Bread is a traditional staple in the UK and Germany, but bakery profits are under pressure. We explore the pockets of potential growth.
By Paul Turner, sales group manager UK, Ireland, Benelux and Nordic, and Sokrates Ageloussis, sales group manager Central Europe
Bread prices have come under huge pressure in European markets where discount supermarket chains have revolutionised the retail grocery landscape in recent times. Along with the free-falling bread consumption that some markets face, this has created serious issues for industrial bakers.
Long-term survival is about seeking out pockets of growth, including sandwich alternatives, flatbreads and artisanal products. Although these growth niches vary from market to market, they all reflect the general concerns of consumers right now: health, naturalness and authenticity.
Downward price trend
In Germany, today’s retailer pressure has reduced the price of a bread roll to as little as 15 Eurocents. In the UK, prices have dropped from around EUR 1.73 to EUR 0.5 for an 800g loaf over the past 12 months alone.
The downturn in UK value sales of bread and other baked goods is expected to continue, with Mintel predicting a 5.2% decline from 2015 to 2020. Volume sales, on the other hands, are expected to fall more than 7% over the same period.
By comparison, German bread consumption is stable. According to market figures from Gira, consumption has fallen only 1.2% over the last 15 years, partly due to the robust German tradition for eating bread with the evening meal.
The discount competitors
Whether you travel to the UK, Germany or the surrounding markets, two discount supermarket chains in particular are on everyone’s lips: Aldi and Lidl. It is these two that have put well-established national supermarkets under pressure with their small and competitively-priced bakery product range.
In the UK, the big four supermarkets Tesco, Sainsbury’s, Morrisons and Asda have responded by rationalising their bakery aisles – a move that has made it difficult for industrial bakers to win space for new product launches. This is where the pockets of growth are a vital lifeline for those bakers with the capability to exploit them.
‘Thins’ and gluten-free
One of the interesting categories that has emerged on the UK market over the past five years is the ‘thins’ sub-category, which has rapidly grown to around EUR 310 million in value. Including, for example, bagels and burger breads in thin versions, these products are widely marketed as low-carb sandwich alternatives. Tortillas and other flatbreads continue to enjoy similar popularity as healthier bread options.
Widespread media coverage of the perceived benefits of a gluten-free lifestyle has kept consumer attention on gluten-free bakery products. Considerable work in this area means that gluten-free breads are today of a reasonably high quality. The quality of gluten-free tortillas, cakes and crumpets, on the other hand, still lags behind.
In pursuit of a healthy glow
While health concerns largely drive innovation on the UK market, in Germany the focus is directed more at innovation within an already healthy segment.
Here, the dominant bread type is mixed bread, based on wheat and rye, followed by toast bread, where many products today contain seeds to give them a healthy glow. Wholegrain and rye bread are other significant sub-categories.
Against this backdrop, trends that are leading innovation on the German market include the addition of ancient grains and the removal of e-numbers, such as emulsifiers and preservatives.
Another trend is artisan-style breads. These include the authentic, organic buns today consumed in the many gourmet burger outlets that have sprung up all over Germany – often recognizable by the queues of people to be found waiting outside for a table, and a good example of premium offers winning over fast food.
This rising artisan movement is also well known in the UK, where the popularity of micro-breweries has inspired the emergence of small, artisanal bakeries. Traditional baking methods, natural ingredients and authentic taste and textures are all part of the concept. Consumers have welcomed the artisans with open arms. As in Germany, premium prices are clearly no barrier to success.
What does it all mean for industrial bakers? Our answer would be that the road ahead is hard but by means impossible. This is a time for a targeted response to consumer concerns and preferences. Reliable market insights have never been more important to new product development.