Against the backdrop of accelerated consumer lifestyles, increasing numbers of women in the workforce, the fragmentation of traditional family structures and an increase in single-occupancy households, Euromonitor examines the opportunities available to bakery product manufacturers.

Despite the historical role of bread in a number of culinary cultures, the bakery products market has generally benefited from a global trend towards the breakdown of traditional eating patterns. The global trend towards urbanisation resulted in accelerated consumer lifestyles, increasing numbers of women in the workforce, the fragmentation of traditional family structures and an increase in single-occupancy households. Recent new product developments are indicative of the consumer demand for products that ease the effects of increasingly busier lifestyles and the consequent constraints on food preparation and shopping time that affect consumers.

Development of premium segment

The maturity of core developed markets in regions such as North America and Western Europe has meant that growth has been increasingly driven by the development of added-value products. Euromonitor's latest global bakery products report looks at how the commodity status of many bakery products and the growing presence of private label offerings raised the importance of manufacturers presenting a distinctive and focused identity for their brands. Market conditions have appeared increasingly to favour major players with the resources to develop premium products and support them with extensive marketing campaigns.

Product segmentation is also starting to play an increasingly important part in manufacturers' product development strategies, leading to a growing number of products targeting specific consumer groups such as children, young adults or the elderly.

Children have long been targeted as a specific group, with strategies including the introduction of child-oriented flavours, tie-ins with movie and television characters and novelty products, such as biscuits that colour milk when dunked. However, segmentation in the adult category has come in for more concentrated attention from manufacturers. For example, products with added calcium would be targeted at elderly consumers in order to reduce the risks of osteoporosis.

Development of bakery products aimed at the health and well-being segment

As well as convenience, product innovation over the review period also reflected the growing awareness of nutritional issues. In most developed countries, the trend towards healthier eating, which had been developing concurrently with that towards indulgence products, persisted throughout 1998-2003. Consequently, the continuing demand for premium products and the innovation strategies of baked goods specialists increasingly focused on products which were perceived to be healthy and sophisticated, such as novelty breads.

Whilst development of low-calorie variants of certain foods has proliferated throughout the review period, it became evident that the vogue for the low-carbohydrate Atkins diet had started to influence consumption patterns towards the end of the review period. Euromonitor reveals that, despite adverse publicity which has prevailed as the medical profession pours scorn on a diet that is not balanced and focuses heavily on high protein content which includes products that are high in saturated fats, it is likely that manufacturers may consider developing this market niche as the popularity of the diet shows no sign of abating.

New packaging formats

Packaging innovation has also become increasingly important in bakery products, as manufacturers have sought to adapt to changing eating habits and demographic and social trends. The increase in snacking has been particularly influential with regard to packaging, leading to innovations aimed at convenience and portability. The maturing of many markets has also meant that packaging has become an increasingly significant factor in generating value sales through the development of added-value products.

For the most part, the companies that saw success in 2002/2003 sought to align their product packaging activities to accommodate increasingly busy lifestyles. Successful packaging strategies included smaller-size packs, new zipper bag technology providing longer storage life, key-word labelling of products to promote health benefits, re-branding and the use of comic book and cartoon characters to appeal to children. Breakfast cereal manufacturers also looked to promoting bowl-with-cereal packs to encourage cereal consumption out of the home. Euromonitor looks at how these lines of development are likely to continue into 2004 and beyond with further segmentation prevalent in packaging solutions.

Gradual but ongoing process of consolidation

Logistical problems regarding the transportation and storage of perishable goods and deep-rooted traditions of purchasing artisanal products, resulting from the historic status of bread as a staple in many national diets around the world, underpin the extremely fragmented nature of the global bakery products market.

However, the market has experienced a gradual, but steady and ongoing, process of consolidation for a number of years now, and the trend continued in 2002 as the share of global value sales accounted for by artisanal products declined by a further 0.1% to 46.9%.

Euromonitor also reveals that within bakery products, private labels accounted for an increasing share of global value sales in every area in 2002. The increase was underpinned by the growing significance of supermarkets in both developed and emerging markets. Although multiple grocer penetration remained low in many developing markets, some such as China witnessed a significant rise in sales of private label products, as their low prices and, increasingly fresh, in-store baking, appealed to consumers.

Improved distribution and multinational penetration in emerging markets

The major growth markets over the 1998-2003 period were in the developing regions of Asia-Pacific and Eastern Europe. Common drivers shared by such developing markets are: growth from a low base, increased urbanisation, higher disposable incomes, growing influence of Western culture and diet, more working women, longer working hours, more liberal economic policies and the spread of manufacturing and distribution networks and growing penetration of storage technology.

The newly published global report also reveals that the development of retail systems within the Asia-Pacific region is set to bring consumers into contact with a growing variety of bakery products. Moreover, manufacturers are expected to invest in the expansion of distribution to the region's vast and significant rural areas, as urban markets become increasingly mature. Developing retail networks and deepening multinational penetration are also predicted to be significant factors in spurring strong volume and value growth in the emerging regions of Africa and the Middle East and Latin America.

Expert Analysis

The World Market for Bakery Products

The global bakery products market registered volume growth in every region except Eastern Europe over the 1998-2002 period. The staple status of bread in many markets means that in volume terms the product is fairly resilient to variations in the macroeconomic environment. Furthermore, bread's essential role in many national diets resulted in population growth in regions such as Africa and the Middle East proving a significant spur to growth.

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