Key Note predicts end of biscuit and cake promotions

By Ben Bouckley

- Last updated on GMT

Related tags: Marketing, Food standards agency

Key Note predicts end of biscuit and cake promotions
Heavy price promotions within biscuits and ambient cakes are likely to end soon, as rising and energy and commodity prices begin to bite, warns research firm Key Note.

In its 2011 report ‘Biscuits and Cakes’, Key Note noted consistent growth over a five-year review period – with a peak in UK market sales by value of £3.46bn in 2010.

“Dramatic cost increases”​ since 2008 on inputs such as wheat, sugar and coca had inevitably been passed down to the consumer, said Key Note, and it added that the discounting wave from 2009, particularly on branded biscuits, is likely to end.

“Taking into account the current economic climate, as well as rising energy and commodity prices, it is likely that such heavy discounting will soon end, as such products become less profitable.

“As the level of promotional activity on biscuit and cake products decreases, volume sales are likely to fall, while the value of the market will rise.”

Volume sales slump

While value and tertiary supermarket brands introduced since the recession appeal to cash-strapped consumers, Key Note said higher prices generally had lifted sales by value in 2010, although volume sales fell as consumers curbed spending on non-essential food items.

Despite ongoing new product development, Key Note warned that the biscuit and cakes industry was dominated by major players, and is “relatively mature and may be approaching saturation”​, thus making it hard for companies to find a niche for new products.

Therefore, companies were increasingly turning to revamping existing brands with new recipes and formats, the research firm said, “in order to minimise the risk of introducing a new name”.

One success story, boosting flagging volume sales, were miniature bagged snack products, said Key Note, which are popular amongst consumers taking lunchboxes to work (a growing recessional trend) or for a snack ‘on the go’, and are marketed in the same retail space as sweets.

Larger ‘sharing packs’ have also grown in popularity due to consumers spending more leisure time at home during a ‘night in’, rather than eating out.

Cereal success

Cereal bars also performed well due to their convenience as a breakfast or lunchtime snack (within a packed rather than bought lunch) and affordability.

Pre-packaged or single-portion products had proved more popular during the recession, said Key Note, with consumers worried that ambient cakes or large packets of biscuits could easily spoil and be wasted.

In addition, healthy eating, promoted heavily by the Food Standards Agency’s drive to cut fat, sugar, salt under the terms of the Responsibility Deal, has seen brands such as WeightWatchers and Go Ahead! expand rapidly, with tertiary brands cashing in.

Looking further ahead, Key Note predicted further increases in sales value and a volume recovery, due to rapidly expanding healthy eating ranges, and “steady performance”​ of chocolate biscuit bars, which have remained a consumer favourite.

“Sweet products tend to be seen as comfort foods and are considered to be relatively cheap indulgences in times of economic uncertainty,”​ Key Note said, noting that the eating-in trend meant increased spending on snack foods.

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1 comment

Way to reduce cost and regain market value

Posted by Haiying Guo,

Biscuits and cakes are general snacks for people for years. It will be very sad if they can not have it as usual, especially for kids... So I sincerely hope that manufacturers' could consider following suggestions.

1. To use solar energy to offset some of cost in production.
2. To use more natural, health and multi-functional ingredients to keep the quality, increase the value and reduce the cost of the products at the same time, such as sweet potato products.

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