UK consumer ups spending on bakery products, but innovation crucial

In total, expenditure on bread and bakery products grew by 6.2 per cent last year, finds a report from market researcher Key Note Publications.

But tainting the figures, the report finds that year-on-year growth in household expenditure on bakery products was erratic in recent years "and modest in 2008", with its share of the total food market shrinking since 2005.

The report highlights the fact that the market for bakery products, like many others in the food industry, not only struggled in 2008 under the weight of rising costs for energy and raw materials, but also the emergence of the banking crisis that has led to practical difficulties in obtaining credit.

"These factors meant that the cost of bread continued to rise throughout the year,"​ write the report authors.

But with the cost of key commodities like wheat and corn decreasing in 2009, and the vertical fall in price for oil, the cost of inputs for the bakery industry are slated to drop this year, relieving the pressure on margins.

White bread sales boom and speciality breads grab market share​

The market is segmented into four broad sectors: white bread, brown and wholemeal bread, speciality breads and bakery products.

Despite the underlying health current that today washes throughout the food industry, driving new healthful formulations by the food technologists and motivating wellness purchases by the consumer, the report finds that spending on white bread grew by more than 10 per cent last year on the previous year.

Growth that stands in stark contrast to the white bread sector that had lost sales during the years between 2005 and 2007.

"This could be linked to the current financial situation, with consumers being more likely to switch to own-label and discounted bread, which tends to be focused more on the white than the brown sector,"​ commented the report authors.

However, in terms of market share, the report highlights the fact that white bread's share "remains considerably smaller"​ than it was at the start of the review (2005 to 2008) period.

By contrast, the brown and wholemeal sector, which saw something of a revival during the middle part of the decade, saw growth slow down during 2008, "although household expenditure remained considerably higher than it was in 2004"​.

Keynote observes that the speciality breads sector overtook white bread as the largest market sector in 2006, and has steadily increased its share of the total bread market since this period.