Now is the time for bakers to seize the moment
Slow growth likely will continue for the packaged retail bread market, but some companies are taking advantage of once-in-a-lifetime changes facing the industry.
BakingBusiness.com, August 6, 2013
by Dan Malovany, Baking & Snack

Despite the collapse of Hostess Brands and other dramatic changes in the marketplace, the overall bread market will eke out only small gains during the next few years as value-, carb- and sodium-conscious consumers continue to keep a close eye on the amount and type of breads, buns, tortillas, English muffins and grain-based foods they consume.

“The fact that sales have remained essentially flat is largely a function of the bread market being very mature and highly saturated,” stated a September 2012 report on the bread market by Chicago-based research firm Mintel.

Specifically, retail sales in current terms are expected to grow 0.8% to 2.7% annually between 2013 and 2017, with sales driven primarily by new product innovation and rising commodity prices, the Mintel report noted.

The most recent scanning data paints a clear picture how changes in the industry affect nearly every player in the bread aisle.

According to IRI, a Chicago-based market research firm, fresh bread sales — the bulk of which is sliced sandwich bread — declined about 1.1% to $8.68 billion for the 52-week period ending May 19. Among other products found in the bread aisle, hamburger and hot dog buns slipped 0.27% to $1.87 billion; bagels/bialys fell 0.33% to $820.9 million, and all other rolls, buns and croissants dropped 0.48% to $1.71 billion, IRI reported. Only English muffins rose — but barely — up 1.85% to $679.9 million. The data covers total US multi-outlets, including supermarkets, drugstores, mass market retailers, military commissaries and select club and dollar stores.

While sales in the highly competitive bread category remain soft, supermarket scanning data indicate some companies are having a banner year after Hostess shut down in November. The post-Hostess benefactors among the Top 10 vendors in the mostly sandwich bread category included Flowers Foods, Thomasville, GA, with sales up 11.8% and Pepperidge Farm, Norwalk, CT, with sales rising 9.5%, IRI noted. Regional bakers did the best, with Lewis Bakeries, Evansville, IN, jumping 17.0%; United States Bakery, Portland, OR, up 18.5%; Aunt Millie’s Bakeries, Fort Wayne, IN, increasing 13.4%; and Schwebel Baking, Youngstown, OH, rising 5.6%. United States Bakery’s growth in the Northwest, where Hostess hadn’t competed for years in the bread aisle, was likely due to geographic growth and market penetration.

However, IRI showed category leader Bimbo Bakeries USA, Horsham, PA, seeing packaged bread sales slide 1.0% to $2.49 billion while private label remained relatively flat, off 0.7% to $2.04 billion. La Brea Bakery, Los Angeles, experienced a slight decline in sales as well.

IRI noted Hostess sales were off 52% to $353.9 million in year-over-year comparisons. Just on a branded basis, that means some $350 million in sales changed hands in the retail bread category alone since Hostess shut down late last year, and that’s not counting what the company sold to foodservice, private label and other channels not monitored by IRI.

The outlook is more optimistic for savvy wholesale bakers, especially those who provide an alternative to the same-old products. “While sales have been stagnant in recent years, bread is ubiquitous in the US,” the Mintel report noted. “Manufacturers seeking to drive gains with new products could consider developing more competitively priced whole grain breads that are high in fiber and relatively low in calories and sodium. Such options are likely to resonate with parents, a key segment for bread marketers, as well as those in the rapidly growing baby boomer segment.”