Industry insight into US bakery market

By Gill Hyslop

- Last updated on GMT

Related tags Us Bakery industry Bakery ingredients frozen foods Health and wellness Gluten-free baked goods Grupo bimbo Flowers foods Campbell soup company Cakes

As consumers increasingly opt to follow a healthy lifestyle, they are demanding more gluten-free, low-carb, whole grain, organic and paleo diet products. However, there will always be a way to find an excuse to give in to indulgence, especially when it comes to freshly baked breads, creamy cakes, flaky pies and sweet rolls.

In the US – as in the rest of the world – the indulgent side of baked goods has taken a slight step back as consumers turn towards gluten-free, low-carb and high fiber options. Consumers are increasingly substituting baked Health, natural (artisanal baked goods) and convenience (par-baked and frozen items) are on the up, and consumers are increasingly substituting backed goods with nuts, yogurt and fruit bars.

Bakery segments by share of revenue

  • Commercial: 91%
  • Retail: 9%

However, to celebrate special occasions and in times of distress and uncertainly, Americans love to revert to traditional bakes like the Boston Cream Pie – a hot milk sponge filled with pastry cream and topped with chocolate ganache – which has been around since the mid-1850s.

Be it health or indulgence, though, when customers are looking for a specific item, most are willing to pay a premium price.

Big bakes

The US bakery industry is a huge business, making up 2.1% of the gross domestic product, according to the American Bakers Association.

Bakery giants

The Mexican conglomerate closed 2018 with revenues of $14.4bn and a workforce of more than 138k employees around the world. The Arnold, Brownberry and Oroweat organic bread maker was placed third in the annual ranking of the 100 Most Important Manufacturers in Mexico 2018, but sells its fresh and frozen sliced bread, buns, cookies, snack cakes, English muffins, bagels, pre-packaged foods, tortillas, salted snacks and confectionery products to more than 32 countries.

Despite reporting a tough fiscal 2018, New Jersey-based Campbell Soup Company posted a 10% increase to $8.6bn, primarily driven from the acquisition of snack maker Snyder’s-Lance, but also gains in its Global Biscuits business like Pepperidge Farm cookies, Arnott’s, Kjeldsens and Royal Dansk biscuits, among other products.

Flowers Foods, headquartered in Thomasville, Georgia, is one of the largest producers of fresh packaged bakery foods in the US with 2017 sales of $3.9bn. Flowers operates bakeries across the country that produce a wide range of bakery products. The company’s top brands include Nature’s Own, Wonder, Tastykake and Dave’s Killer Bread.

The market is highly fragmented, essentially made up of almost 3,000 independent bakeries – 65% of which have less than 10 employees – that bring in an annual revenue of $30m.

Another 6,000 retail bakeries bring in an additional $3bn, with 50 of the largest companies generating 75% of this revenue.

Three producers – Mexican bakery giant Grupo Bimbo, Dave’s Killer Bread maker Flowers Foods and Pepperidge Farm owner Campbell Soup Company – account for 55% of total commercial bakery revenue in the US.

However, profits are not particularly high because of the volatility of raw materials like wheat and vegetable oil, which can vary as much as 40% in a single year. Bakeries are not always able to pass on these increased costs to consumers by raising prices.

Low growth

The US market for baked goods is forecast to grow at only 1% CAGR per annum in the next decade, tied to the low growth of the population, as well as changes in disposable income, consumer preferences and economic conditions.

Product segments by share of revenue

  • Bread: 32%
  • Rolls: 19%
  • Frozen Cakes: 15%
  • Retail Bakery Products: 10%
  • Soft Cakes: 8%
  • Pies: 2%

Conversely, the US bread production industry has seen exports rise by 7.2% to over $1bn, with 80% of products going to Canada, 10% to Mexico and 6% to Japan. The UK accounts for 2% of bread exports.

Piece of cake

According to IBISWorld, although the industry began with a chilling start, the Frozen Cake and Pastry sector will continue to expand, driven by a rising health consciousness, changing consumer tastes and competition from fresh bakery items. In response to these trends, manufacturers have focused on reformulating their existing dessert selections with healthier ingredients, experimenting with new flavor combinations and launching single-serving varieties that have a wider appeal.

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