With a value of euro88bn, the EU bakery market is one of the most valuable sectors in the food industry after carcase meats and fruit and vegetable products. Its volume of nearly 32Mt means that we each consume an average 82kg of bakery products a year - or 225g every day.
Bread is by far the main market segment, accounting for 41% of total value and 63% of volume. Morning goods account for a further 10% of value and 14% of volume. Although the consumption of biscuits and breakfast cereals is relatively low in volume, it brings much of the added value into the sector.
For many years, European bread consumption has been in decline. As Europe's consumers became more affluent they were able to afford to choose from a much wider range of alternative snacks and fillers. However, this decline now shows signs of levelling out.
Total bread consumption has more recently been boosted by innovation, with more attractive loaves often containing added ingredients, toppings and health claims. It has also been boosted by the development of the ready-made filled breads segment as the snack of the moment.
Although biscuits bring much added value to the total bakery market (17% of the sector's value and 11% of the volume), overall sales growth has been low.
Country by country, the largest markets by volume are Germany (7.9Mt), Italy (5.4Mt), and the UK and France (4.6Mt each). However, the UK has the largest biscuit market, followed by Germany, although The Netherlands leads with the highest per person consumption approaching 16kg per year. Germany has by far the largest bread market, followed by Italy. The UK has by far the largest ready-to-eat breakfast cereals market.
In overall terms, EU consumption of bakery products is growing slowly by around 0.2% per year, although prices, including inflation, have been rising by 1.1% per year since 2001. However, growth in consumption has not kept pace with population meaning that, at the same time, per person consumption has been falling by an average of 0.2% per year.
At the same time as companies have been innovating and adding value to this largely traditional sector, many products are now retailer branded and have been used as a spearhead for discount campaigns. Low bread prices attract consumers.
Branding and pricing
A further factor affecting branding and pricing has been the decline in local bakeries. Across Europe the effects of more women joining the workforce, coupled with an increasingly time-poor/cash-rich society, has encouraged this decline.
For example, in Spain where not so many years ago the housewife would often visit the local baker twice a day to buy fresh bread, the trend over the last 20 years has been for supermarkets to take an increasing share of sales with long-life ('sandwich') bread products. Not only has this changed the way bread is sold, it has also changed the way it is manufactured.
The development of the way bread is made and sold continues today with the in-store bakery. There is no doubt that increasing proportions of bread sales are under retailers' own brands, although brands are fighting back with further developments and adding value. However, retailers' brands are also making inroads into morning goods, biscuits, cakes and pastries and even breakfast cereals. The overall effect is, again, to pull prices down, while both retailers and brands are attempting to add value.
Health factors
One of the ways in which bakers have been adding value is through the development of more healthy alternatives. Once, healthy bakery meant low fat croissants or biscuits: today the health options are far more varied.
Breads have been fortified with added omega-3 fatty acids, although the inclusion of the "less effective" plant ALA, instead of marine-sourced DHA and EPA forms, has been criticised. Breads have also been developed that contain extra bran, prebiotics, soya, seeds and even cranberries.
As a major provider of salt in the diet, bread has been reformulated by some manufacturers to avoid criticism over excess salt.
Overall, bread can provide an effective medium for the addition of various healthy elements. This is not the case with morning goods, biscuits, cakes and pastries, which are seen as indulgences. Nevertheless, many reduced fat alternatives are available. These items can also be effective vehicles for a range of so-called 'superfoods'.
As in most food markets today, you are never far from the influences of the health trend in bakery. Until recently, health in bakery was largely confined to reduced or low fat alternatives, but this is changing and the healthy offerings are becoming more widespread and creative.
Bread and morning goods
Bread consumption, the bakery sector's main volume generator, has declined significantly in mature markets over the long-term because of competition from other foods and snacks, although its rate of decline has now slowed. This has been caused by the industry developing new varieties and added-value goods in addition to the development of prepared sandwiches.
A continuing trend towards multiple retailing, single person households and working couples throughout Europe has created a demand for convenience, pre-packaging, extended shelf-life and the development of specialist breads.
These pressures are expected to continue. Many of these products are now sold in frozen form for bake-off. Sales of ethnic breads are also growing strongly in some markets. These can be purchased in frozen form but are often sold chilled or shelf-stable in modified atmosphere packaging.
Meanwhile, morning goods, such as croissants, brioches, doughnuts and buns are also enjoying good growth rates as consumers look for something different to normal weekday breads.
Biscuits
This is a largely traditional market where most products are sold under ambient conditions. However, developments include a wide variety of product types and variations such as cookies and muffins with blueberries and other exotic combinations and 'superfoods' as well as a range of low fat alternatives.
The European biscuit sector has experienced mixed fortunes in the past five years with large variations in performance from country to country. Where declines have occurred these can be put down to two main factors. One is health: biscuits are perceived as high in fat and sugar and unsuitable for those with diabetes or gluten intolerance. The other is competition: many other products now compete in the indulgent snack sector of the market and the success of other products has had a negative effect on the consumption of traditional biscuits.
Many of the major brands have reacted by developing their brands into hand-held snack products in an effort to follow the latest eating trends. There are also far more gluten-free products to be found.
Growth in low fat alternatives, which were such a success in the late 1990s with products such as Bahlsen diet butter Leibniz and McVitie's Go Ahead range, appears to have peaked, however. Consumers are only willing to sacrifice taste and texture on a limited basis and it will take a major improvement in quality to encourage significant growth - especially in a sector so closely associated with indulgence. Nevertheless, the quality of fat and sugar replacement technology is improving all the time and quality is the trigger that the market needs if a significant sector is to be established.
However, despite all these efforts, overall demand is expected to continue to rise only slowly, although per person consumption will decline slightly.
Sales of added-value, chocolate-coated and snack biscuits are forecast to increase at a faster rate than for the market as a whole and this brings with it an increase in the use of exotic and imaginative combinations of ingredients.
Cakes and pastries
In the cakes and pastries sector, there are similar influences. The continuing strength of multiple retailing throughout Europe has brought with it pre-packaging and the development of specialist cakes and pastries including seasonal and celebration cakes.
However, multiple retailers now compete more effectively with specialist bakers and cake-makers by having their own in-store bakeries, giving the consumer a fresh alternative to pre-packaged products.
A further development has been to take cakes into the chilled sector where more value has been added through the sales of fresh cream products and other cakes and pastries. Demand is expected to rise as consumers purchase them either as indulgent treats, snacks and lunchboxes or because they lack the necessary time/skill for home-baking.
Cereal, health and energy bars
One of the fastest food industry growth rates in recent years has been enjoyed by cereal, health and energy bars. Today there are many types available for use either as breakfast or meal replacements, and for snacking, for energy, isotonic or body-building. Significant further growth can be expected, although not at quite the rate of the last five years.
Ready-to-eat breakfast cereals
One of the major successes has been the rise in popularity of ready-to-eat breakfast cereals. The traditional breakfast is being eroded by the need for 'fast nutrition' and this is where cereals have made significant inroads.
However, in the largest market, the UK, demand is virtually saturated although many other EU markets continue to experience significant growth.
For added value products, the future looks positive with continued demands for health through probiotics, soluble and insoluble fibres, fruit pieces and vitamins. Meanwhile, 'functional' breakfast cereals are being developed alongside, and combined with, even more convenient formats and cereal-based snacks.
On the surface, the future for bakery in Europe does not look particularly good, however. Total growth should continue at its current rate of 0.2% per year in volume and 1% per year in value. However, in such a large market there will continue to be niche opportunities for development and adding value.
Areas for development
These will be trend-led rather than market-led. It will be up to the industry to develop bakery products that meet the needs of modern lifestyles. In addition to product development, this will also demand a close look at opportunities in the various distribution channels.
Seven key areas for further development of baked goods have been identified:
* Whole grain/different grains
* Additions/coatings
* Ethnic breads
* Rustic/artisan breads (traditional values)
* Health (including organic and natural ingredients) and healthy inclusions
* Food-on-the go/snacking variants
* Taste and flavour.
This article is from RTS Resource's Big Food Guide 2011, for more information contact Jamie Rice on +44 (0)1902 422282 or email jamie.rice@rts-resource.com