The bakery and snack year in review: The good, the bad and the ugly
The fipronil egg scandal led media reports in 2017, affecting numerous sectors, no less so the bakery industry.
When all thought the furore had died down, the herbicide contamination reared its head again in Germany in October, with a local newspaper alleging authorities had attempted to hide the full extent of the spread of the insecticide in products like pastries.
Other news to trigger a flutter in 2017 was butter and its sharply rising price and threatened shortage that caused a panic among bakers, biscuit, cake and pastry makers. Butter price reached record levels around the globe – the highest since 2014 – as global consumption outstripped production.
However, these two news headlines did nothing to dampen the growth of the global bakery market, which Technavio analysts forecast to grow at a compound annual growth rate (CAGR) of 7.04% from 2014 to 2019.
Breads and biscuits are set to be the bestselling sub-segments, but demand for other bakery items such as cakes, pastries and cookies is also increasing, says the market researcher.
The bakery industry received a boost from a number of launches answering consumer demand for products that are gluten-free and high in fiber and protein.
Gluten-free goes mainstream
The gluten-free ‘trend’ continued its trajectory into mainstream despite reports suggesting going strictly gluten-free is not synonymous with ‘healthy’.
By 2020, MarketsandMarkets forecasts the global gluten-free market to be value at $7.59bn globally.
Snacks on the up and up
People on the move
Several food producers announced leadership changes this year, most notably:
- Panera Bread: founder Ron Shaich resigned as CEO, handing over the reins to former Papa John’s Pizza president Blaine Hurst.
- Snyder's-Lance: CEO Carl E. Lee left suddenly, replaced by former CEO and president of Diamond Foods, Brian Driscoll.
- General Mills: Jeff Harmening replaced Ken Powell as CEO, who will take on the role of chairman when he retires at the end of December.
- Annie’s: John Foraker, president of General Mills’ organic foods unit, resigned at the end of August, stressing his decision had nothing to do with General Mills’ decreased FY2017 sales.
- Kellogg: Steve Cahillane, former CEO of wellness giant Nature’s Bounty, replaced John Bryant as CEO, who retired after 20 years with the company.
- Hostess Foods: Bill Toler is retiring as president and CEO next year and will be replaced by Andrew Jacobs, who was appointed in the newly created position of chief commercial officer in June.
- Royal DSM: appointed Patrick Niels to replace Ilona Haaijer as president of DSM Foods in August.
- Tyson Foods: Tom Hayes replaced Donnie Smith as CEO.
The global snack food market also continued to flourish. Research and Markets expects global snacks will grow at a CAGR of 5.8% from 2016 to reach $620bn by 2021.
Consumers are snacking more and more often. Snack foods are emerging as a legitimate alternative to full-fledged meals, while growing urbanization and the increasing preference for convenience food are also driving the sector.
Salted snacks – such as potato, corn and tortilla chips, popcorn and pretzels – are expected to have the highest market growth during the forecast period.
However, Mintel told BakeryandSnacks that the meat snacks category – including beef jerky, biltong, pork scratching, salami sticks and kabanosy – was the fastest growing sub-segment of the snacks category over the past year, its 6% growth outstripping the 1.3% increase in potato chips sales.
The market researcher also noted the UK popcorn market has enjoyed steady growth of 18% CAGR over past five years, driven by rising consumer interest in lighter and healthier snacks.
To capitalize on this trend, snack formulators made strides to replace unhealthy fats, salt and sugar, adding whole grains, fiber, fruits and vegetables.
However, unlike American consumer’s growing penchant for healthier nibbles, snack sales in Europe were dominated by sugary treats. Sweets lead in the UK, while chocolate brings in the biggest sales in Germany and France.
This area saw big changes, with food companies working towards using fewer and simpler ingredients. The focus has shifted to healthier, clean ingredients, eliminating artificial colors and flavors, high-fructose corn syrup, added sugars and partially hydrogenated oils.
Plant-based proteins, free-from and wellness-enhancers were incorporated more, although taste remained king.
Mintel’s director of Insight, Marcia Mogelonsky, told BakeryandSnacks the more unusual the flavour the more likely the snack producer will capture another consumer, noting that smoked and burnt flavors were tops among Millennials.
This was certainly adopted by PepsiCo for its annual Do Us a Flavor campaign for Lay’s chips. Crispy Taco, Everything Bagel with Cream Cheese, and Fried Green Tomato were picked as this year’s hottest flavors. The company also said bugs are big business for tomorrow’s snacks.
Merges and acquisitions
- The blockbuster deal of 2017 was Amazon’s $13.7bn acquisition of Whole Foods.
- JAB Holding, which manages Krispy Kreme Donghnuts, acquired Panera Bread for $7.5bn.
- Panera is merging with Au Bon Pain, which Panera CEO Ron Shaich helped build in the 1990s.
- Wise Snacks owner Arca International – the largest Coca Cola bottler in Latin America – acquired Deep River Snacks.
- Kellogg acquired RXBar protein bar maker Chicago Bar Company for $600m in October.
- Grupo Bimbo bought East Balt Bakeries to expand global footprint.
- In South Africa, Bokomo cereal and Sasko bread maker Pioneer Foods acquired full ownership of Heinz Foods SA for undisclosed amount.
- Premier renewed its long-standing licence to produce and market Cadbury cakes with Mondelez.
- Utz Quality Foods acquired rival snack giant Inventure Foods for $165m.
- Kettle Foods strengthened its UK popcorn market share with the acquisition of Cornpoppers, just days after ConAgra made a similar move in the US for the producer of Boomchickapop.
- Tyson bought AdvancePierre for $4.2bn.
- Post Holdings acquired Weetabix, Britain’s top selling cereal, for $1.76bn.
Rise of non-GMO
Aligned with Nielsen’s report that a GMO-free claim is a key driver of the growth of US snacks, several producers jumped onto the bandwagon. For example, Mondelēz’ Triscuit transitioned to non-GMO across its entire portfolio, while non-GMO food specialist SunOpta upgraded its roasted snacks capabilities.
To sweeten or not to sweeten…
This year saw Nestlé pledge to cut sugar by 10% in breakfast cereals sold in the UK, followed by an announcement by Kellogg that it was cutting sugar by 40% in three of its popular breakfast cereals. The latter also decided to axe its Ricicles cereal in January 2018, which contains 34g of sugar per 100g of cereal.
However, the cereal giant decided to retain its sugary Frostie’s cereal and will scrap any children’s on-pack promotions, claiming more adults consume the cereal than kiddies do. In another controversial move, General Mills announced it was bringing back its original Classic Trix cereal made with artificial dyes and flavors, due to popular demand.
Good year for…
Calbee got back into full production swing following a potato shortage in Hokkaido that disrupted production of 15 of its potato chip brands.
The company also developed a disease-resistant potato called Poroshiri and launched a range of flavors reflecting the local speciality of each of Japan’s 47 prefectures.
Premier Foods posted good growth for first half of the year, with Mr Kipling, Bisto and Lloyd Grossman accounting for 23% y-o-y revenue growth.
Snyder’s-Lance also reported positive earnings through the year (with a 3.7% increase in sales in Q3), despite a troubled year with the sudden and unexplained resignation of Carl E. Lee after 12 years with the company.
Kellogg’s revenue increase to $3.27bn beat analyst’s predictions of $3.21bn.
Bad year for…
Producer Canada Bread and retailers George Weston, Walmart Canada, Loblaw’s, Sobey’s and Metro, after Canada’s Competition Bureau launched an investigation into alleged price fixing of some packaged breads.
Hostess Brands Q3 revenue lost some its twinkle, coming in at $16.1m versus $26.3m from the year prior. Sales reflected a drop in the popularity of Deep Fried Twinkies.
Cheerios maker General Mills also saw a decline in cereal sales, resulting in a 3.1% decrease in operating profit, although Jeff Harmening said net sales finished in line with expectations.
Snyder’s-Lance subsidiary Princeton Vanguard and PepsiCo Frito Lay continued to face off in court over a dispute whether the phrase ‘Pretzel Crips’ can be registered as a trademark.
General Mills won its lawsuit alleging its Nature Valley granola bars cannot be labelled 100% natural as they purportedly contain traces of herbicides. California Federal judge Michael Davis dismissed the class action lawsuit against the cereal giant, stating the amount of herbicide found was permitted, even for certified organic goods.
Warburtons faced a second fine of more than £1m ($1.29m) for endangering workers’ safety in 2017.