Conundrums in Global Bakery: A Simultaneous Quest for Health and Indulgence
Global bakery is facing a crisis of identity, with two opposing forces driving the industry. On the one hand, consumers are demanding innovative products that provide indulgence and can be eaten as treats, while on the other they may perceive bakery products as unhealthy and demand items less laden with salt and fat. Bakery manufacturers face the challenge of how to satisfy such divergent consumer demands. Over 2006-2011, global bakery grew steadily at a 1% CAGR to reach value sales of US$459 billion.
Regional consumer perceptions in bakery
In 2011, emerging economies experienced the strongest retail growth across most bakery categories. Static or negative growth in bakery volumes within developed markets was offset by impressive growth in emerging regions, particularly Latin America and Asia Pacific. Regionally, Asia Pacific appears insatiable in its demand for bakery products, which is primarily due to growing consumption in China, but also increasingly in India.
In Western Europe and North America, manufacturers have tried to boost or maintain bakery retail value sales by means of a split focus on health and indulgence. This contradictory trend is now emerging in Asia Pacific and Latin America, where high-fibre bakery products are appearing alongside decadent cookies and pastries. In a fragmented market such as bakery, both objectives are achievable.
Growth in indulgence and convenience bakery
Continued product development has allowed the bakery industry to capitalise on the global convenience and snacking trends. Portability and functionality remain key themes, and snacking breads, wraps, sandwich pockets and other products have galvanised the industry. As consumers become increasingly globalised, a growing variety of packaged ethnic bread products are also becoming available.
Meanwhile, in breakfast products, consumers have been encouraged to move away from their traditional comfort zones. Examples include the introduction of premium breakfast biscuits in the UK and breakfast cereals in Lithuania and other areas of Eastern Europe. Launched in early 2012, products such as Kellogg Co’s All Bran breakfast biscuits are well placed to be rewarded with dramatic UK sales.
Manufacturers have also increased value spend and promoted calorie control by developing single-portion cakes and snack packs, which may help somewhat in alleviating obesity concerns. In Russia, premium single-portion cakes comprised 10% of all retail packaged cake value sales in 2011. Other smaller products include mini- and bite-sized bakery snacks, which are increasingly popular at parties and social gatherings. These are very rich, but small, so provide a quick ‘hit’ of taste and flavour.
The cakes industry has also been revolutionised by the introduction of American flavours, which press all the gratification buttons, with flavour combinations like salted caramel stimulating more taste buds. Moving forward, new and exciting flavour developments should ensure the continued popularity of cakes, with US product formats like cookies and cupcakes expanding worldwide.
Growth in health-focused bakery
Health and wellness bakery remains firmly rooted in North America and Western Europe, with an overall global value of US$74 billion in 2011 and a growth rate of around 3% from 2010. North Americans tend to favour organic products more than anyone else, with spending of US$17 per household compared to a global average of just US$2.40. In the US, which commands 90% of organic bakery retail value sales in North America, this trend is particularly evident.
North America is also the largest and most mature fortified/functional (FF) bakery market, although it registered a 2-3% value decline in 2011. Conversely, growth rates of 11%, 9% and 6%, respectively, in 2011 ensured that China, Thailand and Indonesia were the fastest growing countries in FF bakery.
As of 2011/2012, Mexico has overtaken the US as the country with the highest percentage of obese people in its total population. Consequently, it has experienced a rapid surge in diabetic product development since 2009, from nascent beginnings. A marked contrast exists between the two countries, where the mature US market already contains a wide selection of diabetic products, suggesting that Mexico’s dramatic rise in obesity is forcing the market to catch up.
The Asian and Latin American markets have also recognised the benefits of consuming naturally healthy high-fibre products. The South Korean, Chinese and Indian markets have seen the strongest value growth since 2006, posting CAGRs of 15%, 13% and 8%, respectively, for high-fibre bakery. Attractive products include seeded and multigrain breads, which are perceived as healthy and command a higher value spend than white bread.
From a better-for-you perspective, seaweed is one new and interesting ingredient in artisanal bread, with its variable content of sodium which could potentially reduce the use of salt in bread production. In China, there is a trend towards including fruits or vegetables such as cranberries in bread, either as toppings or ingredients.
Western Europe remains the largest gluten-free market
Globally, the largest gluten-free (GF) bakery market is Western Europe, where GF is now recognised as a healthy food choice, rather than a necessary dietary requirement for sufferers of coeliac disease. Ancient cereal grains are back in vogue, with regionally-specific examples including amaranth, quinoa and corn (Latin America), oats and spelt (Europe) and millet and teff (Africa).
In July 2012, scientists from Universidad Polytécnica de Madrid (UPM) patented a GF biscuit made with teff flour, using the physical properties of the grain with other natural ingredients. The biscuit has a low glycaemic index (GI), is high in iron and zinc and should appeal to diabetics, anaemics, coeliacs and sportsmen thanks to its unique nutritional properties, including slow-release carbohydrate.
With cereal prices remaining elevated in 2012, increased demand for alternative grains could signify a trend towards localised production systems and premium products. Smaller networks may better suit the fragmented bakery market as food manufacturers must compete for grain with the feed industry and bioethanol manufacturers.
Future industry development in bakery
Looking ahead, the future for global bakery remains positive, with the industry forecast to grow at just over a 1% CAGR from 2011 to reach retail value sales of US$492 billion in 2016. Global health and wellness bakery is set to grow at a 3% CAGR and should account for around 17% of total bakery sales in 2015.
With China’s share of global bakery retail value sales expected to increase by two percentage points by 2016, emerging economies will be central to manufacturers’ strategic focus. Attractive countries include India, Indonesia and Venezuela. Perhaps, over the next five years, healthy and indulgent products can be developed to satisfy all tastes and preferences, preventing further consumer confusion through mixed messages.