Industry drives Europe’s bread market – with big variations in East and West.
Bread holds a sovereign leading position on the European bakery market. According to our latest Gira bakery report, bread accounts for 80% of all the bakery products consumed within the EU and Turkey.
The latest figures highlight a bakery market dominated by industrial manufacturers. In 2012, 66% of all bakery products were produced by industry – a level expected to rise to 69% by 2016. Of these, 32% are pre-packed, long-life products, 19% fresh finished and 15% bake-off.
But whether most of the bread consumed is fresh, pre-packed or bake-off in your markets depends on which part of Europe you are looking at. Big variations exist between East and West, where the industry is at differing stages of development.
Looking East, pre-packed bread is an important focus segment, largely driven by the rise of supermarkets, which are gradually replacing small grocers and kiosks. The supermarket movement is also increasing the prospects for sales of bake-off bread, as more supermarkets invest in their own baking facilities. Up to 2016, bake-off bread is expected to take market share from artisan products (baked from scratch) and fresh industrial bread with a one to two-day shelf life.
Notable exceptions to this trend include Romania, Bulgaria and Turkey, where bread consumption is based around daily deliveries of fresh industrial products to small stores. In the huge Turkish market, equivalent to a third of EU bread consumption, the tradition for fresh bread is responsible for high volumes of waste. The government here has now taken steps to counter waste by reducing the minimum bread weight from 300g to 250g.
Consumption in slow decline
Although it can be hard to believe when looking at the volume of bread products on supermarket shelves, bread consumption in the EU is on the way down – a long-term decline which the financial crisis has only slowed. In Western Europe, consumers have replaced some of the bread in their diet with pizzas, ready meals and other convenient products that, unlike bread, can be eaten as a meal on their own.
As in the East, there are still large pockets of fresh bread consumption – artisan bakers produce high volumes in Germany, France, Italy and Poland. Generally, though, the West European market stands out for two main trends.
The discount price squeeze
On the one hand, consumers are buying more premium quality industrial breads. On the other, they are going for the low-price, typically white bread sold by supermarkets, particularly discount chains such as Aldi and Lidl, which are now investing in facilities to develop bake-off sales. These supermarket sales are largely responsible for the squeeze on artisan bakers, with more consumers today choosing oven-fresh bake-off breads or pre-packed, long-life products.
For industrial bakers, the price pressures exerted by discount stores are no less challenging, requiring bakers to maintain a sharp focus on cost optimisation of their processes and recipes. Profit margins are dependent on huge volume sales. With the rising popularity of bake-off bread, the competition between industrial bakers is increasingly tough.
Premiumisation by branding
Strong branding is becoming an important success factor. While shopping in supermarkets, consumers tend to seek out the brands they know and trust. Informative packaging clearly states what consumers can expect. This is an advantage that pre-packed bread enjoys over fresh bread – and creates opportunities for product differentiation that can lift bread into the value-added premium category.
Differentiation in the form of regional breads and other specialities may actually turn out to be the rescue ladder that secures the hard-pressed artisan bakers’ long-term survival. By branding themselves as speciality shops that offer products unavailable from the regular retailer, the most innovative artisans could breathe new life into their business.
More information about the state of the bakery industry in Europe is available at www.girafood.com