Consumer Insight

Tough times for bread and baked goods market

Consumers are increasingly cutting back on their consumption of bread and baked goods, whether for diet-
related reasons or because of preference for other breakfast or lunch options. Similarly, those leaving the
category completely through switching to healthier options are likely to have already have done so.
However, widespread interest in innovative ranges, provides cause for some optimism. New Product
Development (NPD) is set to be absolutely key for brands to survive and indeed thrive in this challenging
market landscape.

The Market
The bread and baked goods market is expected to experience a third consecutive year of sales losses in
2016.
According to data from IRI/Mintel, Volume sales are expected to fall by 4% year-on-year to 2.2 billion kg, as
consumers look to other foods which fare better on perceptions of health or offer more excitement. With
deflation adding to the challenges faced by the market, a 6% decline is expected in the value of the bread
and baked goods market in 2016. This would mean the value of sales falling below £4 billion for the first
time since 2011.

However, the decline in volume sales is not forecast to continue in to 2017 as some stabilisation is
expected. This is partly because consumers leaving the category completely, through switching to healthier
options, are likely to already have done so.
Packaged Sliced Bread
The packaged sliced bread market has held its place on the nation’s shopping lists and is still bought by
well over 90% of GB households, it is by far the most popular type of bread.
However, in value terms, sales of pre-packed bread are expected to fall by a further 10% year on year in
2016. With the retail price of all types of pre-packed bread continuing to fall, the decline in volume sales is
expected to be less severe than for value sales.
This category’s problems stem from the significant decline in the proportion of consumers eating bread on
a daily basis. According to The Grocer, 45% of the population are estimated to now eat bread on a daily
basis, compared to 52% a year ago. Over-55s have the highest frequency of eating packaged sliced bread,
but only a quarter of 20-24s eat packaged sliced bread on a daily basis. This makes the long-term future of
the sliced bread market look fairly challenging.
However, opportunities do exist and these include, further promoting the goodness of seeded and
wholegrain loaves. These loaves provide a healthy source of nutrition, a message that will increasingly
resonate with today’s health conscious consumer.
Other Sectors
While still only accounting for approximately 5p in every £1 spent on bread and baked goods, craft bakery
is the only segment of the market growing the value of its sales in 2016, according to Mintel. Craft bakeries
are benefitting from consumers interest in artisan products and are also gradually gaining ground on in-
store bakeries.
Speciality breads were benefiting from consumers seeking out healthier and more exciting alternatives to
traditional sliced bread. However, even these products are experiencing a decline in 2016 and sales are
expected to dip by 4%. Wraps are the only segment within speciality bread where growth has remained in
positive territory in 2016.
Sweet baked goods proved to be more than just resilient in the face of the so called war on sugar in 2015,
positively thriving, with the value of sales up 5% year on year. The outlook is less rosy for 2016, with
volumes set to fall by 3%, equating to a value loss of £4 million. Healthier eating intentions and competition
from foodservice are likely contributing factors.
Sales of gluten-free are growing strongly and this trend looks set to continue for the foreseeable future.
Bakery companies’ response of significant levels of gluten free innovation has helped to limit damage and
encourage gluten avoiders to stay in or return to the bread category.
Price is King
Bread is well established as a price sensitive commodity. As such, it is no surprise that low price is at the
top of consumers’ considerations when buying bread. Encouragingly, however, less than half (44%) of
consumers surveyed cited this factor as most important, suggesting scope for brands to entice consumers
to pay a little extra and build value back into bread. In order to encourage today’s savvy shoppers to trade
up, the onus is on brands to create tangible and compelling benefits so that a higher price point can be fully
justified.

The Outlook
The challenges of the bread and baked goods market are far-reaching, deep rooted and not easily fixed.
There is the negative press around sugar and carbohydrates, plus consumers’ changing out-of home and
on-the-go eating habits means there’s intense competition from other food products in retail and
foodservice.
That said opportunities do exist for this category. Supermarkets can enhance their offering of bread and
baked goods by bringing products from local bakeries to the mass market through collaborations. This
would also show supermarkets to be community-minded through supporting small enterprises.
Widespread interest from consumers in innovative products provides further cause for optimism.
Developing new products such as loaves with added benefits, to capitalise on the health trend, is set to be
absolutely key for brands to survive - and indeed thrive in today’s market landscape.