Following steady declines in 2002 and 2003, retail sales of bakery products in Latin America posted a 9.6% rise in 2004, boosted by lifestyle changes and trends in health, wellness and convenience. But despite these trends, price is still particularly important to Latin American consumers. Euromonitor's Francisco Redruello reports.

According to Euromonitor International, retail sales of bakery products in Latin America reached US$36.2bn in 2004, up 9.6% on the previous year, recovering from the steady decline recorded in 2002 and 2003. This strong value performance in US dollars was aided to some extent by the weakening US dollar. In volume terms, growth in 2004 was 1.2%, again an improvement from the declines posted in 2002 and 2003, however, in more muted terms.

Positive growth in 2004 in Latin America was supported by strong recovery in Argentina. The other major market that witnessed strong growth in 2004 was Mexico, as packaged/industrial baked goods increasingly came to replace traditional foods such as tortillas and arepas in the national diet. The continued trend towards urbanisation and the expansion of the Latin American middle class also saw the increasing prevalence of snacking and the consumption of breakfast cereals, which drove sales in 2004.

Table 1 Retail Value Sales of Bakery Products in Latin America - % Breakdown by Country

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Economy still an issue

Economic considerations in Latin America help to ensure that price remains very important in purchasing decisions and, as a result, artisanal/unpackaged bakery products continue to be significant in the market. Euromonitor International has, however, noted emerging trends in the region in common with more developed markets, albeit on a different scale, such as health awareness, the demand for convenience, indulgence and the growth of in-store bakeries within supermarkets. The main difference between Latin America and the developed regions is that these trends have been present for a longer time in Western Europe and North America, driven by the existence of the dominant middle class.

Health awareness emerging

One of the key trends in Latin America is the increasing importance of health issues amongst middle and upper class consumers in urban areas. Developments in Mexico have been highly indicative. While there is no recognition yet of obesity as the serious public health problem that has preoccupied many developed nations, bakery players in Mexico are already introducing more products that are "good for you".

Thus, it is possible to find an ample variety of whole-grain bread, wholemeal pastries, fortified biscuits, low-calorie biscuits, high-fibre cereal with ever changing flavours and even rice-based cereal with yoghurt, promising fewer calories. Many of the new products launched in recent months are focused on health and wellness, including low-calorie, reduced-fat and higher-fibre lines. The health and wellness trend even made a first for biscuits, with the introduction in 2004 of Gamesa's Zero Line of no-sugar biscuits, quite a novelty in the Mexican market.

Similarly, Brazilian manufacturers have invested substantial amounts in products that contribute to a more balanced and healthy diet. Manufacturers of baked goods and biscuits, for example, which already have considerable penetration in Brazilian households, have focused on the launch of diet/light products in recent years.

Examples of brands and companies investing in this niche are Cróqui, produced by Feinkost (reduced fat and reduced sugar breakfast cereals); Quaker and Ferla (hot cereals); and Nutrella (bread with high fibre). One of the most significant developments in 2004 in the Brazilian market was the introduction of Trakinas Super Carinhas Power by Kraft Foods in May. The new biscuit line is enriched with calcium and vitamins, and is targeted mainly at middle and upper class parents, particularly concerned about the health and well-being of their children.

Busy lifestyles demand convenience

Socio-cultural factors are also currently playing a crucial role in the direction taken by the industry in Latin America. The entry of more women into the workforce and busier lifestyles have been important drivers in the growth of bakery products. For example, in Chile, it is reported that as the number of families with two working parents increase, there is less time to prepare school lunches for children. Individually packaged/industrial cakes are benefiting from this trend, and have significantly increased their presence in Chilean supermarkets as they replace lunches/snack food that was traditionally prepared from scratch.

Convenience was critical in the success of Kraft Foods' Club Social in Argentina as well. The new line of biscuits, introduced two years ago, had a small package size, and profited from the on-the-go trend in consumption, which favoured products that can be easily carried and consumed in any place. Furthermore, its small size means a low price, a factor of paramount importance for Argentinean consumers.

New lines in small formats are also gathering popularity among most Venezuelans. Companies in Venezuela have sought to stimulate sales by offering simple products in small formats at more affordable prices, as the increasing levels of competition have made it difficult to raise prices. For example, Sucesora de Jose Puig launched in late 2003 its traditional biscuit Galletas María in a smaller pack size of 30g.

The indulgence card

Despite economic considerations, the indulgence trend cannot be underestimated, especially given its appeal to children. In Argentina, Arcor's Formis biscuit was one of the most successful launches in the last two years. One of the main reasons cited for its success is that its filling can be seen from the outside and this is extremely tempting for children. It was even reported that some consumers only eat the filling and leave the rest of the biscuit. Industry sources further commented that while the variety and form of the fillings was very appealing to children, the price was also very pleasing to the parents.

In-store bakeries on the increase

Another emerging trend already present in more developed markets, which Euromonitor International has noticed in most Latin American countries, is the increasing number of in-store bakeries within supermarkets. In Colombia, for instance, all major chained retailers have fresh bakeries in their outlets, from hypermarkets to small mini-markets. Upon entering the baked goods section of supermarket chains, such as Carulla and Carrefour in Colombia, the consumer will find countless baked goods on offer, ranging from "wafer" biscuits to "caladitos" (a type of bread cracker) in familiar private label packaging. In Argentina, where artisanal bakers have a high prevalence, consumers are turning to on-site bakeries in supermarkets and hypermarkets, which offer a wider range of cakes and bread at a more affordable price.

Chart 1 Bakery Product Sales in Latin America: Summary of Market Drivers

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Related research from Euromonitor International

The World Market for Breakfast Products