Global Biscuit (cookie) Market: Indulgence and quality still thriving

Better economic prospects are set to have a positive impact on the sales performance of biscuits (UK) and cookies (US) in 2010 as higher disposable incomes encourage consumers to increase their spending on indulgence products.

Demand picks up in 2010

Global retail value sales of biscuits are predicted to reach US$68.2 billion in 2010, according to Euromonitor International’s estimates. Globally, sales are set to grow by 3% in retail volume in 2010, a moderate improvement in relation to the 2.5% increase registered the previous year.

Qualitatively, biscuit manufacturers are continuing to focus on health trends, adding further functionality to their existing product ranges. This is because indulgence in biscuits, especially in developed markets, is no longer regarded as a differentiation treat from more economical private label products.

Research shows that consumers are turning in increasing numbers to new product developments that offer not only indulgence but also health properties. Interestingly, demand for health and premiumisation is making rapid progress among middle- and upper-class consumers in emerging regions as well.

This trend is underpinning demand for high added-value products in urban areas, which account for the bulk of packaged biscuit consumption in developing countries.

Italy and Spain lead growth in Western Europe

Sales of biscuits are predicted to grow by 1.4% in retail volume terms in Western Europe in 2010, up from the 0.9% growth registered the previous year. Biscuit sales in this region are set to benefit from increased innovation activity as well as a moderate recovery in economic growth.

Economic contraction in Western Europe reached its peak in 2009 when GDP declined by 4% in real terms, according to Euromonitor International’s Countries and Consumers database. Recovery is, however, predicted to start in 2010, when GDP will grow by 1% in real terms.

Geographically, biscuits will benefit from fairly strong demand in countries like Italy and Spain, where retail volume sales are expected to grow by 5% and 3%, respectively, in 2010. Demand for biscuits in Spain is being driven by the health positioning that these products have taken in the last few years.

Galletas Gullón, for example, expanded its functional range Active during 2008 and 2009 to include two new products – Glucanos (featuring natural fibre) and Omega 3. Industrias Rodríguez (Virginias) also launched new products that are gluten-free and lactose-free in 2009. Research shows, however, that high unemployment and economic uncertainty will continue to encourage Spanish consumers to turn to more affordable indulgence products.

This is the reason why plain biscuits, the category with the lowest unit price, is expected to outperform other products such as chocolate-coated and filled biscuits. Retail volume sales of plain biscuits in Spain are predicted to grow by 2% in 2010.

Other than because of a relatively low unit price, plain biscuits are benefiting from the current home-snacking trend as cash-strapped consumers prefer eating biscuits as part of their breakfast instead of going to coffee shops and bars.

Similarly, price is playing an increasingly important role in Italian consumers’ spending decisions. The economic recession is driving many consumers to trade down to less expensive products, a trend particularly evident within the standard segment.

Overall, the Italian biscuits category is seeing increasing polarisation of demand, with consumers either preferring low prices or high-quality brands at the expense of mid-priced products. Interestingly, more expensive chocolate-coated biscuits are set to benefit from improved economic prospects in 2010.

According to Euromonitor International’s Countries and Consumers database, Italian GDP is set to grow by 1% in real terms over 2010, in contrast with the 5% decline recorded the previous year. Retail volume sales of chocolate biscuits will grow by a mere 0.2%, a very modest performance which, however, reverses the decline (-0.5%) in sales seen in 2009.

Savoury biscuits and crackers revive demand in the US market

Research shows that health will continue to be one of the key trends driving consumer decisions in the US biscuit market in 2010. It is in light of this trend that American manufacturers have created new varieties of existing products and have introduced new healthier biscuit products to the market.

In 2008, Special K cracker, a biscuit line low in calories and made from whole grains, was introduced. Within sweet biscuits, several manufacturers have introduced 100-calorie pack versions of classic favourites as well as varieties of biscuits enhanced with whole grains. Research shows that although consumers still desire the indulgence of sweet biscuits, they are choosing options that allow them to enjoy small indulgences without feeling guilty.

Savoury biscuits and crackers is one of the few biscuit types expected to post both value and volume sales gains in 2010, with retail value sales up by 2% to reach almost US$5.1 billion. Savoury biscuits are generally seen as healthier snacking options than sweet biscuits, and lend themselves well to whole grain or low-sodium extensions.

As a result, manufacturers which have typically not offered whole grain or natural crackers are beginning to introduce these types of products. Research shows that the premium segment for crackers is continuing to expand. This expansion runs on the back of greater availability of foreign brands along with a wider array of flavours, including cheese, pepper, olive oil, garlic, rosemary and other spices.

Demographic growth and good economic prospects underpin demand in Latin America

Retail value sales of biscuits in Latin America are expected to reach the US$13.5 billion mark by the end of 2010. Retail volume sales are expected to grow by 2% in 2010, compared to the modest 1% registered in 2009.

Demographic growth will continue to be a key driver of demand for biscuits in the region. According to Euromonitor International’s Countries and Consumers data, the birth rate in Latin America stood at 19.6 per 1,000 inhabitants in 2009, quite a high figure when compared with the 11.7 birth rate in more economically developed Western Europe. Furthermore, economic growth is set to play an important role in the recovery of sales.

This economic recovery is set to be driven by stronger activity in urban areas, which account for the bulk of biscuit consumption in the region. Real GDP growth is forecast to improve from a 2% decline in 2009 to a 4% increase in 2010, according to Euromonitor International’s Countries and Consumers database.

One of the countries where economic growth is set to be particularly intense is Brazil, where GDP growth is forecast to increase by 6% in real terms in 2010. In Brazil, biscuit sales are expected to grow by 2% in retail volume in 2010, a performance in line with the growth achieved the previous year. Research shows that demand for biscuits is being underpinned by relatively low prices, which have made these products largely affordable to the majority of Brazilian consumers.

At the higher end of the market, Brazilian manufacturers have bet on the introduction of healthier biscuits, including versions which are low in fat or fat-free, higher in fibre and fortified with vitamins and calcium. They are targeted at busy professionals in urban areas and sales are expanding rapidly, albeit from a relatively reduced consumer base. ‘Health and wellness’ versions are predicted to account for a 30% value share of total biscuit sales in 2010, according to Euromonitor International’s estimates.

Future direction

Global retail volume sales of biscuits are predicted to grow by 15% over the 2010-2015 period, according to Euromonitor International’s projections. Research suggests that increasing dietary concerns and competition from ‘healthy snack bars’ will constrain global growth over the medium term.

Conversely, demand for indulgence snacks offering health and quality properties will drive up sales of premium biscuits. This trend will be particularly intense across developed markets and in urban areas in emerging economies.

Sales in Asia-Pacific will be underpinned by strong demand in India and China. Sales are predicted to grow by 30% in retail volume terms in each of these markets over the 2010-2015 period, a performance partly driven by strong demographic growth. Migration from the countryside to the cities will underpin rapid demographic growth in cities like Beijing and Shanghai.

This trend will push up the number of middle-class consumers with enough purchasing power to buy packaged biscuits, particularly in more affordable plain formats. Similarly, the trade up from artisanal baked products to packaged biscuits will continue in most emerging economies, with a special emphasis on health in South American markets like Brazil and Argentina.

Conversely, maturing consumer demand and dietary concerns in North America and Western Europe are likely to slow the growth of sweet biscuits at global level. This is because consumers in these markets are increasingly turning to more health-oriented snacks like baked low-fat crisps and snacks bars.

The challenge for biscuit manufacturers in more developed regions will be to increase the health content of their portfolios through the addition of functional and low-sugar ingredients, while increasing the indulgence factor via the combination of exotic flavours. Only in doing so will branded products manage to increase differentiation from private label and face up to the challenge currently posed by other snack categories.