popularity. Stores making products such as croissants and rolls available for purchase as a single item means shoppers can now eat such items on the move, rather than having to buy multipacks.

The UK's ageing population will affect the bread and baked-goods sector. The over-65s age group, which prefers bread from in-store bakeries and healthier loaves such as seeded and multigrain, will expand fastest over the next five years.

Mintel predicts that the bread and baked-goods sector will grow by 21% by 2015, when it will be worth £5.9bn. Taking inflation into account, this represents a relatively stagnant market.

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