Industry News | September 3, 2008

Health Motivates Baked Goods Market

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Consumer preference for health-oriented products and the increase in the number of new products backed by health claims are the two noteworthy trends in the baked goods marketplace in recent years. Niche start-up players are standing up to the challenge of rolling out healthier alternatives while multinationals try to shed the lard off their popular brands. Low technological barriers to entry and distinct regional taste expectations encourage local participation in the sector.

The baked goods market comprising of bread and rolls, cakes, pastries, cereals, biscuits, cookies, and doughnuts is well developed and mature in the industrialized parts of world, such as, North America and Western Europe. Noteworthy factors stimulating growth in the baked goods market in Eastern Europe and Asia-Pacific include increased urbanization, rising levels of disposable incomes, exposure to Western culture, and cuisines including dieting habits. The growing number of women in the workforce, longer working hours, liberalization of economic policies, greater spread of distribution and manufacturing networks, advancements in storage technologies, have all contributed to deep market penetration of bakery products. The developing retail system within Asia-Pacific is expected to result in higher product visibility and availability. With urban markets reaching saturation levels, manufacturers are expected to inject significant resources into expanding distribution networks to reach the large, lucrative, yet untapped rural markets.

Baked Goods: A Global Outlook

Worldwide bakery products sales are led by bread/rolls. Manufacturers in North America and Western Europe are developing new varieties of value-added products that attract premium prices, such as, organic breads, wholegrain bread, and multi-cereal breads. Crackers and savory biscuits are frequently consumed as an alternative for chips. Cakes, pastries, and biscuit segments have benefited from the rise in demand for convenience foods and snacks. Manufacturers are offering snack-sized biscuit packs and single-portion cakes.

Rising consumer health consciousness is bringing in some very interesting trends in the baked goods sector. These include growing preference for whole grains and trans fat-free products; rise in favor for allergen-free or gluten-free products; and other baked products fortified with minerals and vitamins. Manufacturers are focusing on reformulating brands by eliminating trans fats and other undesirable ingredients without compromising on taste, texture, shelf life, and quality. North America is the largest market for trans fat free bakery products in the world with the highest rollout of these products on an annual scale. Although indulgence factor will remain an important growth trend, other factors such as change in lifestyles, population growth, aggressive advertising campaigns by leading players, and launch of new products are also expected to play equally important roles in driving the market's growth.

By and large, prices of baked goods such as bread and rolls and pastry and doughnuts are influenced by commodity price changes. For instance, rise in prices of wheat puts pressure on bread producers, since wheat constitutes 60 percent of the cost of bread production. Deep price discounting in key markets also leads players operating on wafer-thin profit margins. Manufacturers are seeking to ease the pressure on corporate bottomlines through product differentiation in the form of new ingredients and packaging.

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