New Market Trends in the European Bakery Sector Bakery market drivers and brakes through 2018 25th Annual IAOM Mideast and Africa District Conference Cape Town, South Africa, 5 December 2014 by Anne Fremaux Contact : Girag & Associates, 13 chemin du Levant, 01210 Ferney-Voltaire, France Email : a.fremaux@girafood.com Tél : +33 4 50 40 24 00
What GIRA does Expertise in Bakery: products/countries/circuits Consulting Individual market research Strategic multiclient research Market due diligence All along the food & drink and distribution chain - throughout the world Update of Bake-off Survey + (2015) Bakery in Russia (2014) Bakery Ingredients France (2014) Bakery Panorama EU-27 & Turkey (2012, 2007) Savoury Pastry Snacks EU-16 (2011) Bake-off Bakery Markets EU-16 (2010, 2006, 2002) Fresh Bakery Strategies in Modern Retail France (2007) Use of Fats in the Bakery Industry France (2006) + open for Founder Client subscription 2
Menu An overview of the European bakery markets Need to adapt to new consumer trends Future challenges in bakery products distribution Who will lead the growth? The new shape of the industry Now and in the future To sum up Some major trends 3
An overview of the European bakery markets Need to adapt to new consumer trends 4
Bakery products and production methods The same definitions used in all countries BreadBread Consumer products Fresh bread Industrial prepacked bread "Artisanal" Industrial Production methods Made from scratch on the premises Fresh Bake-off 5
The European bakery market in 2013: Over 40 million tons and EUR 130 billion 14,000 12,000 10,000 8,000 6,000 4,000 Bread Viennoiserie Patisserie Savoury pastry 2,000 0 Turkey Germany France U. Kingdom Italy Poland Spain Romania Greece Netherlands Belgium Czech Rep. Bulgaria Hungary Portugal Austria Sweden Ireland Slovakia Denmark Finland Lithuania Cyprus Latvia Slovenia Estonia Bakeryconsumption ('000 t) Source: Gira compilation Overall bakery consumption has decreased by -0.2% in the past 10 years Consumption should remain steady in the near future. 6
Bread & fresh products dominate But suffer from increasing competition Bakery products consumption volumes by products, 2013 Europe Bakery products consumption volumes by technology, 2013 Europe 7
Long-term trends have stopped or slowed down: bread has benefited from the crisis Growth in products - 2001/2006, 2006/2012 and 2012/2018 Savoury P. 2,0% 2001/2006 Viennoiserie & Patisserie % volume growth pa 1,0% 0,0% 2006/2012 2012/2018 Bread 2012/2018 2006/2012 0 2 500 5 000 7 500 10 000 12 500 15 000 17 500 20 000 22 500 25 000 27 500 30 000-1,0% 2001/2006-2,0% Source: Gira (Size of bubble denotes value in EUR mio) Market volume ('000t) 8
Bakery consumption will show contrasted future growth towards 2018 40,500 40,450 40,400 DK FI 40,350 ('000 tons Bakery) 40,300 40,250 40,200 40,150 40,100 UK IT ES NL EL BE IE PT AT SE PL RO CZ BG HU SK LT LV CY SI EE 40,050 40,000 39,950 DE FR 39,900 Source: Gira 2013 DE FR UK IT ES NL EL BE PT AT SE IE DK FI PL RO CZ BG HU SK LT LV CY SI EE 2018f TK 9
Trends in bakery products consumption: polarization of the bakery market Trading down for basic products: Success of low-price standard daily bread Success of hard-discount stores Trading up: High quality and more expensive bread specialities Success of artisan breads ("Pain de Tradition Française") Hamburger frees o.s. from fast-food Retailers and manufacturers need to fill the gaps! 10
Bakery products consumption drivers and brakes Main consumption drivers: Bread: natural and cheap New tastes and new shapes Search for snack and food-on-the-go Looking for meal solutions New tastes Snacking On-the-go Mini-bites Convenience Meal solutions Savoury Brakes on consumption growth: Effect of the economic downturn on indulgence and added value products Sweet products: a treat and not a need Health concern Competition from alternative savoury snacks Return to home-baking Trade down 11
"Better-for-you" bakery: Salt intake reduction Fat alternatives High-fibre, high protein options Functional and fortified foods Free-from Gluten Wheat Allergens Sat fats Palm oil Clean-label formulations The major health challenges in bakery Without affecting products' quality BUT the consumer still want a wide variety of tasty bakery goods! Bakery and ingredients producers need to adapt! New ingredients formulations: enzyme-based, technological, flavour Special requirements also imposed on technology: specific production lines, even custom-built machines 12
Avoiding food waste: 25% of bread products in high-income countries are wasted At retail & consumer level, during storage & processing Buying local to support local economy: Manufacturers buying local flour Consumer buying in local stores or directly to producers Carbon footprint: Bakery products contain a wide spectrum of ingredients from different origins New processes which make smarter use of natural resources Sustainability is omnipresent Global "green" trends also apply to bakery products The annual volume of water used for wasted food would fill lake Geneva three times 13
Future challenges in bakery products distribution Who will lead the growth? 14
Modern retailers now hold 45% of distribution expected to increase further Bakery products distribution channels, Europe, 2001/2017 trends (by volume) 15
Modern retailers now hold 45% of distribution expected to increase further Bakery products distribution channels, Europe, 2001/2017 trends (by volume) 20,000 18,000 16,000 14,000 Modern retailers 12,000 Foodservice ('000t) 10,000 8,000 6,000 Artisan bakers Bakery chains 4,000 2,000 0 2001 2006 2013 2017 Source: Compilation Gira Artisan bakers => Services & foodservice Modern retailers => "Freshly baked": key in driving footfall and more frequent visits Bakery chains => A mixed positioning between a traditional bakery & a fast-food outlet Foodservice sector => Expansion of coffee shops and cafes/bars 16
Artisan bakers generally have the highest price positioning Fresh bread price positioning by retail sector - 2012 150 Index 100 = average country price 125 100 75 50 CH BE FR IT ES NL DE PL HU UK Source: Gira Artisan bakers Modern retailers Hard-discount 17
New types of bakery stores: threats or opportunities? Single product bakery "Yesterday's Bread" in France "Click & collect" bakery Bread vending machine in Belgium Discount bakery stores in the UK 18
The new shape of the industry Now and in the future 19
Industrial bakers supply 67% of bakery With main opportunities for bake-off European bakery products production: artisanal versus industrial, 2013 Artisanal supply: 33% Industrial supply: 67% 20
Craft bakers still represent huge volumes But almost no potential Growth % in total bakery production methods Europe, 2013/2018 6% % volume growth pa 2013/2018 5% 4% 3% 2% 1% 0% -1% -2% 0 Home-baking In-store scratch Bake-off Fresh Prepacked long-life -3% Artisan -4% Source: Gira Market volume ('000t) (Consumption figures) 21
Biggest growth is foreseen for bake-off, everywhere! Growth prospects in bakery products production 2013/2018 22
To sum up Some major trends 23
Drivers The main trends - And their likely effect on Industrials & Millers' activities Brakes Bread: staple & healthy Snacking, on-the-go, savoury Expansion of modern retail Industrial production Bread & fresh products: mature markets Trading down Increasing health concern Declining artisans & in-store scratch baking Opportunities Target both ends markets Answer to the still big standard markets Add value to bakery products and flours Branding Opportunities for differentiation New ingredient formulations ISB in hard-discount Opportunities for bake-off volumes Threats Rising cost and raw material prices Volatility Pressure on selling prices / on quality ISB in hard-discount Threat for bake-off margins 24
Is bake-off now at a turning point? Bake-off at production level: sustainability will be the key Trends are moving towards clean-label products Carbon footprint: bake-off is energy intensive New formulation and new ingredients Upgrade bakery processes Bake-off at consumer level: "Defrost" labelling regulation? Positive impact of "freshly baked" or "baked in-store" "Freshly baked" a misleading label? Emphasizing scratch baking whenever possible UK, Slovakia, Czech Republic, Greece Aldi (DE) and Coles (AU) taken to court It is a still ongoing legal battle 25
Thank you for your attention! a.fremaux@girafood.com 26