Sector Trend Analysis - Bakery Product Trends in the United Kingdom

Introduction

Overall, the world is experiencing an increase in demand for bakery products with a compound annual growth rate (CAGR) of 4.14% from 2012 to 2016. Moreover, this trend is expected to hold for the years of 2017 to 2021. The global consumer trend remains a greater health conscience, as health issues such as obesity are more than ever being emphasized through government campaigns.

The newfound craving for American-style bakery products is believed to be due to the emerging popularity of American coffee shop chains, such as Starbucks. Furthermore, in the current era, it is essential for baking product businesses to release enough variety to target every niche audience, from the health conscious to the occasional indulgers.

Although many EU countries feature in the worldwide top ten, the overall CAGR for the EU (0.56%) is nowhere near that of the world (4.14%). This is due to opposing preoccupations and different market dynamics. Europe's consumers differ a lot from country to country, however British and European consumers both craved the same thing in 2016: novelty and foreign flavours. The global health awareness also reached EU consumers. These movements lead to the slowing of many products that were deemed out of style or unaligned with the current health and wellness (HW) trends, which will be addressed in the subsector analysis.

In 2016, Canada exported US$2.273 billion worth of bakery products to the world, while US$2.199 billion went to the United States. A small percentage was exported to the United Kingdom (0.99%), representing US$22.5 million. However, the potential for Canadian exporters in the UK is favourable, as the country has been increasingly importing from Canada with a CAGR of 9.9%, which is a faster growth than the UK global import growth (1.54%).

Subsector analysis

Baked goods

Baked goods is the central category of all three bakery products, leading with more than half of the retail sales market share. It has been experiencing a slight decline of 0.86% over the past five years, with retail sales hovering at US$8.5 billion in 2016 versus US$8.8 billion in 2012. This is likely due to higher consumer health awareness and UK government's sensitization programs as a response to high obesity rates, which has driven people away from sweets and carbohydrate-rich foods.

Globalisation and exposure to non-traditional cuisine has been inciting the British into trying a multitude of ethnic breads like pitas, naans, and tortillas instead of traditional foods like packaged leavened bread. In fact, flat packaged bread has been massively growing in popularity with a 9.27% CAGR, thanks to its fresh, trendy and health-friendly appeal.

On the other hand, leavened bread, which is perceived as being old-fashioned, has dropped 3.33% in sales volume.

Artisanal baked goods are growing in demand due to an increasing awareness of product quality, capitalising 28.2% of retail sales market shares. British consumers are looking for authentic, high-quality and unknown flavours. Likewise, there is a battle of quality perceptions between artisanal and retailer products, the latter fighting back with on-site bakery sections. Among the top five companies, only Mondelez International and Pladis are multinationals, which shows the British value locality over label.

In fact, there is growing competition between multinationals and artisanal sellers, in addition to private labels, as both of the artisanal and private label sectors are gaining a significant amount of market shares. The main strategy used by multinationals in 2016 was strong marketing campaigns revolved around health and wellness, as well as introducing creative flavours. For example, Warburton's leveraged their ranking through high-profile advertising campaigns, while Premier Foods exploited the snacking trend and released snack-sized versions of their packaged cakes.

Breakfast cereals

The popularisation of the on-the-go lifestyle has been negatively affecting this category's demand, as consumers no longer depend on cereal for breakfast, making it the smallest sector in terms of sales value. In fact, in 2012, retail sales hit US$ 2.5 billion whereas in 2016, they reached US$ 2.6 billion, scoring a 2012-2016 retail sales CAGR of 0.97%. One reason behind this slow growth is the recent popularity of discounters, which force prices down for retailers.

The effects of the modern busy lifestyle are felt by the relatively low retail volume CAGR of 0.99%. Despite this result, hot cereals, muesli and granola were the big winners of this category with CAGRs of 8.16% and 5.10%, respectively. These products capitalized on the recent health and wellness (HW) trends in an impressive way. In fact, as parents grow weary of sugary cereals and are turning to more natural and earthy options like oatmeal and muesli for their children, cereal product producers are trying to recreate the same health appeal by cutting back sugar contents or launching high protein products.

In the next years, the demand for less processed and premium products is expected to keep rising as an effect of the HW trend. This will maintain the high growth of muesli and granola products in addition to that of hot cereals. Some of the other cereal types are expected to recover from their 2012 to 2016 negative growths, as companies adjust to the current health and wellness consumption trends.

Kellogg remained the main player in the cereals category with a 25.8% market share in 2016, despite the 4% loss in market shares due to the decline in RTE cereal. Also, PepsiCo has been gaining territory thanks to its hot cereals selection, with a 3% increase in market shares from 2012 to 2016. Among the top five, Associated British Foods Plc was the only domestic company, while the other four were multinationals.

Biscuits and snacks

The biscuits and snack category is the second-largest and the most rapidly growing category, with US$ 4.0 billion in retail sales in 2016 and CAGR of 2.97%. Energy bars and fruit and nut bars saw the largest increase in volume sales, as the products successfully aligned themselves as legitimate HW and on-the-run goods. Sweet biscuits haven't performed as well as expected, partly due to a critical flooding that affected the main biscuit supplier, United Biscuits (Euromonitor, 2017). The evolving health and wellness trend also threatens the biscuit industry, as British consumers are concerned about their consumption of fat and sugar. Companies will have to stay attuned and innovate according to consumer preoccupations to stay competitive and capitalize on this sector.

It is interesting to compare the growth of processed fruit snacks and fruit and nut bar. Processed fruit saw an increase in sales volume of 14.33%, where fruit and nut bars grew 18.92%. Both products grew in a substantial way due to their strong appeal to health-conscious consumers. In fact, they are in direct competition. However, the fruit and nut bar has the advantage of extra protein, and is thus a more inclusive product. Energy bars have the same inclusive nature, as they can touch to every health claim from high-protein to high-fiber, while being vegan, gluten-free or organic. They can also pertain to athletes, working adults or young kids.

While two multinationals figure among the top five (Mondelez International and Kellogg), it is Pladis Ltd (United Biscuits), a domestic company, that held the most market shares in 2016. Indeed, the company's strength in that year was their heavy focus on marketing. The best bet for biscuits companies that want to have successful sales in the UK is to align their products with HW trends while keeping prices affordable, as these items have traditionally been available at low cost.

New product launch analysis

According to the Mintel Global New Products Database (GNPD), 1787 products were launched in the baked products market in 2016. The most popular launch type was “New Variety” with 799 products, followed by “New Packaging” (414), “New Product” (312), “Relaunch” (227) and “New Formulation” with 35 goods. Within the new products, the top claims were vegetarian, ethical - environmentally friendly package, no additives/preservatives, social media, and low/no/reduced trans-fat. The vegetarian claim was used in 73.1% of new launches in 2016.

White sugar, salt and wheat flour were used in 68.9%, 65.1% and 64.0% of this year's launches. In the last year, plum, pink salt and cocoa beans saw the largest growth, with each evaluated at 1300%, 1200% and 900% in all bakery product categories. This is given that in the previous year only one product of each ingredient was released (Mintel, 2017).

While the total launches origins cover many countries, it is noticed that the UK's share is largely dominant (40.0%) which explains the dominance of domestic companies in all three categories. The following foreign companies were France (3.19%), Italy (2.80%), Germany (1.73%) and the Netherlands (1.34%).

Over the past five years, the leading type of launch was “New Variety”, accumulating 3,918 products and representing 45.6% of the total 5-year sample. An explanation for this may be processors' desire to keep up with consumer trends by modifying products that are familiar in ways that align with current health and wellness concerns, such as reducing sugar or fat consumption.

New product examples

Opportunities for Canada

The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) will help provide opportunities for Canadian producers, processors and exporters to reach the EU's 510 million consumers.

CETA can support you by:

• Reducing or eliminating tariffs on products imported into the EU
• Improving and expanding market access for Canadian products
• Providing a competitive advantage with preferential access to EU markets

Find more details:
CETA for agri-food exporters

For more information

International Trade Commissioners can provide Canadian industry with on-the-ground expertise regarding market potential, current conditions and local business contacts, and are an excellent point of contact for export advice.

• Overview of Trade Commissioner Services in the United Kingdom
• Find a Trade Commissioner

For additional intelligence on this and other markets, the complete library of Global Analysis reports can be found on the International Market Intelligence page, arranged by region:

For additional information on ANUGA 2017, please contact:

• Ben Berry, Deputy Director
• Trade Show Strategy and Delivery
• Agriculture and Agri-Food Canada
• ben.berry@canada.ca

Related reports

• Bakery products in Germany
• Healthy biscuits, snacks and snack bar trends in the UK
• Bakery products in Italy

Resources

• Euromonitor International, 2017.
• Euromonitor International, May 2017. Baked Goods in the United Kingdom
• Euromonitor International, May 2017. Breakfast Cereals in the United Kingdom
• Euromonitor International, May 2017. Health and Wellness in the United Kingdom
• Euromonitor International, May 2017. Sweet Biscuits, Snack bars and Fruit Snacks in the United Kingdom
• Mintel Global New Products Database, 2017.
• STATISTA, 2017. Starbucks – Statistics & Facts
• Webb, Dominic. CETA: the EU-Canada free trade agreement

Sector Trend Analysis - Bakery Product Trends in the UK - Global Analysis Report

Prepared by: Amina Qacha, Market Analyst (Co-op student)

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